According to Itan's accounting policies, how are accounts receivable classified?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable - Accounts receivable consist mainly of monthly royalties and marketing funds due according to franchise agreements. Management assesses the collectability of accounts receivable at the close of each period and records an allowance for doubtful accounts based on specific identification. Management has determined all accounts to be collectible at December 31, 2024 and 2023.
Credit losses - The Company follows standards applicable to accounting for credit losses, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to trading receivables, financing receivables, held-to-maturity debt securities, and receivables relating to repurchase agreements and securities lending agreements. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, accounts receivable primarily consist of monthly royalties and marketing funds that are due according to the franchise agreements. At the close of each accounting period, Itan's management assesses the collectability of these accounts.
Itan records an allowance for doubtful accounts based on specific identification, which means they evaluate each account individually to determine if it is likely to be collected. As of December 31, 2024 and 2023, Itan's management determined that all accounts receivable were collectible, indicating they did not anticipate any losses from uncollectible accounts during those periods.
Itan also follows standards applicable to accounting for credit losses, replacing the incurred loss methodology with the current expected credit loss (CECL) methodology. This CECL methodology is applicable to trading receivables, financing receivables, held-to-maturity debt securities, and receivables relating to repurchase agreements and securities lending agreements. It also applies to off-balance sheet credit exposures not accounted for as insurance and net investments in leases recognized by a lessor. At December 31, 2024 and 2023 the Company had no allowances for credit losses.