What is the title of ASU 2016-02, which Pearce Bespoke adopted?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
xpected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
Note 2 – Summary of Significant Accounting Policies – Continued
Recently Adopted Accounting Standards – 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.
During the period ended December 31, 2023, the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. As a result of implementing ASU No. 2016-02, the Company recognized a right-of use asset and lease liability of $47,474 on its balance sheet as of December 31, 2023
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, titled Leases (Topic 842). This update supersedes existing guidance for accounting for leases under Topic 840, Leases. The FASB subsequently issued additional ASUs to amend and clarify Topic 842. These include 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 introduced by ASU 2016-02 is the requirement for companies to recognize right-to-use (ROU) assets and lease liabilities for operating leases on their balance sheets. This means that Pearce Bespoke, and by extension its franchisees, must account for leases in a more comprehensive manner, reflecting the assets and liabilities associated with leasing arrangements directly on their balance sheets.
Pearce Bespoke adopted ASU No. 2016-02, Leases, during the period ended December 31, 2023. As a result, the company recognized a right-of-use asset and lease liability of $47,474 on its balance sheet as of December 31, 2023. The adoption of this standard did not significantly affect the amounts reported in the statement of operations and members' equity (deficiency) for the period ended December 31, 2023. For a prospective franchisee, this indicates that Pearce Bespoke has already integrated these accounting standards into its financial reporting, and new franchisees will need to understand how these standards affect their own financial statements related to any leased assets.