How does Floors To Go management estimate the allowance for expected credit losses?
Floors_To_Go Franchise · 2025 FDDAnswer from 2025 FDD Document
he terms of the franchise agreement.
Brokerage fees from certain floor and window covering manufacturers utilized by the franchisees are recognized monthly based on the total amount of purchases made by the member franchisees and the terms of the contract. The performance obligation for the franchisees and manufacturers are considered to be met over the terms of the franchise agreement.
Notes to Financial Statements
Accounts Receivable
Accounts receivable are customer obligations due under normal trade terms generally requiring payment within 30 to 60 days from the invoice date. No collateral or other security is required to support accounts receivable, which are stated at the amount management expects to collect from outstanding balances. None of the Company's contracts have a significant financing component. Management estimates an allowance for expected credit losses based on the amount it expects to col
Source: Item 23 — RECEIPTS (FDD pages 47–204)
What This Means (2025 FDD)
According to Floors To Go's 2025 Franchise Disclosure Document, the company estimates its allowance for expected credit losses based on several factors. These include the amount they expect to collect from customers, how long receivables have been outstanding, historical collection experience, current market conditions, and forecasted economic and business environments.
The FDD also states that amounts deemed uncollectible are written off against the allowance for credit losses. For the years ending December 31, 2024, and 2023, the expenses associated with this allowance were $52,720 and $35,724, respectively, and these are recognized in operating expenses.
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016‐13, Financial Instruments ‐ Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326), which replaced the incurred loss impairment methodology with a new methodology that reflects current expected credit losses (“CECL”) on financial assets. Floors To Go adopted this standard on January 1, 2023, using a modified retrospective method, but the adoption did not have a material impact on their financial statements and disclosures.