Company: LIFD
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001096906-25-001332
Chunk: 104

Company: LFTD PARTNERS INC.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 104
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 Under the CECL Model, an entity recognizes its estimate of expected losses as an allowance. The Company has considered the applicable guidance in ASU 2016-13. Key aspects of the CECL Model include the following:

 1.The CECL Model applies to financing receivables measured at amortized cost, which includes trade accounts receivable. 2.An entity will recognize an allowance for credit losses that results in the financial statements reflecting the net amount expected to be collected from the financial asset. 3.The allowance represents the portion of the amortized cost basis that an entity does not expect to collect due to credit over the asset’s contractual life, considering past events, current conditions and reasonable and supportable forecasts of future economic conditions.

In performing its CECL Model Analysis, management calculates the ratio of write offs to sales made to wholesalers and distributors for the trailing three-year period (the “Bad Debt Loss Rate”). The Bad Debt Loss Rate is then multiplied by sales made to wholesalers and distributors during the trailing twelve months (the “Bad Debt Calc”). The Bad Debt Calc is compared to the total accounts receivable that is older than 90 days as of reported period end; for conservatism, whichever is larger is considered the Allowance for Doubtful Accounts as of reported period end. The Company’s position is that the Company’s conservative approach toward the treatment of Allowance for Doubtful Accounts provides sufficient coverage in relation to potential credit losses from outstanding invoice write-offs. 

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An allowance for sales is recorded for estimated future discounts/refunds related to returns of products sold prior to the reporting period end. An allowance for sales reduces net sales on the Consolidated Statements of Operations, and also reduces accounts receivable on the Consolidated Balance Sheets. Sales allowances of $350,000 and $304,018 were reported as of June 30, 2025 and December 31, 2024, respectively. A primary impetus for the need of a sales allowance and a reduction in accounts receivable as of June 30, 2025 and December 31, 2024 was that, sometimes, when employees of federal, state and local regulatory agencies and/or law enforcement make statements and/or issue correspondence that claim or imply that certain hemp-derived products are unsafe or illegal, these statements and correspondence, and industry publications and/or news media coverage of such statements and correspondence, may trigger confusion, uncertainty or alarm among the distributors, retailers and consumers who purchase our products, and consequently result in decreased sales or returns/exchanges