Cracker Barrel Announces Lease Re-thinking

If this pace keeps up, there won’t be a single restaurant that hasn’t redone its lease accounting…
Cracker Barrel released an 8-K this morning, announcing that it will re-examine its lease accounting. No numbers, just the promise of restated figures soon.
What’s different in crypto Custodian Barrel’s 8-K, however, is that they sound a bit more defensive of their past accounting than their fellow restaurateur restates (RRs). Below, an excerpt from the 8-K:
“Since 1985, generally accepted accounting principles in the United States (”GAAP”) have required that leases for which there are rent increases over the term of the lease be accounted for at the average rent payment over the applicable term. This typically results in accrued rent expense in the early years being higher than cash rent payments, with the difference being recorded on the balance sheet as deferred rent liability. In later years of the lease, actual cash rent payments typically are higher than the average rent, and the difference is recorded by reducing the deferred rent liability. In effect, rent payments from the later years of the lease are partially accrued in the earlier years of the lease. GAAP generally requires that this average, or straight-line, rent be calculated over the minimum term where the lessee would incur no economic penalty from terminating the lease.”
All true. The reason for the straight-lining of the rent expense over the lease term is that it reflects the way the physical property is being used. If there’s no rent expense …

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