Under what circumstances does Crisp & Green write off outstanding accounts receivable balances?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
Accounts receivables are stated at the amount management expects to collect from Outstanding balances. At the beginning of 2023, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which modifies the measurement of expected credit losses. The Company adopted this new guidance utilizing the modified retrospective transition method. The adoption of the Standard did not have a material impact on the Company's financial statements but did change how the allowance for credit losses is determined. The Company extends credit terms to customers, primarily franchisees, in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial conditions and generally requires no collateral. Accounts receivables are recorded at their estimated net realizable value, net of an allowance for credit losses. The Company's estimate of the allowance for credit losses is based upon historical experience, its evaluation of the current status of receivables, current economic conditions, certain forward looking information and unusual circumstances, if any. Expected credit losses are recorded through a charge to earnings and a credit to the allowance for expected credit losses based on its assessments. Balances that are still outstanding after management has used reasonable collection efforts are written off. The Company determined no allowance was necessary at December 31, 2023, 2022, and 2021.
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
According to Crisp & Green's 2024 Franchise Disclosure Document, the company writes off outstanding accounts receivable balances after management has used reasonable collection efforts.
Crisp & Green states accounts receivable at the amount management expects to collect. The company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which modifies the measurement of expected credit losses. The company adopted this new guidance utilizing the modified retrospective transition method. The adoption of the Standard did not have a material impact on the Company's financial statements but did change how the allowance for credit losses is determined.
In the normal course of business, Crisp & Green extends credit terms to customers, primarily franchisees. They perform ongoing credit evaluations of their customers' financial conditions and generally do not require collateral. Accounts receivables are recorded at their estimated net realizable value, net of an allowance for credit losses. The company's estimate of the allowance for credit losses is based upon historical experience, its evaluation of the current status of receivables, current economic conditions, certain forward looking information and unusual circumstances, if any. Expected credit losses are recorded through a charge to earnings and a credit to the allowance for expected credit losses based on its assessments.
For a prospective Crisp & Green franchisee, this means that the franchisor has a process for managing and writing off uncollectible debt. It also means that Crisp & Green assesses the creditworthiness of its franchisees and may offer credit terms. Franchisees should maintain open communication with Crisp & Green regarding any financial difficulties to explore potential solutions before their accounts become overdue.