How does Baymont Inn Suites measure the expected credit losses of its receivables?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company generates trade receivables in the ordinary course of its business and provides for estimated bad debts on such receivables. The Company measures the expected credit losses of its receivables on a collective (pool) basis which aggregates receivables with similar risk characteristics and uses historical collection attrition rates for ten years to estimate its expected credit losses. As such, the Company measures the expected credit losses of its receivables by segment and geographical area. The Company provides an estimate of expected credit losses for its receivables immediately upon origination or acquisition and may adjust this estimate in subsequent reporting periods as required. When the Company determines that an account is not collectible, the account is written-off to the allowance for doubtful accounts. The Company also considers whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, the Company would adjust the allowance for doubtful accounts to reflect the expected effects of the current environment on the collectability of the Company's trade receivables which may be material.
Source: Item 23 — RECEIPTS (FDD pages 97–443)
What This Means (2025 FDD)
According to Baymont Inn Suites's 2025 Franchise Disclosure Document, the company measures expected credit losses of its receivables on a collective basis. This involves grouping receivables with similar risk characteristics. To estimate these losses, Baymont Inn Suites uses historical collection attrition rates over a ten-year period. The company measures these expected credit losses by segment and geographical area.
Baymont Inn Suites provides an estimate of expected credit losses for its receivables immediately upon origination or acquisition. This estimate may be adjusted in subsequent reporting periods as needed. When an account is deemed uncollectible, it is written off to the allowance for doubtful accounts. Baymont Inn Suites also assesses whether historical economic conditions are comparable to current economic conditions.
If current or expected future conditions differ from the historical conditions, Baymont Inn Suites will adjust the allowance for doubtful accounts. This adjustment reflects the expected effects of the current environment on the collectability of the company's trade receivables, which may be material. This approach ensures that the company's financial statements accurately reflect the potential for credit losses on its receivables.