What happens to account balances for Ben Jerrys after all means of collection have been exhausted and the potential for recovery is considered remote?
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 addresses the collectability of outstanding receivables in accordance with ASC 326 Financial Instruments-Credit Losses. Ben Jerrys records trade accounts receivable at the invoiced amount, without interest. The company maintains an allowance for credit losses to cover estimated losses within its accounts receivable. This estimate is informed by historical loss experience, economic forecasts, and factors affecting customers, such as credit risk and industry trends.
Ben Jerrys reviews its allowance for credit loss accounts monthly, with specific attention to balances past due over 90 days and exceeding a specified amount, which are individually assessed for collectability. After Ben Jerrys has exhausted all collection methods and deems the potential for recovery as remote, the outstanding account balances are charged off against the allowance for credit losses.
For a prospective Ben Jerrys franchisee, this means that the company has a system in place to manage and account for potential credit losses from franchisees. It also means that Ben Jerrys does not have any off-balance-sheet credit exposure related to its franchisees. This is a fairly standard accounting practice, but it is good to know that Ben Jerrys is proactive in managing its credit risk.