What standards does Itan follow for accounting for credit losses?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
on (FDIC) up to $250,000 per bank as of December 31, 2024 and 2023. The Company had $0 and $104,387 that were in excess of the FDIC limit as of December 31, 2024 and 2023, respectively. Management believes that the Company is not exposed to any significant credit risk with respect to its cash.
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.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the company adheres to specific standards for accounting for credit losses. Itan follows standards applicable to accounting for credit losses, which replaces the incurred loss methodology with an expected loss methodology, known as the current expected credit loss (CECL) methodology.
The CECL methodology is applied to various financial instruments, including trading receivables, financing receivables, held-to-maturity debt securities, and receivables relating to repurchase agreements and securities lending agreements. It also extends to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, as well as net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Receivables held by Itan are subject to this guidance.
As of December 31, 2024, and 2023, Itan reported having no allowances for credit losses. This indicates that management has determined all accounts to be collectible during those periods. Furthermore, management assesses the collectability of accounts receivable, which primarily consist of monthly royalties and marketing funds due according to franchise agreements, at the close of each period and records an allowance for doubtful accounts based on specific identification.