How does the carrying amount of C12 Group's financial instruments relate to their fair value?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts Receivable
Accounts receivable are financial instruments which potentially subject the Company to credit risk. The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is recorded. When amounts become uncollectible, the Company aims to pursue reconciliation Biblically, and after periodic review, they will be charged to operations when that determination is made. Management's policy is to grant unsecured credit to its customers.
Supplies Inventory
Supplies inventory is valued at the lower of cost (first-in, first-out) or net realizable value and consists of promotional, educational and office supplies.
Property and Equipment
Property is recorded at cost. Impairments are recognized when property net carrying costs are determined to be in excess of their fair value and are not recoverable.
3. Summary of Significant Accounting Policies (Continued)
Property and Equipment (Continued)
Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives as follow:
Website and Computer Equipment 5 years Office Furniture and Equipment 5 - 7 years Leasehold Improvements 3 years
Goodwill
The Company accounts for intangible assets pursuant to FASB ASC 350. Intangible assets with an indefinite life are not amortized but are assessed at least annually for impairment. Impairment exists when the carrying amount of the intangible assets exceeds the implied fair value. If impairment has occurred, the Company would recognize a current period charge against earnings at the time of impairment. In management's opinion, there has been no impairment to the value of the recorded goodwill at December 31, 2022.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to C12 Group's 2025 Franchise Disclosure Document, the company addresses the relationship between the carrying amount and fair value of its assets in the context of goodwill and property. Goodwill, representing the excess of asset acquisition costs over fair value, is assessed for impairment annually. If the carrying amount exceeds the implied fair value, C12 Group would recognize a charge against earnings in the current period. This indicates that C12 Group adjusts the carrying amount of goodwill to reflect its fair value when necessary.
For property and equipment, C12 Group recognizes impairments when the net carrying costs are determined to be in excess of their fair value and are not recoverable. This means that if the value of property and equipment declines below their carrying cost, and the company cannot recover that cost, an impairment is recognized to reduce the carrying amount to fair value. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which include website and computer equipment (5 years), office furniture and equipment (5-7 years), and leasehold improvements (3 years).
Accounts receivable are also considered financial instruments subject to credit risk. C12 Group considers its accounts receivable to be fully collectible and does not record an allowance for doubtful accounts. However, when amounts become uncollectible, they are charged to operations after a periodic review and a determination is made. This suggests that while the initial carrying amount reflects the full value, adjustments are made to reflect fair value when collectibility is in doubt. Prospective franchisees should note that C12 Group's accounting policies aim to align the carrying amounts of its assets with their fair values through regular assessments and adjustments for impairment and uncollectibility.