What is the abbreviation for the Accounting Standards Codification referenced by Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
preceding week. All receivables not received on time receive additional scrutiny from management and may be charged interest at rates up to 12% annually.
The Financial Accounting Standards Board ("FASB") issued guidance FASB Accounting Standards Codification ("ASC") 326 which changed how entities 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. 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 trade accounts receivable. The impact of the adoption was not considered material to the financial statements and primarily resulted in enhanced disclosures only.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the Financial Accounting Standards Board (FASB) issued guidance under FASB Accounting Standards Codification, which is abbreviated as "ASC". This guidance, specifically ASC 326, pertains to how entities measure credit losses for financial assets not measured at fair value through net income.
ASC 326 represents a shift from the incurred loss model to an expected loss model for measuring credit losses. This means that instead of recognizing losses only when they are incurred, companies must now estimate and account for potential future credit losses. For Carbones Pizzeria, the financial assets subject to this guidance are the trade accounts receivable, which are the royalty and advertising fees due from franchisees.
The adoption of ASC 326 was not considered material to Carbones Pizzeria's financial statements, primarily resulting in enhanced disclosures. This suggests that while the accounting method changed, it did not significantly impact the company's overall financial position. However, franchisees should be aware that Carbones Pizzeria management scrutinizes receivables not received on time and may charge interest at rates up to 12% annually.
For the year ended October 31, 2024, the allowance for credit losses for accounts receivable amounted to $175,595. This figure represents management's best estimate of probable credit losses in its existing accounts receivable. The allowance is determined based on historical experience and an analysis of individual past due balances, considering current conditions and reasonable forecasts.