What Is The Best Way To Deal With Accounts Receivable Under New Guidelines?

From the 2007 semi annual report of listed companies that have been disclosed, many listed companies still account for all accounts receivable in accordance with aging analysis method, that is, it is not clear whether the amount of individual accounts receivable is significant.

Such treatment does not conform to the "accounting standards for Enterprises No. twenty-second - Financial Instruments Recognition and measurement" guidelines.

An enterprise should distinguish between the amount of a single account and the amount of bad debts when it accounts for the accounts receivable.

Accounts receivable with a significant amount should be calculated according to the difference between the current value of future cash flow and its book value. The non accounts receivable of a single amount can be calculated according to the original age analysis method.

Should the general enterprise's accounts receivable be dealt with in accordance with the relevant standards of financial instruments? Should we follow the method of financial instrument guidelines in carrying out the impairment test, will the old age analysis method be no longer applicable?

Under the new guidelines, accounts receivable belong to financial assets.

Therefore, accounts receivable of all enterprises should be accounted for in accordance with the relevant provisions of the accounting standards for Enterprises No. twenty-second - confirmation and measurement of financial instruments.

The allowance for bad debts of all enterprises should also be prepared according to the requirements of the accounting standards for Enterprises No. twenty-second - confirmation and measurement of financial instruments.

Accounting standards for Enterprises No. twenty-second - confirmation of financial instruments

The application guideline provides for the provision of bad debts for accounts receivable:

For a single amount of receivables, the impairment test should be conducted separately.

If there is any objective evidence that the impairment has occurred, it should be confirmed on the basis of the difference between its future cash flow value and its book value.

Loss, provision for bad debts.

For a non major amount of receivables, the impairment test may be conducted separately, the impairment loss shall be determined, the allowance for bad debts shall be prepared, and the receivables that are not impaired after being tested separately can be divided into several combinations according to the similar credit risk characteristics, and then the impairment loss shall be calculated according to the proportion of these receivable combinations in the balance sheet balance, and the allowance for bad debts shall be prepared.

Determined according to a certain proportion of the balance of receivables.

It should reflect the actual impairment loss of each item, that is, the book value of each combination exceeds the amount of its future cash flow present value.

The enterprise should be based on the actual loss rate of the accounts receivable combination with similar or similar credit risk characteristics in the previous year, and determine the proportion of the provision for bad debts in the current period according to the current situation, so as to calculate the provision for bad debts in the current period.