What accounting standard has Face Foundrie adopted for determining the allowance for doubtful receivables?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
nts receivable are recorded for amounts due based on the terms of executed franchise agreements for franchise sales, royalties and other sales transactions. These accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of outstanding amounts.
When determining the allowance for doubtful receivable, the Company has adopted ASC 326, Financial Instruments—Credit Losses. This standard requires that management utilize the Current Expected Credit Losses ("CECL") model to recognize the appropriate allowance for doubtful receivables. This model requires entities to estimate and recognize expected credit losses over the life of the financial instrument. For trade receivables, management has elected to apply a simplified approach, based on historical loss experience and adjustments for current and forecasted economic conditions. Management regularly evaluates individual customer receivables, considering their financial condition, credit history and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded as
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the company has adopted ASC 326, Financial Instruments—Credit Losses, for determining the allowance for doubtful receivables. This accounting standard requires Face Foundrie to use the Current Expected Credit Losses (CECL) model to recognize the appropriate allowance. The CECL model mandates that Face Foundrie estimate and recognize expected credit losses over the life of its financial instruments.
For trade receivables, Face Foundrie applies a simplified approach based on historical loss experience, adjusted for current and forecasted economic conditions. This means Face Foundrie looks at past instances where they weren't able to collect receivables and adjusts those figures based on the current economic climate to estimate potential future losses. Management regularly evaluates individual customer receivables, considering their financial condition, credit history, and current economic conditions to determine collectibility.
As of December 31, 2024, Face Foundrie had an allowance for doubtful accounts of $25,000, while there was no allowance for doubtful accounts as of December 31, 2023 and 2022. The accounts receivable balance was $424,770, $96,311 and $101,020 as of December 31, 2024, 2023 and 2022, respectively. Accounts receivable are written off when deemed uncollectible, and any recoveries of previously written-off accounts are recorded as income when received.