How are royalty receivables stated on Ledgers' financial statements?
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, royalty receivables are recorded at the amount that Ledgers' management anticipates collecting from outstanding balances at the end of the year. Ledgers estimates potential credit losses by considering factors such as the length of time accounts receivable are due, historical loss data, the customer's ability to pay, and the condition of the general economy and industry.
Ledgers writes off accounts receivable when they become uncollectible. Any subsequent payments received on these previously written-off receivables are then credited against credit loss expense. As of December 31, 2024, 2023, and 2022, management determined that no allowance for credit losses related to royalty receivables was necessary.
For a prospective franchisee, this means that Ledgers takes a proactive approach to managing and accounting for royalty receivables. They carefully assess the collectibility of these receivables and adjust their financial statements accordingly. The fact that no allowance for credit losses was deemed necessary for the past three years could indicate the financial stability of Ledgers' franchisees.