Does the text specify any changes in accounting principles disclosed in the Checkersrallys financial statements?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the fiscal year ended January 2, 2023 due to the adoption of ASU No. 2016-02, Leases.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference a rate that is expected to be discontinued. The amendment applies only to contracts, hedging relationships, and other transactions that utilize a reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform—Deferral of the Sunset Date of Topic 848, which deferred the sunset date of Topic 848 to December 31, 2024. These ASUs were effective upon issuance, and the Company may elect to apply the amendments prospectively through December 31, 2024 as the transition of reference rates is completed.
On June 16, 2023 the Company modified the reference rate. These modifications 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 13.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The standard was issued as part of the Board's simplification initiative. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The update makes several amendments to Topic 740 including a change in the way an entity recognizes franchise tax. ASU 2019-12 is effective for entities that are not public business entities for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. Upon evaluation of the pronouncement, the Company has adopted the standard as of January 4, 2022, and determined it has no material impact on the financial statements and related disclosures.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, there have been changes in accounting principles. Specifically, in the fiscal year ended January 2, 2023, Checkersrallys changed its method of accounting for leases due to the adoption of ASU No. 2016-02, Leases. This indicates a shift in how the company recognizes and reports lease-related assets and liabilities on its financial statements.
Additionally, Checkersrallys adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, effective as of January 4, 2022. This update simplifies income tax accounting by removing certain exceptions in ASC 740 and changes how franchise taxes are recognized. However, Checkersrallys determined that the adoption of this standard had no material impact on its financial statements and related disclosures.
Furthermore, in March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference a rate expected to be discontinued. Checkersrallys modified the reference rate on June 16, 2023, replacing the previous LIBOR-based reference rate with SOFR-based rates and utilized the optional expedients set forth in ASC 848. The modified debt is described in Note 13.