What financial assets held by Bumble Roofing are subject to the guidance in FASB ASC 326?
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 the "current expected credit loss" (CECL) model, which requires expected credit losses for financial instruments to be based on historical experience, current conditions, and reasonable forecasts. This model is used to measure credit losses of financial assets.
The financial assets held by Bumble Roofing that are subject to the guidance in FASB Accounting Standards Codification (ASC) 326 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 consolidated financial statements or footnotes.
For a prospective Bumble Roofing franchisee, this means that the franchisor must carefully evaluate and forecast potential credit losses on its receivables. While the FDD indicates that the initial adoption of this standard had no material impact, it is important for franchisees to understand how these accounting policies could affect the franchisor's financial stability and its ability to support the franchise system.