How does Hardees recognize the amortization of the operating lease asset and accretion of the lease liability for an operating lease?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
We recognize an operating lease asset and lease liability at lease commencement, which are measured by discounting lease payments using the estimated risk free rate as the discount rate. We made an accounting policy election to use the risk-free rate as our discount rate to determine the initial and subsequent measurement of operating lease liabilities. Subsequent amortization of the operating lease asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Reductions to the operating lease asset and the change in the lease liability are included in changes in operating lease assets and liabilities, net in the Combined Consolidated Statements of Cash Flows.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company recognizes the amortization of the operating lease asset and accretion of the lease liability for an operating lease as a single lease cost. This cost is recognized on a straight-line basis over the lease term.
Hardees measures the operating lease asset and lease liability by discounting lease payments using the estimated risk-free rate as the discount rate at the lease commencement. The company has elected to use the risk-free rate as their discount rate to determine the initial and subsequent measurement of operating lease liabilities.
Any reductions to the operating lease asset and changes in the lease liability are included in changes in operating lease assets and liabilities, net, within the Combined Consolidated Statements of Cash Flows. This approach simplifies the accounting for operating leases by combining the amortization and accretion into a single, consistent expense over the life of the lease.