What impact did the adoption of ASU 2016-13 have on Big Apple Bagels' financial statements?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard's main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods with those fiscal years beginning after December 15, 2022. The Company adopted ASU 2016-13 in fiscal 2024 using the modified retrospective method. The adoption did not have a material impact to the financial statements.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the company adopted ASU 2016-13 in fiscal year 2024 using the modified retrospective method. ASU 2016-13 relates to Financial Instruments—Credit Losses (Topic 326) and is aimed at improving financial reporting by requiring earlier recognition of credit losses on financing receivables, including trade receivables.
The main goal of ASU 2016-13 is to broaden the information that an entity must consider when developing its expected credit loss estimate for assets. This applies whether the assets are measured collectively or individually.
However, the adoption of ASU 2016-13 did not have a material impact on Big Apple Bagels' financial statements. This means that for a prospective franchisee reviewing the financial statements, the changes due to this accounting standard are not significant enough to notably alter the reported financial position or performance of the company.