What was the net impact to retained earnings when Craters & Freighters adopted ASU No. 2016-13?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, requires the Company to present financial assets measured at amortized cost (including trade receivables) at the net amount expected to be collected over their remaining contractual lives. Estimated credit losses are based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amounts.
The Company adopted ASU No. 2016-13 on January 1, 2023. The net impact to retained earnings would have been immaterial, thus no adjustment was made to retained earnings. Results for the year ended December 31, 2023, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 FDD, when Craters & Freighters adopted Accounting Standards Update (ASU) No. 2016-13 on January 1, 2023, the net impact to retained earnings was immaterial. As a result, Craters & Freighters did not make an adjustment to retained earnings.
ASU No. 2016-13 relates to the measurement of credit losses on financial instruments. It requires Craters & Freighters to present financial assets, such as trade receivables, at the net amount expected to be collected over their remaining contractual lives. The estimated credit losses are based on historical experience, current conditions, and reasonable forecasts affecting the collectibility of the reported amounts.
For prospective franchisees, this information indicates that Craters & Freighters adheres to updated accounting standards and that the adoption of ASU No. 2016-13 did not significantly affect the company's financial position. The financial statements for the year ending December 31, 2023, are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.