What factors does Buildingstars' management consider when evaluating the allowance for potential account losses?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable are carried net of allowance for credit losses. The allowance for credit losses is increased by provisions charged to expense and reduced by accounts charged off, net of recoveries. The allowance is maintained at a level considered adequate to provide for potential account losses based on management's evaluation of the anticipated impact on the balance of current economic conditions, changes in the character and size of the balance, past and expected future loss experience and other pertinent factors.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, the company maintains an allowance for credit losses to cover potential uncollectible accounts receivable. This allowance is adjusted based on provisions charged to expense and reductions from accounts charged off, net of any recoveries.
Buildingstars' management determines the level of this allowance by evaluating several factors. These include the current economic conditions, which can impact the ability of franchisees and customers to pay their debts. They also consider changes in the character and size of the accounts receivable balance, which could indicate shifts in the risk profile of their customer base.
Additionally, Buildingstars takes into account its past and expected future loss experience. This involves analyzing historical data on uncollectible accounts to predict future losses. Management also considers other pertinent factors that may affect the collectibility of accounts receivable, ensuring the allowance is adequate to cover potential losses.