What accounting standard did Crave Cookies adopt on January 1, 2023?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Notes to Financial Statements December 31, 2022 and 2021
Note 3: Operating Leases – ASC 842
Change in Accounting Principle
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-of-use (ROU) asset on a discounted basis, for substantially all leases, as well as additional disclosures regarding leasing arrangements. Disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented or, as permitted by ASU 2018-11, at the beginning of the period in which it is adopted, i.e., the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company adopted ASC Topic 842, regarding lease accounting, on January 1, 2023. This standard necessitates that Crave Cookies, as a lessee, recognize lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet for substantially all leases. This accounting change reflects how leases are reported in Crave Cookies' financial statements.
For a prospective Crave Cookies franchisee, this means that the financial statements included in the FDD and those they will receive periodically from Crave Cookies will reflect lease obligations as both liabilities and assets. This provides a more transparent view of the company's financial commitments related to leases. The adoption of ASC 842 impacts how Crave Cookies presents its financial position and results of operations, particularly concerning leases.
It's important for franchisees to understand how these accounting changes affect the financial statements, as leases are a common aspect of operating a physical storefront. Franchisees should consult with their own financial advisors to fully understand the implications of ASC 842 and how it impacts their investment in a Crave Cookies franchise. Understanding these accounting principles can aid in better financial planning and analysis of the franchise's performance.