How does C12 Group recognize an allowance for losses on accounts receivable?
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 in an amount equal to the current expected credit losses. The estimation of this allowance is based on several factors. These factors include an analysis of historical loss experience, current receivables aging, and management's assessment of current conditions. It also includes reasonable and supportable expectations of future conditions, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.
The FDD states that C12 Group assesses collectability by pooling receivables where similar characteristics exist. They evaluate receivables individually when specific customer balances no longer share those risk characteristics and are considered at risk or uncollectible.
For a prospective franchisee, this means that C12 Group has a process in place to account for potential losses from unpaid accounts receivable. This process involves a detailed analysis of various factors to estimate potential credit losses. It also involves assessing the collectability of receivables based on their characteristics and risk profiles. This accounting practice provides a more accurate representation of the company's financial health by recognizing potential losses on accounts receivable.