What happens when Chocolate Bash determines franchisee accounts receivable are uncollectible?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
Company reports these receivables at net realizable value.
Management determines the allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. On a continuing basis, management analyzes delinquent accounts receivable and, once these accounts receivable are determined to be uncollectible, they are written off through a charge against an existing allowance account. The allowance account is reviewed regularly and adjusted against earnings as appropriate. The Company determined that an allowance on outstanding franchisee receivables of $0 was necessary as of December 31, 2023, December 31, 2022, & December 31, 2021. Franchisee bad debt expense was $0 for the year ended December 31, 2023, December 31, 2022, & December 31, 2021. Franchisee amounts written off were $0 for the year ende
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the company maintains an allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. This allowance is a reserve against accounts receivable that Chocolate Bash believes may not be fully collectible.
On a continuing basis, Chocolate Bash's management analyzes delinquent accounts receivable. If these accounts are determined to be uncollectible, they are written off through a charge against the existing allowance account. This means the uncollectible amount is removed from the accounts receivable balance and reduces the allowance for doubtful accounts. The allowance account is reviewed regularly and adjusted against earnings as appropriate, ensuring that the financial statements accurately reflect the expected collectability of franchisee receivables.
For the years ended December 31, 2023, December 31, 2022, and December 31, 2021, Chocolate Bash determined that an allowance on outstanding franchisee receivables of $0 was necessary. Additionally, franchisee bad debt expense and franchisee amounts written off were $0 for each of those years. This indicates that, historically, Chocolate Bash has not experienced issues with uncollectible franchisee accounts, but this could change in the future depending on various economic factors and the financial health of its franchisees.