What is the purpose of the allowance for expected credit losses at Carbones Pizzeria?
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 allowance for expected credit losses is management's best estimate of potential credit losses within its existing accounts receivable. This allowance is reviewed periodically by the company's management.
Management determines the allowance based on historical experience and analyzes individual past due balances to assess collectability, considering current conditions and reasonable forecasts. This process helps Carbones Pizzeria account for potential uncollectible royalty and advertising fees from franchisees.
If Carbones Pizzeria's management believes that a receivable is not recoverable, 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 indicates the amount of money Carbones Pizzeria has set aside to cover potential losses from franchisees failing to pay their dues.