What is Bw Premier Collection's strategy for managing credit risk related to its investments?
Bw_Premier_Collection Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is also potentially subject to concentrations of credit risk in its investments. The Company has investments in certificates of deposits, mutual funds, common shares, U.S. treasury and government agency bonds, corporate bonds, mortgage and asset-backed securities, and municipal and provincial notes and bonds. The Company has appointed an investment advisory firm to oversee the Company's investment strategy who have assigned various fund managers to manage the Company's investments. The Company has not experienced any other-than-temporary impairment losses in such accounts and believes it is not exposed to any significant credit risk to investments based on its ability to hold investments until recovery as well as the active management of the portfolio.
Source: Item 23 — Receipts (FDD pages 54–203)
What This Means (2025 FDD)
According to Bw Premier Collection's 2025 Franchise Disclosure Document, the company is potentially exposed to credit risk in its investment portfolio. To mitigate this risk, Bw Premier Collection invests in various financial instruments, including certificates of deposit, mutual funds, common shares, U.S. Treasury and government agency bonds, corporate bonds, mortgage and asset-backed securities, and municipal and provincial notes and bonds.
To oversee its investment strategy, Bw Premier Collection has appointed an investment advisory firm that assigns fund managers to manage the company's investments. The FDD states that Bw Premier Collection has not experienced any other-than-temporary impairment losses in these accounts. The company believes it is not exposed to any significant credit risk related to its investments due to its ability to hold investments until recovery and the active management of its portfolio.
Furthermore, Bw Premier Collection has adopted Financial Accounting Standards Board (FASB) ASU No. 2016-13, which introduces a new credit loss methodology called Current Expected Credit Losses (CECL). This methodology requires earlier recognition of credit losses and provides additional transparency about credit risk. Bw Premier Collection adopted this guidance on December 1, 2023, using the modified retrospective approach. The company analyzes its available-for-sale debt securities to determine the amount of allowance related to credit loss that needs to be recorded, considering factors such as the inherent default risk, current ratings, and the extent of any current loss position. The company also considers its intention to sell the securities and the likelihood of being required to sell them before recovery of the amortized cost basis.