What accounting standard changed how Carbones Pizzeria measures credit losses?
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 (ASC) 326. This guidance altered how Carbones Pizzeria measures credit losses for most financial assets not measured at fair value through net income. The most significant change was a shift from the incurred loss model to the expected loss model.
Under this standard, Carbones Pizzeria is required to provide disclosures that give financial statement users useful information for analyzing the company's exposure to credit risk and the measurement of credit losses. The financial assets held by Carbones Pizzeria that are subject to FASB ASC 326 are trade accounts receivable.
Carbones Pizzeria adopted this standard effective January 1, 2023, and the company did not consider the impact of the adoption to be material to the financial statements. The adoption primarily resulted in enhanced disclosures only. For the year ended October 31, 2024, the allowance for credit losses for accounts receivable amounted to $175,595.