How does Big Blue Swim School determine the allowance for credit losses?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
s. Actual results could differ from those estimates.
Accounts receivable
Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of some of its franchisees to make required payments. Unbilled accounts receivable, which are included in accounts receivable, represent amounts for which the Company has an unconditional right to receive payment for, although invoicing is subject to contractual billing requirements. The Company assesses collectability by reviewing accounts receivable and its contract assets on a collective basis where similar risk characteristics exist. In determining the amount of the allowance for doubtful accounts, management considers historical collectability and makes judgments about the creditworthiness of the pool of franchisees based on credit evaluations. Current market conditions and reasonable and supportable forecasts of future economic conditions are considered in adjusting the historical losses to determine the appropriate allowance for doubtful accounts. Uncollectible accounts are written off when all collection efforts have been exhausted.
BIG BLUE SWIM SCHOOL FRANCHISING, LLC
(A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024, 2023 AND 2022
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts receivable (continued)
The Company recorded an allowance for credit losses in the amount of $- and $100,000 as of December 31, 2024 and 2023, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 75)
What This Means (2025 FDD)
According to Big Blue Swim School's 2025 Franchise Disclosure Document, the company maintains allowances for doubtful accounts to cover estimated losses from franchisees who may not be able to make required payments. Big Blue Swim School assesses the collectability of accounts by reviewing accounts receivable and contract assets, considering factors with similar risk characteristics.
To determine the allowance for doubtful accounts, Big Blue Swim School's management considers historical collectability data and makes informed judgments about the creditworthiness of its franchisees, based on credit evaluations. The company also takes into account current market conditions and forecasts of future economic conditions to adjust historical losses and determine the appropriate allowance for doubtful accounts. Uncollectible accounts are written off after all collection efforts have been exhausted.
The FDD indicates that Big Blue Swim School recorded an allowance for credit losses of $- as of December 31, 2024, and $100,000 as of December 31, 2023. Additionally, the FDD states that concentration of credit risk with respect to receivables is limited due to the number of franchisees in the Company's customer base and their geographic dispersion.