What happens if Carbones Pizzeria does not charge off a receivable that management believes is unrecoverable?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
orical experience and then analyzes individual past due balances for collectability based on current conditions and reasonable and supportable forecasts.
In addition, if Management believes it is probable a receivable will not be recovered, i
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, if the company's management believes that a receivable is not likely to be recovered, it is charged off against the allowance for credit losses. For the year ended October 31, 2024, the allowance for credit losses for accounts receivable amounted to $175,595, while for the year ended October 31, 2023, the allowance for credit losses for accounts receivable amounted to $109,133.
If Carbones Pizzeria's management does not charge off an unrecoverable receivable, the allowance for credit losses would not accurately reflect the true amount of probable credit losses. This could lead to an overstatement of the company's assets and an inaccurate representation of its financial health.
Franchisees should be aware that the accuracy of financial reporting depends on the proper handling of accounts receivable and the allowance for credit losses. Failure to adhere to these accounting principles could have implications for the overall financial stability of Carbones Pizzeria.