When does the standard regarding measurement and recognition of expected versus incurred credit losses for financial assets held become effective for Carls if Carls is not a public entity?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
In June 2016, the Financial Accounting Standards Board ("FASB") issued a standard that requires measurement and recognition of expected versus incurred credit losses for financial assets held, including trade receivables. The standard is effective for interim and annual reporting periods beginning after December 15, 2019 for public entities. For other entities, the standard is effective for interim and annual reporting periods beginning after December 15, 2022. The Company adopted this amendment during the first quarter of 2024. The adoption of this guidance did not have a material impact on our Combined 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 Financial Accounting Standards Board (FASB) issued a standard in June 2016 that mandates the measurement and recognition of expected versus incurred credit losses for financial assets held. This standard applies to trade receivables as well. For entities that are not public, this standard becomes effective for interim and annual reporting periods beginning after December 15, 2022.
Carls adopted this amendment during the first quarter of 2024. The disclosure states that the adoption of this guidance did not have a material impact on their Combined Consolidated Financial Statements.
For a prospective franchisee, this means that Carls has already adopted this accounting standard. Therefore, franchisees should ensure they understand how Carls accounts for credit losses and how this might affect their own financial reporting and management of receivables. While the impact was not material for Carls, individual franchisees should assess the potential impact on their specific operations.