When did Checkersrallys adopt the pronouncement effective January 3, 2023 regarding the current expected credit loss impairment model?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
replaced 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 within those annual periods using a modified retrospective transition method.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company adopted the pronouncement regarding the current expected credit loss (CECL) impairment model effective January 3, 2023. This model, set forth in Financial Accounting Standards Board (FASB) ASU 2016-13, replaces the incurred loss model and requires financial assets 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 Checkersrallys franchisee, this means that Checkersrallys has updated its accounting practices to comply with the CECL model for financial assets. The allowance for credit losses reflects management's current estimate of credit losses expected to occur over the remaining life of a financial asset.
The FDD states that Checkersrallys determined that the adoption of this pronouncement had no material impact on the financial statements and related disclosures. This suggests that the change in accounting models did not significantly affect Checkersrallys's reported financial position or performance.