What accounting method was used for the business combination resulting from Topco's acquisition of Burger BossCo in the Checkers FDD?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| New deferrals due to cash received and other | 439 | | 403 | | Revenue recognized during the period | (1,068) | | (858) | | Deferred franchise fees at end of period | $ 9,025 | $ | 9,654 |
NOTE 4 - BUSINESS COMBINATION
Out-of-Court Restructuring
As discussed in Note 1. Description of Business, the Out-of-Court Restructuring agreement, executed on June 16, 2023 (the "restructuring date"), resulted in Topco acquiring all of the voting interests of Burger BossCo. As a result, Topco gained control of Burger BossCo and the transaction was determined to be a business combination in accordance with ASC 805 and is accounted for in accordance with the acquisition method of accounting. As the accounting acquirer, Topco will recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. As an indirect subsidiary of the accounting acquirer, the Company has elected to apply pushdown accounting, whereby it will also recognize the assets acquired and liabilities assumed at fair value as of the acquisition date.
The total stock consideration was $97.8 million comprised 90 shares of Burger BossCo which were acquired by Topco. The fair value of the stock consideration was determined by a third-party valuation specialist using the market and income approaches, and the results were weighted appropriately.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to the 2025 Checkers Franchise Disclosure Document, the business combination resulting from Topco acquiring all voting interests of Burger BossCo was treated as a business combination under ASC 805. It was accounted for using the acquisition method of accounting. As the accounting acquirer, Topco recognized the assets acquired and liabilities assumed at fair value as of June 16, 2023, the acquisition date.
Furthermore, as an indirect subsidiary of the accounting acquirer, Checkers elected to apply pushdown accounting. This means Checkers also recognized the assets acquired and liabilities assumed at fair value as of the acquisition date. The total stock consideration for the acquisition was $97.8 million, comprising 90 shares of Burger BossCo acquired by Topco. A third-party valuation specialist determined the fair value of the stock consideration using market and income approaches, appropriately weighting the results.
Due to the Out-of-Court Restructuring and the change in control of CDI's parent, Checkers elected to apply pushdown accounting, recording assets and liabilities at their fair values at the date of the restructuring. The financial statements for periods before June 16, 2023, reflect CDI prior to the restructuring (Predecessor), while periods after this date reflect CDI after the restructuring (Successor). The change in accounting basis means the Successor and Predecessor financial statements are not directly comparable, which is highlighted by a black line separating the periods where applicable.