What factors does Ledgers consider when estimating the 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 the 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.
Ledgers writes off accounts receivable when they become uncollectible. 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.
For a prospective franchisee, understanding how Ledgers assesses credit losses is crucial. It provides insight into the financial management practices of the company and how they handle potential uncollectible accounts. This knowledge can help franchisees better understand the stability and reliability of Ledgers' financial operations.