What factors does Bombs Away's management consider when determining the allowance for doubtful accounts?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
after invoicing. The Company reports these receivables at net realizable value.
Management determines the allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. On a continuing basis, management analyzes delinquent accounts receivable and, once these accounts receivable are determined to be uncollectible, they are written off through a charge against an existing allowance account. The allowance account is reviewed regularly and adjusted against earnings as appropriate. The Company determined that an allowance on outstanding franchisee receivables of $0 was necessary as of December 31, 2023. Franchisee bad debt expense was $0 for the year ended December 31, 20
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the management team determines the allowance for doubtful accounts by considering historical losses, current expectations, and prevailing economic conditions. This allowance is an estimate of the amount of accounts receivable that Bombs Away may not be able to collect. Franchisee receivables primarily result from initial franchise fees, royalty fees, brand development contributions and training fees charged to franchisees.
Bombs Away's management analyzes delinquent accounts receivable on a continuing basis. When these accounts are deemed uncollectible, they are written off against an existing allowance account. The allowance account is regularly reviewed and adjusted against earnings as necessary to reflect the most accurate estimate of potential losses.
As of December 31, 2023, Bombs Away determined that an allowance on outstanding franchisee receivables of $0 was necessary. Franchisee bad debt expense was $0 for the year ended December 31, 2023, and franchisee amounts written off were also $0 for the same period. This indicates that, at the time, Bombs Away did not experience any significant issues with uncollectible franchisee accounts.