What accounting standard update (ASU) supersedes existing guidance for accounting for leases, as mentioned in the Learningrx FDD?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
2024 and 2023 were $898 and $898, respectively.
Advertising
The Corporation expenses costs for advertising as the costs are incurred. Total advertising costs charged to expense for the years ended September 30, 2024 and 2023 were $50,212 and $34,373, respectively.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance for accounting for leases under Topic 840, Leases. The FASB also subsequently issued the following additional ASUs, which amend and clarify Topic 842: ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018- 11, Leases (Topic 842): Targeted Improvements; ASU 2018-20, Narrow-scope Improvements for Lessors; and ASU 2019-01, Leases (Topic 842): Codification Improvements. The most significant change in the new leasing guidance is the requirement to recognize right-to-use (ROU) assets and lease liabilities for operating leases on the balance sheet.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes and deferred tax assets related primarily to differences between taxable income for tax purposes (cash basis) and book taxable income (accrual) plus any operating losses carried forward. Deferred taxes assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, ASU 2016-02, Leases (Topic 842), issued by the FASB in February 2016, supersedes the existing guidance for accounting for leases under Topic 840, Leases. This update requires companies to recognize right-to-use (ROU) assets and lease liabilities for operating leases on their balance sheets, which represents a significant change in lease accounting.
In addition to ASU 2016-02, the FASB issued several additional ASUs to amend and clarify Topic 842. These include ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20, and ASU 2019-01, all focused on refining various aspects of lease accounting. The adoption of Topic 842 required Learningrx to restate amounts as of October 1, 2021, resulting in an increase in both operating lease ROU assets and operating lease liabilities by $362,438.
For a Learningrx franchisee, understanding these accounting standards is crucial, especially concerning lease agreements for their center. The requirement to recognize ROU assets and lease liabilities on the balance sheet can impact their financial statements and key financial ratios. Franchisees should consult with their financial advisors to fully understand the implications of Topic 842 and how it affects their specific lease arrangements and financial reporting.