What is Counselor Realty's responsibility regarding the continuous evaluation of pooling decisions for receivables?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
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 pools its receivables based on similar risk characteristics to estimate expected credit losses. These estimates take into account past events, historical loss experience, current events, and future expectations as of the balance sheet date. If a receivable does not share the same risk characteristics as others, it is measured individually.
Counselor Realty is responsible for continuously evaluating these pooling decisions. As risk characteristics change over time, the company must adjust its pooling decisions from period to period. This ongoing evaluation ensures that the allowance for credit losses accurately reflects the expected collectability of receivables.
This continuous evaluation is important for franchisees because it affects the accuracy of Counselor Realty's financial statements. If the pooling decisions are not properly evaluated and adjusted, the allowance for credit losses may be inaccurate, which could lead to misstatements in the company's financial position. This could impact a franchisee's understanding of the financial health of the franchisor.