How does Carbones Pizzeria's management determine the allowance for credit losses?
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 allowance is reviewed periodically by the management team.
To determine the allowance, Carbones Pizzeria's management considers historical experience and analyzes individual past-due balances. This analysis includes assessing collectability based on current conditions and reasonable, supportable forecasts. This approach allows them to evaluate the likelihood of collecting outstanding payments from franchisees.
Additionally, if Carbones Pizzeria's management believes that a receivable is unlikely to be recovered, it is charged off against the allowance. For the year ended October 31, 2024, the allowance for credit losses for accounts receivable amounted to $175,595. This figure represents the company's estimation of uncollectible amounts from franchisees, reflecting a degree of financial risk associated with outstanding payments.