Was there a cumulative effect for the change in accounting at the date of adoption for Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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, which changed how entities measure credit losses for most financial assets. This standard shifts from an incurred loss model to an expected loss model. The company adopted this standard effective January 1, 2023.
For Carbones Pizzeria, the adoption of this standard primarily resulted in enhanced disclosures. The FDD states that the impact of the adoption was not considered material to the financial statements.
For a prospective franchisee, this suggests that changes in accounting standards may occur, but their impact on the financial statements may not always be significant. In this case, the change mainly affected the way credit losses are disclosed, rather than having a substantial financial impact on Carbones Pizzeria.