What information does Counselor Realty evaluate when determining its loss rates?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company utilizes the aging method in determining its lifetime expected credit losses on its 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. For receivables that are not expected to be collected within the normal business cycle, the Company considers current and forecasted direction of the economic and business environment. Such forecasted information includes: GDP growth, unemployment rates and interest rates, amongst others.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the company considers several factors when determining its loss rates for accounts receivable. The company uses the aging method to estimate lifetime expected credit losses, basing calculations primarily on historical loss experience. However, this is adjusted for current conditions and reasonable forecasts.
Specifically, Counselor Realty evaluates information related to historical losses, adjusting for current conditions and forecasts. These adjustments consider past due receivables, customer creditworthiness, changes in receivable terms, and external forces like competition and legal/regulatory requirements. For receivables not expected to be collected within the normal business cycle, the company considers the current and forecasted direction of the economic and business environment.
This forecast incorporates factors such as GDP growth, unemployment rates, and interest rates. By pooling receivables based on similar risk characteristics, Counselor Realty aims to refine its loss rate estimations. The company also continuously evaluates these pooling decisions and adjusts as needed when risk characteristics change. This comprehensive approach suggests that Counselor Realty actively monitors and adapts its loss rate assessments based on a variety of internal and external factors.