When did Carls adopt the Accounting Standards Update 2019-12 regarding income tax simplification?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
In December 2019, the FASB issued Accounting Standards Update 2019-12, "Income Taxes (Topic 740)(ASU 2019-12)", which provides final guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences among other changes. For nonpublic business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2021. Early adoption of this guidance is permitted. The Company adopted this guidance on February 1, 2022 on a prospective basis, and adoption of this guidance had no material impact to the Consolidated Financial Statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the company adopted Accounting Standards Update 2019-12, related to income tax simplification, on February 1, 2022. This update, issued by the FASB in December 2019, provides guidance that simplifies income tax accounting by removing certain exceptions in ASC 740. These exceptions relate to intra-period tax allocation, calculating income taxes in interim periods, and recognizing deferred tax liabilities for outside basis differences. The update was effective for fiscal years after December 15, 2021, for nonpublic entities, with early adoption permitted.
Carls implemented this guidance on a prospective basis, meaning the changes were applied to future transactions and events rather than retrospectively adjusting prior periods. The disclosure indicates that the adoption of this guidance did not have a material impact on the Consolidated Financial Statements. This suggests that the changes brought about by the update did not significantly alter Carls's reported financial position or results of operations.
For a prospective franchisee, this information provides insight into Carls's accounting practices and its adherence to current accounting standards. While the adoption of this standard did not have a material impact, it demonstrates Carls's commitment to simplifying its accounting processes and aligning with updated regulations. Understanding the timing and impact of such accounting changes can help franchisees better interpret and analyze the company's financial statements.