When did Checkers adopt the Financial Instruments - Credit Losses standard, and what was its impact on the consolidated financial statements?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
aced the previous LIBOR-based reference rate to SOFR-based rates. Pursuant to the modification of the contractual terms of these instruments, the Company utilized the optional expedients set forth in ASC 848. The modified debt is described in Note 10.
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 wi
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company adopted the Financial Instruments - Credit Losses standard effective January 3, 2023. This standard, also known as ASU 2016-13, sets forth a current expected credit loss impairment model for financial assets, replacing the previous incurred loss model. The guidance requires applying a CECL model, which measures credit losses based on past events, current conditions, and reasonable forecasts. This model applies to financial assets, including trade receivables, measured at amortized cost, and requires them to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis.
For a prospective Checkers franchisee, understanding the impact of accounting standards like ASU 2016-13 is important for assessing the financial health and reporting practices of the company. While the adoption of this standard can affect how Checkers reports its financial assets and potential credit losses, it's crucial to note that the company determined it had no material impact on the consolidated financial statements and related disclosures.
This means that, at least initially, Checkers did not experience significant changes in its financial reporting as a result of adopting this new standard. However, franchisees should be aware that accounting standards and their impacts can evolve over time, and it's advisable to stay informed about any future changes that could affect the company's financial performance and transparency.