What is the 'current expected credit loss' model used by Bumble Roofing based on?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
Effective October 1, 2023, the Company adopted the requirements of ASU 2013-03, Financial Instruments – Credit Losses. This ASU introduces a "current expected credit loss" ("CECL") model which requires all expected credit losses for financial instruments held at the reporting date to be based on historical experience, current conditions, and reasonable supportable forecasts. The CECL model replaces the existing incurred loss method and is applicable to the measurement of credit losses of financial assets. Under the standard, disclosures are required to provide users of the consolidated 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 Accounting Standards Codification ("ASC") 326 were royalty and accounts receivable, rebates receivable, and notes receivable. There was no material impact to the consolidated financial statements or footnotes upon adoption of this new accounting policy.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the company adopted Accounting Standards Update 2013-03, Financial Instruments – Credit Losses, effective October 1, 2023. This update introduces a "current expected credit loss" (CECL) model.
Under this model, Bumble Roofing is required to base all expected credit losses for financial instruments held at the reporting date on three key factors: historical experience, current conditions, and reasonable supportable forecasts. This CECL model replaces the previously used incurred loss method for measuring credit losses on financial assets.
For Bumble Roofing, the financial assets subject to this guidance include royalty and accounts receivable, rebates receivable, and notes receivable. The adoption of this new accounting policy did not have a material impact on the company's consolidated financial statements or footnotes. The standard also requires disclosures to provide users of the financial statements with useful information for analyzing the company's exposure to credit risk and the measurement of credit losses.