What is the basis for Craters & Freighters management's best estimate of current expected credit losses?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Craters & Freighters' 2025 Franchise Disclosure Document, the company reduces the carrying amount of accounts receivable by an allowance that reflects management's best estimate of current expected credit losses. This estimate is determined through an analysis of historical loss experience, current receivables aging, and management's assessment of current conditions, including expected changes during a reasonable forecast period.
Craters & Freighters uses an aging method to estimate allowances for credit losses. This involves assessing collectability by pooling receivables with similar risk characteristics. Receivables are evaluated individually when specific customer balances no longer share those risk characteristics.
For the years ending December 31, 2024 and 2023, Craters & Freighters management determined that an allowance for credit losses of $20,000 and $50,000, respectively, was necessary. This indicates a change in the estimated credit losses between the two years, potentially reflecting changes in the risk profile of receivables or the overall economic conditions.