What is the purpose of ASU 2016-02, which Golden Krust Caribbean Restaurant adopted?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
In February 2016, the FASB issued ASU 2016-02, Leases ("ASC 842"). The standard increases transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet. Most prominent of the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.
The standard had a material impact on the consolidated balance sheets but did not have an impact on the consolidated statement of operations and comprehensive loss, nor statements of cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.
The Company leases office space and a restaurant location and determines if an arrangement is a lease at inception. Operating leases are included in operating lease rightof-use (ROU) assets, other current lease liabilities and operating lease liabilities on the balance sheets. The Company does not have any finance leases as of December 31, 2023 and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Golden Krust Caribbean Restaurant adopted FASB ASU 2016-02, also known as Leases (ASC 842), in February 2016. The purpose of this standard is to increase transparency and comparability among organizations by requiring the recognition of right-of-use (ROU) assets and lease liabilities on the balance sheet. The most prominent change is the recognition of ROU assets and lease liabilities by lessees for leases classified as operating leases.
For Golden Krust Caribbean Restaurant, the adoption of this standard had a material impact on the consolidated balance sheets. However, it did not affect the consolidated statement of operations and comprehensive loss, nor the statements of cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.
Golden Krust Caribbean Restaurant leases office space and a restaurant location. They determine if an arrangement is a lease at its inception. Operating leases are included in operating lease right-of-use (ROU) assets, other current lease liabilities, and operating lease liabilities on the balance sheets. As of December 31, 2023, and 2022, Golden Krust Caribbean Restaurant did not have any finance leases.