How does Crowne Plaza estimate lifetime credit losses for accounts receivable?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable arise from sales to a large number of customers. Accounts receivable are recorded at their original amount less an allowance for any expected lifetime credit losses. The lifetime credit losses are estimated by means of a provision matrix that is based on historical credit loss experience by region and number of days past due. For certain defined owner groups, for example those in financial distress, lifetime expected credit losses are calculated by reference to recent credit loss experience for that specific population. Management also reviews relevant past events, current conditions and reasonable and supportable forecasts about the future in order to establish whether the loss rates implied by the provision matrix should be amended. In the normal course of business, the Company extends credit generally without requiring collateral.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the company estimates lifetime credit losses for accounts receivable using a provision matrix. This matrix is based on historical credit loss experience, broken down by region and the number of days an account is past due. This approach is common in industries with a large number of customers and ongoing accounts receivable, as it provides a systematic way to estimate potential losses.
For specific owner groups facing financial distress, Crowne Plaza calculates lifetime expected credit losses by referencing recent credit loss experience within that particular group. This targeted approach allows for a more accurate assessment of risk for these higher-risk accounts. Management also reviews past events, current conditions, and forecasts about the future to determine if the loss rates from the provision matrix need to be adjusted. This ensures the estimates remain relevant and responsive to changing economic conditions.
In the normal course of business, Crowne Plaza extends credit without requiring collateral. The allowance for expected credit losses was $53,457 as of December 31, 2024, and $44,963 as of December 31, 2023. These figures represent management's estimate of uncollectible accounts receivable. Prospective franchisees should be aware that these credit losses can impact the overall financial performance of Crowne Plaza and, indirectly, the services and support provided to franchisees.