Is the Gokhale Method currently evaluating the impact of adopting the new lease accounting guidance?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
In February 2016, FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize lease liabilities and corresponding right-of-use assets for those leases classified as operating leases under previous U.S. GAAP to increase transparency and comparability. Under the new standard, enhanced disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from the leases. The new standard requires the use of a modified retrospective approach including a number of optional practical expedients and will be effective for fiscal years beginning after December 15, 2021. The Company is evaluating the impact of adopting this guidance to the financial statements.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 FDD, Gokhale Method is evaluating the impact of adopting new lease accounting guidance. Specifically, Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), issued by the Financial Accounting Standards Board (FASB) requires lessees to recognize lease liabilities and corresponding right-of-use assets for leases classified as operating leases under previous U.S. GAAP. The goal is to increase transparency and comparability in financial reporting.
Under this new standard, Gokhale Method will need to provide enhanced disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires a modified retrospective approach, including optional practical expedients, and was set to be effective for fiscal years beginning after December 15, 2021.
For a prospective Gokhale Method franchisee, this means that the franchisor is working to comply with updated accounting standards related to leases, which could impact how leases are reported in their financial statements. While the FDD indicates that Gokhale Method is evaluating the impact, it does not provide specific details on the expected effects or any potential changes to their financial statements. Franchisees should consult with their own financial advisors to understand the implications of these accounting changes.