How does Cool Binz recognize interest income from notes receivable?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
l 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.
Notes Receivable
Notes receivable are issued upon the sale of a franchise or area franchise rights; in conjunction with the sale of equipment; or, in some cases, to refinance a franchise's overall obligations. Notes receivable are reported at original issue amount plus accrued interest, less principal repaid. Interest is recognized according to the terms of the specific notes. An allowance for credit losses is established for amounts expected to be uncollectible over the contractual life of the notes receivable. The Company collectively evaluates notes receivable 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 s
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, notes receivable are issued when Cool Binz sells a franchise or area franchise rights, sells equipment, or refinances a franchise's obligations. Cool Binz reports these notes receivable at the original issue amount, adding any accrued interest and subtracting principal repayments. Interest income from these notes is recognized based on the specific terms outlined in each note.
To account for potential losses, Cool Binz establishes an allowance for credit losses, which estimates the amounts that may not be collectible over the life of the notes. This allowance is determined by collectively evaluating the notes receivable and using an expected loss model. The model considers Cool Binz's historical loss rates, adjusted for current economic conditions and any reasonable forecasts. Factors like unemployment and consumer spending data are taken into account when making these adjustments.
When amounts are deemed uncollectible, they are written off against the allowance for credit losses during that period. If any of these written-off amounts are later recovered, they are recognized as income when received. Notes are considered delinquent if their repayment terms are not met. As of December 31, 2024, $128 of notes receivable were considered past due.