When did the FASB issue ASU 2016-02, Leases ('ASC 842') which Checkersrallys adopted?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
In February 2016, the FASB issued ASU 2016-02, Leases ("ASC 842"). ASC 842 requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset ("right-of-use asset") for the lease term and a liability to make lease payments ("lease liability").
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the FASB issued ASU 2016-02, Leases ('ASC 842') in February 2016. This accounting standard requires lessees to record an asset representing the right to use an underlying asset for leases with terms longer than 12 months, along with a corresponding liability for lease payments.
Checkersrallys adopted ASC 842 on January 4, 2022. Upon adoption, Checkersrallys recognized an operating lease liability of $229.6 million and an operating right-of-use asset of $193.6 million. Additionally, the company recognized a financing lease liability of $0.6 million and a financing right-of-use asset of $0.3 million. A cumulative adjustment of $38.6 million was recorded to beginning retained earnings.
For a prospective Checkersrallys franchisee, this accounting change means that leases are now recognized on the balance sheet, providing a more transparent view of the company's lease obligations and assets. The adoption of ASC 842 impacts how Checkersrallys accounts for its leases, which in turn could affect the financial metrics and ratios that franchisees use to evaluate the company's financial health. Franchisees should be aware of these changes and how they might influence their assessment of Checkersrallys's financial position.