When did Carbones Pizzeria adopt FASB ASC 326?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
ceding week. All receivables not received on time receive additional scrutiny from management and may be charged interest at rates up to 12% annually.
As of January 1, 2023, accounts receivable was $232,832.
In June 2016, the FASB issued guidance (FASB 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 Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in enhanced disclosures only.
The Company's allowance for expected credit losses, is Management's best estimate of the amount of probable credit losses in its existing accounts receivable. The Company reviews its allowance for expected credit losses periodically. Management determines an allowance based on historical experience and then analyzes individual past due balances for collectability based on current conditions and reasonable and supportable forecasts.
In addition, if Management believe
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the company adopted FASB ASC 326 effective January 1, 2023. This accounting standard, issued by the Financial Accounting Standards Board (FASB), changes how companies measure credit losses for most financial assets not measured at fair value through net income. The most significant change is a shift from an incurred loss model to an expected loss model.
For Carbones Pizzeria, the financial assets subject to this guidance are trade accounts receivable, which are the amounts due from franchisees for royalty and advertising fees. The company states that the adoption of this standard did not have a material impact on its financial statements, primarily resulting in enhanced disclosures. This suggests that the change mainly affected how the company reports its financial information rather than significantly altering the actual amounts reported.
The company's approach to managing credit losses involves estimating probable credit losses in its existing accounts receivable. This estimate is based on historical experience, analysis of past due balances, current conditions, and reasonable forecasts. If the company believes a receivable will not be recovered, it is charged off against the allowance for credit losses. For the year ended October 31, 2023, the allowance for credit losses for accounts receivable amounted to $109,133.
For a prospective franchisee, this information indicates that Carbones Pizzeria is adhering to current accounting standards in managing its receivables. While the adoption of FASB ASC 326 itself may not have a direct impact on franchisees, understanding how the company manages and accounts for potential credit losses can provide insight into its financial practices and risk management.