How does Cool Binz determine the allowance for credit losses on trade accounts receivable?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
Trade accounts receivable are stated at invoice amounts. An allowance for credit losses is established for amounts expected to be uncollectible over the contractual life of the receivables. The Company collectively evaluates trade receivables to determine the allowance for credit losses. The Company calculates the allowance using an expected loss model that considers the Company's actual historical loss rates adjusted for current economic conditions and reasonable and supportable forecasts. The Company considers unemployment and consumer spending data when making adjustments for reasonable and supportable forecasts. Uncollectible amounts are written off against the allowance for credit losses in the period they are determined to be uncollectible. Recoveries of amounts previously written off are recognized when received.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, the company establishes an allowance for credit losses for trade accounts receivable based on amounts expected to be uncollectible over the contractual life of the receivables. Cool Binz collectively evaluates these receivables to determine the allowance.
The company calculates this allowance using an expected loss model. This model considers Cool Binz's actual historical loss rates, which are then adjusted to reflect current economic conditions and reasonable, supportable forecasts. To make these adjustments, Cool Binz considers data related to unemployment and consumer spending.
When amounts are determined to be uncollectible, they are written off against the allowance for credit losses during that period. Conversely, if amounts previously written off are later recovered, these recoveries are recognized when they are received.