Does Benihana expect the adoption of ASU 2016-13 to result in a material change to its consolidated financial statements?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326)" ("ASU 2016-13"). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to assess credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022. The Company will adopt the standard effective January 1, 2023. The Company does not expect the adoption of ASU 2016-13 to result in a material change to its consolidated financial statements.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company does not anticipate that adopting ASU 2016-13 will significantly impact its consolidated financial statements. ASU 2016-13, which addresses financial instruments and credit losses, mandates that companies measure credit losses using a methodology that accounts for expected credit losses. This involves considering a broader range of information to assess credit loss estimates.
Benihana adopted this standard starting January 1, 2023. The disclosure indicates that while the company has implemented the standard, it does not foresee any material changes to its financial statements as a result. This suggests that Benihana believes its current practices for managing and estimating credit losses already align with the requirements of ASU 2016-13, or that any adjustments needed are not substantial enough to cause a significant change.
For a prospective franchisee, this information provides insight into Benihana's financial management practices and its assessment of potential financial impacts from accounting standard updates. It suggests that Benihana is proactive in adopting new accounting standards but does not expect this particular standard to cause significant disruption to its financial reporting.