What was the impact of adopting ASC 326 on My Salon Suite's financial statements?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued ASC 326 which significantly changed how entities will measure credit loss 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 incurrent loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statement 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 were subject to the guidance were trade accounts receivables. 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 enhanced disclosure only. There was no impact to prior period.
Source: Item 6 — Other Intangibles and Goodwill (FDD pages 274–314)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, the company adopted ASC 326 effective January 1, 2023. ASC 326 significantly changed how entities measure credit loss for most financial assets that aren't measured at fair value through net income. The most significant change involves shifting from the incurrent loss model to the expected loss model. The financial assets held by My Salon Suite that were subject to the guidance were trade accounts receivables.
The adoption of ASC 326 was not considered material to My Salon Suite's financial statements. The primary result was enhanced disclosure. There was no impact to any prior periods.
For a prospective My Salon Suite franchisee, this accounting change primarily affects the way My Salon Suite reports its financial results, specifically concerning potential credit losses from accounts receivable. Since the impact was immaterial, it suggests that My Salon Suite has a stable and reliable system for managing credit risk associated with its receivables.