What factors does Ledgers consider when estimating its allowance for credit losses?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty receivables are stated at the amount management expects to collect from balances outstanding at year-end. The Company estimates its allowance for credit losses by considering a number of factors, including the length of time accounts receivable are due, previous loss history, the customer's current ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited against credit loss expense. Management has determined their is no allowance for credit losses related to royalty receivables as of December 31, 2024, 2023, and 2022.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, when estimating its allowance for credit losses, Ledgers considers several factors. These include the length of time accounts receivable are due, previous loss history, the customer's current ability to pay its obligation, and the condition of the general economy and the industry as a whole.
This means that Ledgers assesses the risk of not collecting outstanding payments from its franchisees based on how long the payments are overdue. It also looks at its past experiences with uncollectible accounts, the current financial health of its franchisees, and the overall economic climate. By considering these elements, Ledgers aims to create a realistic estimate of potential credit losses.
Ledgers writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited against credit loss expense. As of December 31, 2024, 2023, and 2022, management determined there was no allowance for credit losses related to royalty receivables.