What accounting standard regarding leases did Beard Papas adopt effective January 1, 2022?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2023 | 2022 | |
|---|---|---|
| Cash flows from operating activities: | ||
| Net income (loss) $ | 79,942 | $ (55,963) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) | ||
| operating activities: | ||
| Depreciation and amortization | 4,176 | 6,189 |
| Non-cash lease expenses | 93,795 | 154 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 175,158 | (151,953) |
| Due from affiliates | 6,689 | (2,892) |
| Inventories | (185,525) | 7,868 |
| Prepaid expenses and other current assets | (2,293) | 61,791 |
| Accounts payable | 211,246 | 6,054 |
| Due to affiliates | (25,428) | 16,087 |
| Accrued expense and other current liabilities | 130,673 | 3,494 |
| Deposit payable | (15,000) | - |
| Lease liability | (70,271) | (1,973) |
| Net cash provided by (used in) operating activities | 403,162 | (111,144) |
| Cash flows from investing activity: | ||
| Purchases of property and equipment | (434, 139) | |
| Security deposits | - | (13,048) |
| Net cash used in investing activity | (434,139) | (13,048) |
| Net decrease in cash and cash equivalents | (30,977) | (124,192) |
| 1 vot decrease in easif and easif equivalents | (30,977) | (124,192) |
| Cash and cash equivalents at beginning of year | 1,225,836 | 1,350,028 |
| Cash and cash equivalents at end of year $ | 1,194,859 | $ 1,225,836 |
| Supplemental disclosure for cash flow information: | ||
| Income taxes paid during the year $ | 2,800 | $ 2,800 |
| Interest paid during the year $ | 150 | $ - |
Supplemental disclosure for non-cash transaction
The Company adopted Accounting Standards Codification (ASC) 842 on January 1, 2022 and recorded operating lease right-of-use asset and corresponding operating lease
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, the company adopted Accounting Standards Codification (ASC) 842 effective January 1, 2022. This standard pertains to lease accounting. Upon adoption, Beard Papas recorded an operating lease right-of-use asset and a corresponding operating lease liability of approximately $4,600.
In 2023, Beard Papas entered into an office lease agreement, which resulted in the recognition of an operating lease right-of-use asset and a corresponding operating lease liability of approximately $541,000. This indicates that ASC 842 had a notable impact on the company's financial statements, particularly in how leases are reported and valued.
For a prospective franchisee, this information highlights the importance of understanding lease accounting standards, as these standards can significantly affect a company's balance sheet. Franchisees should be aware of how leases are treated under ASC 842 and how this might impact their own financial reporting and obligations when leasing a location for their Beard Papas shop.