In Burger King's consolidated statement of operations, under what classifications is bad debt expense recognized for expected credit losses?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
(loss) ("AOCI") in the consolidated statements of shareholders' equity.
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 forei
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, bad debt expenses recognized for expected credit losses are classified within specific categories in the consolidated statement of operations. These classifications are based on the nature of the underlying receivable.
Specifically, Burger King categorizes bad debt expenses as "Cost of sales", "Franchise and property expenses", or "Advertising expenses and other services". This means that when a franchisee's debt is deemed uncollectible, the expense is recorded in one of these three areas, depending on what the debt relates to. For example, uncollectible royalty payments might be classified under "Franchise and property expenses", while unpaid advertising contributions could fall under "Advertising expenses and other services".
In 2024, net bad debt expense totaled $24 million. In 2023, it totaled $20 million, and in 2022, it amounted to $19 million. This detailed classification provides transparency into where Burger King is experiencing credit losses and helps in analyzing the financial health of its franchisees and the overall franchise system. Prospective franchisees should understand these classifications to better assess the financial risks and obligations associated with owning a Burger King franchise.