For Burger King, where is bad debt expense classified in the consolidated statement of operations?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
For any transaction that is denominated in a currency different from the entity's functional currency, we record a gain or loss based on the difference between the foreign exchange rate at the transaction date and the foreign exchange rate at the transaction settlement date (or rate at period end, if unsettled) which is included within other operating expenses (income), net in the consolidated statements of operations.
Cash and Cash Equivalents
All highly liquid investments with original maturities of three months or less and credit card receivables are considered cash equivalents.
Accounts and Notes Receivable, net
Our credit loss exposure is mainly concentrated in our accounts and notes receivable portfolio, which consists primarily of amounts due from franchisees, including royalties, rents, franchise fees, contributions due to advertising funds we manage and, in the case of our TH segment, amounts due for supply chain sales. Accounts and notes receivable are reported net of an allowance for expected credit losses over the estimated life of the rece
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, gains or losses from transactions denominated in a currency different from the entity's functional currency are recorded based on the difference between the foreign exchange rate at the transaction date and the foreign exchange rate at the transaction settlement date. If unsettled, the rate at period end is used. These gains or losses are included within other operating expenses (income), net in the consolidated statements of operations.
While the document specifies where foreign exchange gains and losses are recorded, it does not explicitly state where bad debt expense is classified in the consolidated statement of operations. However, the document does mention accounts and notes receivable are reported net of an allowance for expected credit losses. This suggests that bad debt expense, which arises from uncollectible receivables, could potentially be related to this allowance.
To gain a comprehensive understanding of how Burger King classifies bad debt expense, a prospective franchisee should directly inquire with the franchisor about its specific accounting practices and where this expense is reported on the consolidated statement of operations. Understanding this classification is important for assessing the financial health and operational efficiency of Burger King.