How does Counselor Realty measure receivables that do not share the same risk characteristics with other receivables?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company recognizes an allowance for credit losses for trade and other receivables to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of past events and historical loss experience, current events and also future events based on our expectation as of the balance sheet date. Receivables are written off when the Company determines that such receivables are deemed uncollectible. The Company pools its receivables based on similar risk characteristics in estimating its expected credit losses. In situations where a receivable does not share the same risk characteristics with other receivables, the Company measures those receivables individually. The Company also continuously evaluates such pooling decisions and adjusts as needed from period to period as risk characteristics change.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the company addresses accounts receivable and potential credit losses. Counselor Realty pools its receivables based on similar risk characteristics to estimate expected credit losses. However, when a receivable does not align with these shared risk characteristics, Counselor Realty measures those receivables individually.
This individualized approach ensures that receivables with unique risk profiles are not averaged into the general pool, which could distort the overall assessment of potential credit losses. Counselor Realty continuously evaluates its pooling decisions and makes adjustments as needed when risk characteristics change, allowing for a dynamic and responsive approach to managing accounts receivable.
For a prospective franchisee, this means that Counselor Realty has a system in place to account for unusual or high-risk receivables separately. This could be relevant if a franchisee has a client or situation that deviates from the norm. It also indicates that Counselor Realty is proactive in adjusting its risk assessment methods as circumstances evolve, which could provide a more accurate reflection of the financial health of the receivables.