What was the reported value of Bumble Roofing's leasehold improvements as of September 30, 2023?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
Adoption of New Accounting Policies
Accounting Standards Update 2016-02, Leases
Effective October 1, 2022, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). The objective of this ASU is to increase transparency and comparability in financial reporting by requiring balance sheet recognition of leases and note disclosure of certain information about lease arrangements. The Company adopted ASU 2016-02 using the modified retrospective method. This method allows the standard to be applied retrospectively through a cumulative catch-up adjustment to equity recognized upon adoption, if necessary. Adoption of ASU 2016-02 did not result in changes to the Company's beginning equity balance on October 1, 2022. Upon adoption, the Company elected to use risk-free discount rate, an option only available to private entities, when calculating the present value of future lease payments if an interest rate is not explicit in a lease agreement.
Adoption of this ASU resulted in the Company recording right-of-use ("ROU") assets of $3,397,752 and corresponding operating lease liabilities of $3,953,689 on October 1, 2022 which represents the present value of future lease payments on the Company's office and warehouse leases further detailed in Note 8 at the date of adoption. The difference in ROU asset and operating lease liability at inception is due to a deferred rent and certain tenan
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the financial statements of Outdoor Living Brands Holdco, LLC, which includes Bumble Roofing, do not explicitly state the value of leasehold improvements as of September 30, 2023. However, the document does mention the adoption of Accounting Standards Update (ASU) 2016-02, Leases, effective October 1, 2022, which led to the recording of right-of-use (ROU) assets of $3,397,752 and corresponding operating lease liabilities of $3,953,689. The difference between these figures is attributed to deferred rent and tenant allowances amounting to $555,937, which was netted against the ROU asset.
While the FDD provides information on ROU assets and lease liabilities, it does not break down the specific value of leasehold improvements separately. Leasehold improvements would typically be included within the broader category of fixed assets or ROU assets related to leased properties.
A prospective Bumble Roofing franchisee should request clarification from the franchisor regarding the specific accounting treatment of leasehold improvements and how these are valued and reported within the company's financial statements. Understanding the value of leasehold improvements can be important for assessing the overall financial health and capital investments of the company.