When did Precision Door Service adopt ASC 842, and what method was used for adoption?

According to the 2025 FDD, Precision Door Service adopted ASC 842 effective January 1, 2022, using the modified retrospective adoption method. This adoption did not result in any adjustments to the opening retained earnings.

Precision Door Service utilized the modified retrospective option available in ASC 842, allowing them to continue applying the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented during the year of adoption. The company elected not to separate lease and non-lease components for new and modified leases after the adoption date. Instead, they account for each separate lease component of a contract and its associated non-lease components as a single lease component. Additionally, Precision Door Service elected not to recognize a right-of-use asset and a lease liability for leases with an initial term of twelve months or less.

For a prospective franchisee, this means that Precision Door Service has updated its accounting practices to comply with the latest lease accounting standards. The modified retrospective method simplifies the transition by not requiring restatement of prior periods, which can reduce the administrative burden. The election not to separate lease and non-lease components and the exemption for short-term leases further streamline the accounting process for Precision Door Service.

Understanding these accounting changes is important for franchisees as it affects how leases are reported in the financial statements, which can impact financial ratios and overall financial analysis. Franchisees should consult with their own financial advisors to understand the implications of ASC 842 on their specific circumstances.