When did Chesters adopt the Current Expected Credit Loss Standard (CECL)?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued guidance ASC 326, Current Expected Credit Loss Standard (CECL), which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity's exposure to credit risk and the measurement of credit losses. Financial assets held by the Company that are subject to the guidance in FASB ASC 326 were trade accounts receivable. The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements.
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Chesters adopted the Current Expected Credit Loss Standard (CECL) effective January 1, 2023. This accounting standard, issued by the Financial Accounting Standards Board (FASB), significantly changes how companies measure credit losses for most financial assets.
The most significant change from the previous model is the shift from an incurred loss model to an expected loss model. This means that Chesters now has to account for potential credit losses over the entire life of a financial instrument, rather than just recognizing losses when they are likely to occur. The financial assets held by Chesters that are subject to this guidance are trade accounts receivable.
The adoption of this standard requires Chesters to provide disclosures that allow users of the financial statements to analyze the company's exposure to credit risk and the measurement of credit losses. However, Chesters states that the impact of adopting CECL was not considered material to the financial statements.
For a prospective franchisee, this information provides insight into how Chesters manages its financial reporting and accounting practices. While the impact of CECL adoption was deemed immaterial, it demonstrates that Chesters is adhering to current accounting standards, which can provide a level of confidence in the company's financial transparency.