What is the impact of ASU 2022-02 on Pearce Bespoke's financial instruments and credit losses?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
New Accounting Standard – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). Topic 326 aims to replace the incurred loss impairment methodology under current GAAP with a methodology that reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Topic 326 was subsequently amended by ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures; ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses; 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842); and ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief. The Company was incorporated January 22, 2023, therefore, Topic 326 did not result in any material adjustments to balance sheet accounts, net loss, or retained earnings (deficit).
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which was subsequently amended by ASU 2022-02, aims to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses. This requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
However, because Pearce Bespoke was incorporated on January 22, 2023, Topic 326, including the amendments by ASU 2022-02, did not result in any material adjustments to balance sheet accounts, net loss, or retained earnings (deficit). This means that the new accounting standard did not have a significant impact on Pearce Bespoke's financial statements for the reporting periods covered.
For a prospective franchisee, this information indicates that Pearce Bespoke's financial reporting is in compliance with current accounting standards, but the adoption of these standards did not materially affect the company's financial position due to its recent incorporation. This suggests that Pearce Bespoke has a relatively clean financial slate in terms of historical credit loss adjustments.