What factors does C12 Group consider when estimating the allowance for expected credit losses?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
Allowance for Expected Credit Losses: The Company recognizes an allowance for losses on accounts receivable in an amount equal to the current expected credit losses. The estimation of the allowance is based on an analysis of historical loss experience, current receivables aging, and management's assessment of current conditions and reasonable and supportable expectation of future conditions, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The Company assesses collectability by pooling receivables where similar characteristics exist and evaluates receivables individually when specific customer balances no longer share those risk characteristics and are considered at risk or uncollectible.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to C12 Group's 2025 Franchise Disclosure Document, the company recognizes an allowance for losses on accounts receivable that is equal to the current expected credit losses. The estimation of the allowance is based on several factors. These include an analysis of historical loss experience, the current aging of receivables, and the management's assessment of current conditions.
In addition to these factors, C12 Group also considers reasonable and supportable expectations of future conditions. The company assesses collectability by pooling receivables with similar characteristics. They evaluate receivables individually when specific customer balances no longer share those risk characteristics and are considered at risk or uncollectible.
For a prospective C12 Group franchisee, understanding these factors is crucial. It provides insight into how C12 Group manages and mitigates credit risk associated with accounts receivable. This also demonstrates the company's approach to financial prudence and risk management, which can be a key consideration for franchisees assessing the financial health and stability of the franchise system.