What is ASU No. 2016-13, as issued by FASB and referenced in the Stretch Zone FDD, concerned with?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 requires the immediate recognition of estimated credit losses that are expected to occur over the life of many financial assets, such as accounts receivable. The new model referred to as the CECL model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures.
This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as trade receivables. Topic 326 was effective for the Company on January 1, 2023 and its adoption did not have a material impact on the Company's financial statements.
The Company has also evaluated and believes the impact of other issued standards and updates, which are not yet effective, will not have a material impact on the Company's financial position, results of operations or cash flows upon adoption.
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, ASU No. 2016-13, issued by the FASB (Financial Accounting Standards Board), relates to Financial Instruments - Credit Losses. Specifically, it concerns the measurement of credit losses on financial instruments. This accounting standards update (Topic 326) mandates the immediate recognition of estimated credit losses anticipated over the lifespan of various financial assets, including accounts receivable.
This update introduces a new model known as the CECL (Current Expected Credit Loss) model. The CECL model applies to financial assets that are subject to credit losses and are measured at amortized cost, as well as certain off-balance sheet credit exposures. These include loans, held-to-maturity debt securities, loan commitments, financial guarantees, net investments in leases, and trade receivables.
For Stretch Zone, Topic 326 became effective on January 1, 2023. The company has determined that the adoption of this standard did not have a material impact on its financial statements. Additionally, Stretch Zone has assessed other issued standards and updates that are not yet effective and anticipates that these will also not materially affect the company's financial position, results of operations, or cash flows upon adoption. This indicates that Stretch Zone believes it is in compliance with accounting standards and that future changes are not expected to significantly impact its financial reporting.