Author Archives: Karl

Writing receivables off the balance sheet

So you’ve identified that a certain receivable balance is impaired and the collection of the outstanding amounts is unlikely. Once you’ve done that, you ought to write those receivables down in the sense that you’d recognize a provision within the accounts receivable group on the balance sheet to show the amount between what was initially recognized and what you expect to get instead. For an example, if the original amount was 200 CU and now you’d estimate that you’d only get half of it, your provision should be 100 CU. The net receivable is thus 100 CU on your balance sheet.  Continue reading →

Writing down assets in their value

An asset is written down in value if and only if the recoverable amount identified is lower of the assets carrying value recognized within the books. On the basis of the test for an impairment you’ve identified the assets recoverable amount (as mentioned earlier it’s highest of either the ‘value in use’ or ‘fair value less costs to sell’) and now you compare it against the assets carrying amount. Provided the latter is the lower amount, you recognize an impairment charge in the amount that’s the difference between recoverable amount and the carrying value.   Continue reading →