How does Christian Brothers Automotive estimate expected credit losses for receivables?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
Expected Credit Losses (Topic 326)**
The Company utilizes the loss rate method in determining its lifetime expected credit losses on its account receivables. This method is used for calculating an estimate of losses based primarily on the Company's historical loss experience. In determining its loss rates, the Company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition, and legal and regulatory requirements on the level of estimated credit losses in the existing receivables. As of December 31, 2024 and 2023, the Company determined that an allowance for credit losses was not needed.
Accounts receivable, net of allowance for credit losses as of December 31, 2024, December 31, 2023 and January 1, 2023, was approximately $17,632,000, $13,055,000 and $12,954,000, respectively.
Notes Receivable
Current Expected Credit Losses (Topic 326)
The Company utilizes the loss rate method in determining its lifetime expected credit losses on its note receivables. This method is used for calculating an estimate of losses based primarily on the Company's historical loss experience. In determining its loss rates, the Company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing receivables. As of December 31, 2024 and 2023, the Company determined that an al
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to Christian Brothers Automotive's 2025 Franchise Disclosure Document, the company uses the loss rate method to determine lifetime expected credit losses on both account and note receivables. This method calculates estimated losses based primarily on Christian Brothers Automotive's historical loss experience.
To determine loss rates, Christian Brothers Automotive evaluates information related to its historical losses, adjusting for current conditions and reasonably forecasted periods. These adjustments involve both qualitative and quantitative assessments, considering factors such as past due receivables, customer creditworthiness, changes in receivable terms, the impact of competition, and legal and regulatory requirements.
For the years ending December 31, 2024 and 2023, Christian Brothers Automotive determined that an allowance for credit losses was not needed for either accounts or notes receivable. The net accounts receivable, after accounting for credit losses, were approximately $17,632,000 as of December 31, 2024, $13,055,000 as of December 31, 2023, and $12,954,000 as of January 1, 2023. This indicates that Christian Brothers Automotive has not had significant issues with uncollectible receivables in recent years.