What method does Coffee News use to determine uncollectible accounts receivable?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
Effective January 1, 2024, the Company adopted FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which modifies the measurement of expected claims and credit losses on certain financial instruments. Topic 326 requires measurement and recognition of expected versus incurred losses for financial assets held. Financial assets held by the Company that are subject to ASU 2016-13 include franchisee accounts receivable. The adoption of this ASU did not have a material impact on the Company's financial statements.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, the company adopted FASB Accounting Standards Update (ASU) 2016-13 on January 1, 2024. This update, titled Financial Instruments—Credit Losses (Topic 326), modifies how expected claims and credit losses on financial instruments are measured.
Topic 326 mandates that Coffee News measure and recognize expected versus incurred losses for financial assets held, specifically franchisee accounts receivable. This means that instead of waiting for a loss to occur before recognizing it, Coffee News now accounts for potential losses that are expected to occur in the future.
The adoption of ASU 2016-13 did not have a material impact on Coffee News's financial statements. This suggests that the change in accounting method did not significantly alter the reported financial results for the company.
For a prospective franchisee, this information indicates that Coffee News is using a forward-looking approach to assess potential credit losses from franchisees, which is a standard accounting practice. While the impact was not material, it's a sign of proactive financial management.