How does Craters & Freighters assess collectability of receivables?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
tween the Company and Franchisee.
Allowance for Credit Losses
The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the current expected credit losses. The estimate of the allowance for credit losses is based on an analysis of historical loss experience, current receivables aging, and management's assessment of current conditions and expected changes during a reasonable and supportable forecast period. The Company uses an aging method to estimate allowances for credit losses. Management assesses collectability by pooling receivables with similar risk characteristics and evaluates receivables individually when specific customer balances no longer share those risk characteristics. Management of the Company has determined an allowance for credit losses of $20,000 and $50,000 is necessary at Decem
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 FDD, Craters & Freighters utilizes an allowance for credit losses to account for potential uncollectible receivables. Management's best estimate of current expected credit losses determines the carrying amount of accounts receivable. This estimate is informed by several factors, including historical loss experience, the aging of current receivables, and management's assessment of current and expected future conditions.
Craters & Freighters employs an aging method to estimate these allowances, which involves grouping receivables with similar risk characteristics. Receivables are evaluated individually if specific customer balances no longer align with these shared risk characteristics.
As of December 31, 2024, Craters & Freighters determined that an allowance for credit losses of $20,000 was necessary, compared to $50,000 on December 31, 2023. This indicates a change in the perceived risk of uncollectible accounts over the year. This allowance directly impacts the company's financial statements, reflecting a more conservative valuation of its assets by acknowledging potential losses from uncollectible accounts.