According to Itan's accounting policies, what is the treatment of accounts receivable?
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
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by a lessor in accordance with Topic 842 on leases. Receivables held by the Company are subject to this guidance. At December 31, 2024 and 2023 the Company had no allowances for credit losses.
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 period, Itan's management assesses the collectability of these accounts. They record an allowance for doubtful accounts based on specific identification.
For the years 2024 and 2023, Itan's management determined that all accounts were collectible as of December 31. This means that Itan believed all franchisees would pay what they owed, and no allowance for doubtful accounts was recorded during those years.
Itan also adheres to standards for credit losses, replacing the incurred loss methodology with the current expected credit loss (CECL) methodology. This applies to receivables held by the company. However, as of December 31, 2024 and 2023, Itan had no allowances for credit losses, indicating they did not anticipate any losses from uncollectible accounts receivable.