How does Aerus record accounts receivable?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts Receivable
Accounts receivable are recorded at the invoiced amounts owed for products shipped and typically do not bear interest. Amounts are recorded net of an allowance for expected credit losses which represents the best estimate of probable loss inherent in the Company's accounts receivable portfolio. The allowance for credit losses is computed under the allowance method, based on experience, current economic conditions, and the financial condition of customers. Accounts considered uncollectible are charged off against the allowance account in the year they are deemed uncollectible. Other receivables are comprised of tariff and Canadian fee refunds which are expected to be received within one year.
Notes Receivable
Notes receivable consists primarily of amounts due from franchisees. The allowance for credit losses is estimated, based on experience, current economic conditions, and the financial condition of borrowers. Provisions for credit loss is determined based on an evaluation of the credit risk of the franchisee. Credit risk is based on payment history and the franchisee's level of business.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, accounts receivable are recorded at the invoiced amounts for shipped products and typically do not bear interest. These amounts are recorded net of an allowance for expected credit losses, which represents the company's best estimate of probable losses within its accounts receivable portfolio. Aerus computes the allowance for credit losses under the allowance method, considering experience, current economic conditions, and the financial condition of its customers.
Accounts that are considered uncollectible are charged off against the allowance account in the year they are deemed uncollectible. Other receivables include tariff and Canadian fee refunds expected to be received within one year. Notes receivable, primarily from franchisees, also have an allowance for credit losses estimated based on experience, economic conditions, and the borrowers' financial health. Provisions for credit loss are determined by evaluating the credit risk of each franchisee, considering their payment history and business level.
For a prospective Aerus franchisee, understanding these accounting practices is crucial. It clarifies how Aerus manages and accounts for money owed to them, especially concerning potential losses from franchisees who may not be able to pay. This also highlights the importance of maintaining a good payment history and a stable business, as these factors directly influence Aerus's assessment of credit risk and the potential for future financing opportunities. The franchisee should inquire about the historical trends in accounts receivable and the typical range of the allowance for credit losses to better understand the financial stability and risk management practices of Aerus.