Why did Checkersrallys change its method of accounting for leases in the fiscal year ended January 2, 2023?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
As required by ASC 842, Leases, Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and amendment, including, but not limited to, property values, property lives, discount rates and term, all of which can impact the classification and accounting for a lease or sublease as operating or finance for leases where the Company is a lessee and operating, sale-type and direct financing for leases where the company is lessor. The amount of depreciation and amortization, interest and rent expense and income reported would vary if different estimates and assumptions were used.
Fiscal Year
The Company's fiscal reporting periods consist of 52 or 53 weeks ending on the Monday closest to December 31. References included herein to "year" or "years" ended represent fiscal years. The first, second and third quarters of a fiscal year consist of three 4-week periods and the fourth quarter consists of either a 4-week or 5-week period. The periods January 3, 2023 to June 16, 2023 and June 17, 2023 to January 1, 2024 consisted of 24 and 28 weeks, respectively. The year ended January 2, 2023 consisted of 52 weeks while the year ended January 3, 2022, consisted of 53 weeks.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company's accounting policies require management to make estimates and assumptions regarding new leases, subleases, renewals, and amendments. These estimates include property values, property lives, discount rates, and terms, all of which impact how Checkersrallys classifies and accounts for leases. These estimates are made as required by ASC 842, Leases.
The document indicates that the amounts of depreciation and amortization, interest, and rent expense and income reported can vary depending on the estimates and assumptions used. This means that Checkersrallys's financial statements are subject to change based on these estimations, which could affect a franchisee's understanding of the company's financial performance.
While the FDD mentions the use of estimates and assumptions in lease accounting as required by ASC 842, it does not explicitly state that Checkersrallys changed its method of accounting for leases during the fiscal year ended January 2, 2023. The document only confirms that the year ended January 2, 2023 consisted of 52 weeks.