When did Bb.Q Chicken adopt the new accounting standards (ASUs) related to leases?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
In February 2022, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance for accounting for leases under Topic 840, Leases. The FASB also subsequently issued the following additional ASUs, which amend and clarify Topic 842: ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases (Topic 842): Targeted Improvements; ASU 2018-20, Narrow-scope Improvements for Lessors; and ASU 2019-01, Leases (Topic 842): Codification Improvements. The most significant change in the new leasing guidance is the requirement to recognize right of use (ROU) assets and lease liabilities for operating leases on the balance sheet.
The Company elected to adopt these ASUs effective January 1, 2022 and utilize all of the available practical expedients. The adoption had a material impact on the Company's balance sheet but did not have a material impact on the income statement.
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
According to Bb.Q Chicken's 2025 Franchise Disclosure Document, the company adopted the new accounting standards (ASUs) related to leases effective January 1, 2022. These standards, issued by the FASB, include ASU 2016-02, Leases (Topic 842), which supersedes previous guidance under Topic 840. Additional ASUs amending and clarifying Topic 842 were also adopted. Bb.Q Chicken elected to utilize all available practical expedients during this adoption.
The most significant change resulting from these new leasing guidelines is the requirement to recognize right-of-use (ROU) assets and lease liabilities for operating leases on the balance sheet. For a prospective Bb.Q Chicken franchisee, this means that any operating leases they enter into for their restaurant location will need to be accounted for as assets and liabilities on their balance sheet, impacting their financial reporting and potentially their ability to secure financing.
Bb.Q Chicken states that the adoption of these ASUs had a material impact on the company's balance sheet. However, the adoption did not have a material impact on the income statement. This suggests that while the presentation of the company's financial position changed significantly, the reported profitability was not substantially affected. Franchisees should consult with their financial advisors to understand the full implications of these accounting changes on their own financial statements and business decisions.