When did Cd One Price Cleaners adopt FASB ASC 326, Credit Losses?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
New Accounting Principle – The Company adopted Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 326, Credit Losses, using the modified retrospective method, which allows for the Company to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable. As a result, the comparative period presented in the financial statements has not been revised and is in accordance with standards in effect for that year. ASC 326 replaces the incurred loss model for measuring the allowance for credit losses with a new model that reflects current expected credit losses (CECL) that are expected to occur over the lifetime of the assets. This estimate must be based on all relevant information, such as historical information, current conditions, and reasonable and supportable forecasts that could impact the collectability of the amounts. The CECL methodology is applicable to financial assets that are measured at amortized cost including trade accounts receivable. We 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 72)
What This Means (2025 FDD)
According to Cd One Price Cleaners' 2025 Franchise Disclosure Document, the company adopted Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 326, Credit Losses, effective January 1, 2023. This adoption was implemented using the modified retrospective method, which allows the company to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable. The comparative period presented in the financial statements was not revised and remains in accordance with the standards in effect for that year.
ASC 326 replaces the incurred loss model with a new model reflecting current expected credit losses (CECL) that are expected to occur over the lifetime of the assets. This estimate must be based on all relevant information, such as historical information, current conditions, and reasonable and supportable forecasts that could impact the collectability of the amounts. The CECL methodology is applicable to financial assets that are measured at amortized cost including trade accounts receivable.
The impact of adopting this standard was not considered material to Cd One Price Cleaners' financial statements and primarily resulted in enhanced disclosures only. For a prospective franchisee, this means that Cd One Price Cleaners has updated its accounting practices to reflect expected credit losses on its assets, but this change did not significantly affect the company's financial position or performance.