How did the adoption of Topic 842 affect Crave Cookies' statements of operations?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
ed by ASU 2018-11, at the beginning of the period in which it is adopted, i.e., the comparatives under ASC 840 option.
The Company adopted Topic 842 on January 1, 2022 (the effective date) using the comparatives under ASC 840 transition method, which applies Topic 842 at the beginning of the period in which it is adopted. Prior period amounts have not been adjusted in connection with the adoption of this standard. The Company elected the package of practical expedients under the new standard, which permits entities to not reassess lease classification, lease identification or initial direct costs for existing or expired leases prior to the effective date. The Company elected the practical expedient to account for nonlease components and the lease components to which they relate as a single lease component for all. Also, the Company elected to keep short-term leases with an initial term of 12 months or less off the balance sheets. The Company did not elect the hindsight practical expedient in determining the lease term for existing leases as of January 1, 2022.
The most significant impact of adoption was the recognition of operating lease ROU assets and operating lease
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the adoption of Topic 842, concerning leases, had a limited impact on the company's financial statements. Specifically, Crave Cookies adopted Topic 842 on January 1, 2022, utilizing the comparatives under ASC 840 transition method, which means the company applied Topic 842 at the beginning of the period in which it was adopted and did not adjust prior period amounts.
The most significant change resulting from the adoption of Topic 842 was the recognition of operating lease Right-of-Use (ROU) assets and operating lease liabilities, which amounted to $11,758. However, the disclosure explicitly states that the adoption of this standard did not significantly affect Crave Cookies' statements of operations or cash flows.
For a prospective Crave Cookies franchisee, this implies that while the company has adopted the latest accounting standards for leases, the impact on the income statement and cash flow is minimal. This suggests that the franchisee's financial analysis and projections would not be significantly altered by the adoption of Topic 842 at the franchisor level. The franchisee should still carefully review the lease terms for their specific location, as these will have a direct impact on their own financial statements.