For what leases is Itan required to recognize a ROU asset and lease liability on the balance sheet?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Leases - The Company follows ASU 2016-02, Leases (Topic 842) and all related amendments. The standard established a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months and disclose key information about the leasing arrangements. Options to renew a lease are only included in the lease term to the extent those options are reasonably certain to be exercised. Leases will be classified as either finance or operating. Operating lease liabilities and their corresponding ROU assets are initially recorded based on the present value of lease payments over the term of the lease. The rate implicit in lease contracts is typically not readily determinable and, as a result, the Company utilizes the treasury yield rate to discount lease payments. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset of its estimated life. The Company had no finance leases at December 31, 2024 and 2023.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Itan adheres to ASU 2016-02, Leases (Topic 842), and its related amendments. This standard mandates that Itan, as a lessee, must recognize a right-of-use (ROU) asset and a lease liability on its balance sheet for all leases with terms extending beyond 12 months.
Options to renew a lease are factored into the lease term only if it is reasonably certain that these options will be exercised. The leases are then categorized as either finance or operating leases. Operating lease liabilities, along with their corresponding ROU assets, are initially recorded based on the present value of lease payments over the lease term.
Typically, the rate implicit in lease contracts is not easily determinable, so Itan uses the treasury yield rate to discount lease payments. Finance leases are generally those that allow Itan to substantially utilize or pay for the entire asset over its estimated life. As of December 31, 2024 and 2023, Itan had no finance leases.