How does Crepe De Licious carry its accounts receivable?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
United States franchisor for the "Crepe Delicious" chain of restaurants. Beginning in January 2021, the Company also directly operates and owns a restaurant, Dolphin Mall (the Restaurant).
Basis of Accounting
The Company's policy is to prepare its financial statements on the accrual basis of accounting. An accrual basis financial statement gives effect to all revenue billed but not collected, expenses incurred but not yet paid, and expenses prepaid but not yet incurred.
Use of Estimates
The preparation of financial statements in conformity with U.S generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis, thus accounts receivable do no bear interest, although a finance charge may be applied to such receivables that are past due.
The Company recognizes an expected allowance for credit losses that is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis by portfolio segment where similar risk characteristics exist. The Company's primary portfolio segments are franchisee receivables and corporate receivables. Accounts and rebates receivables are evaluated individually when they do not share similar risk characteristics, such as in circumstances where amounts are considered at risk or uncollectible.
The allowance estimate is derived from a review of the Company's historical losses based on the aging of its accounts and rebates receivables. This estimate is adjusted for management's assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis, and while accounts receivable do not typically bear interest, a finance charge may be applied to past due receivables.
Crepe De Licious recognizes an expected allowance for credit losses, which is updated to reflect changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis by portfolio segment, where similar risk characteristics exist. The primary portfolio segments are franchisee receivables and corporate receivables.
Accounts and rebates receivables are evaluated individually when they do not share similar risk characteristics, such as when amounts are considered at risk or uncollectible. The allowance estimate is derived from a review of the company's historical losses based on the aging of its accounts receivable, adjusted for management's assessment of current conditions, forecasts regarding future events, and other relevant factors.
Crepe De Licious will write off receivables when there is information indicating the debtor is facing significant financial difficulty and there is no possibility of recovery. Recoveries made from accounts previously written off will be recognized as an offset to credit loss expense in the year of recovery. Due to franchisee bankruptcy, the company anticipates higher than expected credit losses than have been incurred in the past, and management has individually assessed these balances for an allowance for credit losses.