When did Hck Hot Chicken adopt the new accounting standard ASU 326?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued guidance ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (ASU 326). ASU 326 significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity's exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were trade accounts receivable. The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, the company adopted the accounting standard ASU 326, Financial Instruments – Credit Losses (Topic 326), effective January 1, 2023. This standard significantly changed how entities measure credit losses for most financial assets not measured at fair value through net income, shifting from an incurred loss model to an expected loss model. The financial assets held by Hck Hot Chicken subject to this guidance were trade accounts receivable.
The adoption of ASU 326 required enhanced disclosures to provide users of the financial statements with useful information for analyzing Hck Hot Chicken's exposure to credit risk and the measurement of credit losses. However, Hck Hot Chicken states that the impact of adopting this standard was not considered material to the financial statements.
For a prospective franchisee, this information indicates that Hck Hot Chicken is adhering to current accounting standards and providing necessary disclosures related to credit losses. The fact that the impact was not material suggests that the change did not significantly affect the company's financial position or operations. Franchisees may want to inquire about the specific enhanced disclosures to understand how Hck Hot Chicken manages and reports credit losses related to its accounts receivable.