What accounting model does Checkers use for financial assets under ASU 2016-13?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses that sets forth a current expected credit loss impairment model for financial assets, which replaced the current incurred loss ("CECL") model, and in 2018 and 2019 issued amendments and updates to the new standard. The amended guidance requires the application of a CECL model, which measures credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. This model requires a financial asset (or group of financial assets), including trade receivables, measured at amortized cost to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The allowance for credit losses should reflect management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset. This guidance is effective for annual periods beginning after December 15, 2022, and interim periods within those annual periods using a modified retrospective transition method. The Company adopted this pronouncement effective January 3, 2023 and determined that it had no material impact on the consolidated financial statements and related disclosures.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers adheres to ASU 2016-13, Financial Instruments - Credit Losses, which mandates a current expected credit loss (CECL) impairment model for financial assets. This model replaced the previous incurred loss model. The CECL model assesses credit losses by considering past events, current conditions, and reasonable forecasts.
Under the CECL model, Checkers is required to present financial assets, including trade receivables measured at amortized cost, at the net amount expected to be collected. This involves deducting an allowance for credit losses from the amortized cost basis. The allowance for credit losses should reflect management's current estimate of expected credit losses over the remaining life of the financial asset.
Checkers adopted this accounting standard on January 3, 2023. Upon adoption, Checkers determined that the implementation of ASU 2016-13 had no material impact on its consolidated financial statements and related disclosures. This suggests that the change in accounting models did not significantly alter how Checkers reports its financial position or performance.