What was the impact of adopting FASB ASC 326 on Black Bear Diner's financial statements?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Recently Adopted Accounting Policies: In June 2016, the FASB issued guidance ("FASB ASC 326") which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. The use of a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments may result in the earlier recognition of allowances for losses. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity's exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 are primarily trade accounts receivable. The Company adopted the standard effective December 29, 2022 using the prospective approach. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the company adopted FASB ASC 326 effective December 29, 2022, using the prospective approach. FASB ASC 326 significantly changed how entities measure credit losses for most financial assets and certain other instruments not measured at fair value through net income, shifting from an incurred loss model to an expected loss model. The financial assets held by Black Bear Diner that are subject to this guidance are primarily trade accounts receivable.
However, the adoption of FASB ASC 326 was not considered material to Black Bear Diner's financial statements. The primary impact was new or enhanced disclosures. This means that while the accounting standard changed, it did not significantly affect the reported financial results of Black Bear Diner.
For a prospective franchisee, this suggests that changes in accounting standards are monitored and implemented by Black Bear Diner, but in this specific case, the change did not have a substantial financial impact. This indicates a level of financial oversight and compliance within the Black Bear Diner organization. Franchisees should be aware that accounting practices and standards can evolve, but the franchisor will handle the implementation of these changes.