How does Hawthorn Suites By Wyndham measure the expected credit losses of its receivables?
Hawthorn_Suites_By_Wyndham Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company generates trade receivables in the ordinary course of its business and provides for estimated bad debts on such receivables. The Company measures the expected credit losses of its receivables on a collective (pool) basis which aggregates receivables with similar risk characteristics and uses historical collection attrition rates for ten years to estimate its expected credit losses. As such, the Company measures the expected credit losses of its receivables by segment and geographical area. The Company provides an estimate of expected credit losses for its receivables immediately upon origination or acquisition and may adjust this estimate in subsequent reporting periods as required. When the Company determines that an account is not collectible, the account is written-off to the allowance for doubtful accounts. The Company also considers whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, the Company would adjust the allowance for doubtful accounts to reflect the expected effects of the current environment on the collectability of the Company's trade receivables which may be material.
Source: Item 23 — RECEIPTS (FDD pages 92–402)
What This Means (2025 FDD)
According to Hawthorn Suites By Wyndham's 2025 Franchise Disclosure Document, the company measures expected credit losses for accounts receivable by grouping receivables with similar risk characteristics into pools. It then uses historical collection attrition rates over a ten-year period to estimate these losses. This approach is applied separately by segment and geographical area, allowing for a tailored assessment of credit risk.
Hawthorn Suites By Wyndham estimates expected credit losses for receivables as soon as they originate or are acquired, and these estimates can be adjusted in subsequent reporting periods as needed. When an account is deemed uncollectible, it is written off against the allowance for doubtful accounts. This process ensures that the balance sheet reflects a realistic valuation of outstanding receivables.
In addition to historical data, Hawthorn Suites By Wyndham also considers current and expected future economic conditions. If these conditions differ significantly from those in effect when the historical data was generated, the allowance for doubtful accounts is adjusted to reflect the anticipated impact on the collectability of trade receivables. This adjustment can be material, highlighting the importance of staying responsive to changing economic environments in assessing credit risk.