How does Checkers amortize deferred financing costs attributable to funded debt?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Deferred financing costs attributable to funded debt are recorded as a deduction from the related debt balance when incurred and amortized into interest expense using the effective-interest over the life of the related debt. If additional cash is drawn, then a proportional amount of the unamortized basis is reclassed from an asset to discount, and amortized using the effective interest method.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, deferred financing costs related to funded debt are treated as a deduction from the associated debt balance when they are incurred. Checkers amortizes these costs into interest expense using the effective-interest method over the life of the related debt.
Specifically, if Checkers draws additional cash, a proportional amount of the unamortized basis is reclassified from an asset to a discount. This reclassified amount is then amortized using the effective interest method as well.
For prospective franchisees, this accounting treatment primarily affects Checkers's financial statements, which franchisees may review as part of their due diligence. Understanding how Checkers handles these costs can provide insight into the company's financial management and debt structure. It's important to note that these costs are associated with Checkers's debt, not the franchisee's debt, but the overall financial health of the franchisor can impact the franchise system.