What accounting standard does Exit use to estimate the allowance for lifetime expected credit losses?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company accounts for receivables at their original invoice amount, less an estimate made for credit losses. The Company monitors trade and other receivable balances and contract assets and estimates the allowance for lifetime expected credit losses in accordance with ASU No. 2016-13, Financial Instruments - Credit Losses. Estimates of expected credit losses are based on historical collection experience and other factors, including current market factors and forecasted economic conditions.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Exit monitors trade and other receivable balances and contract assets to estimate the allowance for lifetime expected credit losses. This is done in accordance with ASU No. 2016-13, Financial Instruments - Credit Losses.
Exit's estimates of expected credit losses are based on historical collection experience and other factors. These factors include current market factors and forecasted economic conditions. This approach reflects the requirements of generally accepted accounting principles (GAAP), which require companies to make informed estimates about potential losses.
For a prospective Exit franchisee, this means that Exit is proactive in assessing and accounting for potential credit losses. This can provide a more transparent view of the company's financial health. Franchisees should be aware that these estimates can change based on economic conditions and market factors, which could impact Exit's financial statements.