1140
Accounts Receivable
ASC 310: Receivables
📖 Overview
This standard addresses accounting treatment for receivables, including recognition, measurement, and disclosure. It uses the incurred loss model for allowance for doubtful accounts (unlike the expected credit loss model in IFRS 9).
🎯 Scope
This standard applies to the accounting treatment for receivables, including:
- Trade receivables from sale of goods or services.
- Non-trade receivables.
- Loans receivable.
- Disclosures related to credit risk.
⚙️ Key Principles
1. **Measurement**: Receivables are measured at Net Realizable Value – the amount expected to be collected after deducting the allowance for doubtful accounts.
2. **Allowance for Doubtful Accounts**:
- Created based on management's estimate.
- Uses the Incurred Loss Model, not the Expected Credit Loss (ECL) model.
3. **Write-Off of Bad Debts**: Receivables are written off when collection becomes impossible.
✅ Recognition
Receivables are recognized when:
- Goods are sold or services are provided on credit.
- An invoice is issued to the customer.
- There is an unconditional right to payment (except for the passage of time).
Bad Debt Expense is recognized when the allowance is created or increased.
A reversal of the allowance (if the estimate decreases) is recognized as revenue.
📏 Measurement
**Initial Measurement:**
- Receivables are recorded at the invoice face amount.
- Not discounted because credit periods are typically short (less than one year).
**Subsequent Measurement:**
- Measured at Net Realizable Value.
- Allowance for doubtful accounts is created based on:
- Percentage of credit sales.
- Aging analysis of receivables.
- Individual customer review.
**Write-Off of Bad Debts:**
- Receivables are written off when management determines collection is impossible.
- Written off against the allowance for doubtful accounts.
📊 Presentation
**On the Balance Sheet:**
- Receivables appear within current assets.
- Allowance for doubtful accounts is shown as a deduction from gross receivables.
**On the Income Statement:**
- Bad debt expense appears within operating expenses (typically under SG&A).
**Note Disclosures:**
- Components of receivables (trade, non-trade).
- Aging analysis of receivables.
- Allowance for doubtful accounts (opening and closing balances, movement).
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for receivables.
- Components of receivables (trade, non-trade, due from related parties).
- Aging analysis of receivables (current, past due 30-60-90 days, over 90 days).
- Allowance for doubtful accounts (opening and closing balances, additions, write-offs, reversals).
- Receivables pledged as collateral.
- Any receivables sold or factored.
🔗 Related Standards
ASC 606 (Revenue from Contracts with Customers), ASC 326 (Credit Losses), ASC 820 (Fair Value Measurement)
📁 Related Accounts in the Chart of Accounts
Explore accounts commonly associated with this accounting standard.