What impact did the adoption of Accounting Standards Update 2019-12 have on Carls' Consolidated Financial Statements?
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 adoption of Accounting Standards Update 2019-12, which simplifies income tax accounting, had no material impact on the company's Consolidated Financial Statements. Carls adopted this guidance on February 1, 2022, on a prospective basis.
This update, issued by the Financial Accounting Standards Board (FASB) in December 2019, addresses income taxes (Topic 740) and eliminates certain exceptions related to intra-period tax allocation, interim period income tax calculations, and deferred tax liabilities for outside basis differences. While the update was effective for fiscal years beginning after December 15, 2021, for nonpublic business entities, early adoption was permitted, which Carls elected to do.
For a prospective franchisee, this means that the changes in accounting standards related to income taxes did not significantly alter Carls's reported financial results. This suggests that the franchisee can rely on the provided financial statements without needing to account for any material distortions caused by the adoption of this accounting update.