Did the adoption of ASU 2016-13 have a significant impact on the financial statements of Crave Cookies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instrument – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, related to the impairment of financial instruments. This guidance, commonly referred to as current expected credit loss (CECL), changes impairment recognition to a model that is based on expected losses rather than incurred losses. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade receivables.
Adoption of the standard did not have significant impact on the financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company adopted ASU 2016-13, Financial Instrument – Credit Losses (Topic 326), effective January 1, 2023. This accounting standards update (ASU) changes how companies recognize impairment of financial instruments, shifting from a model based on incurred losses to one based on expected losses, particularly for financial assets measured at amortized cost, including trade receivables.
For a prospective Crave Cookies franchisee, this means that the way Crave Cookies accounts for potential credit losses from customers changed. Instead of waiting for a loss to occur, Crave Cookies now estimates potential losses upfront. However, the FDD states that the adoption of this standard did not have a significant impact on Crave Cookies' financial statements.
This lack of significant impact suggests that Crave Cookies either had very few credit losses to begin with or that the expected losses under the new standard were similar to the previously recognized incurred losses. Franchisees should be aware of this accounting change, although it appears not to have materially affected Crave Cookies' financial reporting. Franchisees may want to inquire about the company's historical credit loss experience and its expectations for future credit losses to better understand the financial health and stability of Crave Cookies.