What does Carbones Pizzeria's management base its allowance for expected credit losses on?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
ounts receivable. The impact of the adoption was not considered material to the financial statements and primarily resulted in enhanced disclosures only.
The Company's allowance for expected credit losses, is Management's best estimate of the amount of probable credit losses in its existing accounts receivable. The Company reviews its allowance for expected credit losses periodically. Management determines an allowance based on historical 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, the company's management determines the allowance for expected credit losses based on their best estimate of probable credit losses within existing accounts receivable. This involves a periodic review of the allowance.
Specifically, management calculates the allowance using a combination of historical experience and an analysis of individual past-due balances. This analysis assesses the collectability of these balances considering current conditions and reasonable, supportable forecasts.
Furthermore, if Carbones Pizzeria's management believes that a receivable is unlikely to be recovered, it is charged off against the allowance. For the year ending October 31, 2024, the allowance for credit losses for accounts receivable totaled $175,595. This indicates the level of potential uncollectible amounts Carbone's Pizzeria has accounted for.