When does Ledgers write off accounts receivable?
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, the company writes off accounts receivable when they become uncollectible. Payments that are subsequently received on such receivables are then credited against credit loss expense.
For a prospective Ledgers franchisee, this accounting policy means that Ledgers has a process in place to deal with unpaid accounts receivable. Instead of perpetually carrying uncollectible amounts on its books, Ledgers removes them (writes them off) when they are deemed uncollectible. If, after an account is written off, a payment is received, that payment is then applied to reduce the credit loss expense.
This policy is fairly standard in accrual-based accounting. It provides a more accurate picture of the company's financial health by not overstating assets with amounts that are unlikely to be collected. Franchisees should inquire about Ledgers' specific procedures for determining when an account is considered uncollectible, as this can impact the franchisee's financial reporting and potential tax implications.