How does Ben Jerrys estimate expected credit losses for its accounts receivable portfolio?
Ben_Jerrys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company records receivables and accesses collectability of outstanding receivables in accordance with ASC 326 Financial Instruments-Credit Losses. ASC 326 verses prior codification does not result in any material differences.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for credit losses for estimated losses inherent in its accounts receivable portfolio. The estimate of expected credit losses is based on the Company's historical loss experience, adjusted for current and reasonable and supportable forecasts of economic conditions and other pertinent factors affecting the Company's customers such as known credit risk or industry trends. The Company reviews its allowance for credit loss accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its franchisees.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 89–133)
What This Means (2025 FDD)
According to Ben Jerrys's 2025 Franchise Disclosure Document, the company estimates expected credit losses inherent in its accounts receivable portfolio based on several factors. Ben Jerrys considers its historical loss experience as a primary component in this estimation. This involves analyzing past instances where accounts receivable were not fully collected.
In addition to historical data, Ben Jerrys adjusts its estimates based on current and reasonably supportable forecasts of economic conditions. This forward-looking approach allows the company to account for potential changes in the economic environment that could impact customers' ability to pay. Other pertinent factors affecting Ben Jerrys's customers, such as known credit risks or industry trends, are also taken into consideration to refine the credit loss estimates.
Ben Jerrys reviews its allowance for credit loss accounts monthly to ensure the estimates remain accurate and up-to-date. Furthermore, the company individually reviews past due balances over 90 days and over a specified amount for collectability. When all collection efforts have been exhausted and the potential for recovery is considered remote, the account balances are charged off against the allowance. Ben Jerrys does not have any off-balance-sheet credit exposure related to its franchisees.