FAR Trade receivables: recognition, measurement, presentation and transfers

The rules, one page each

1. Net Trade Receivables: Aging and the Ending AllowanceWorked example

   Report gross amounts from normal customer sales, including related notes, less the required ending credit-loss allowance and other valuation deductions, including estimated sales discounts under the gross method. Use the reporting-date allowance, not its preadjustment balance or adjusting entry.

2. Calculate bad debt expense from an aging scheduleWorked example

   Aging determines the required ending allowance, not the expense. The provision equals that target minus the allowance balance before adjustment, after recorded write-offs, recoveries, and provisions.

3. CECL for Trade Receivables: Allowance and Write-OffsStep by step

   For amortized-cost trade receivables, record a lifetime expected credit loss allowance at initial recognition using historical experience, current conditions, and reasonable, supportable forecasts. Writing off an already estimated loss reduces receivables and the allowance equally, with no new expense.

4. Trade Accounts Receivable vs. Nontrade and Customer CreditsSort it

   Trade accounts receivable are open-account claims from ordinary customer sales. Customer credit balances are current liabilities unless a legally enforceable right and intent permit offsetting against amounts due from that same customer.

5. Receivables Transfers: Sale, Borrowing, and Current ClassificationDecision tree

   Selling receivables requires legal isolation, the transferee's right to pledge or exchange them, and no retained effective control; otherwise, record secured borrowing. Retained receivables are current if realized within the longer of 12 months or the operating cycle.