Allowances and expense for the period

Learning objectives

• Calculate the expense for the period from the change in the allowance and the receivables written off, and the net receivables balance.L2, L3

Normative references

• IAS 24 §18If there have been related party transactions, the entity discloses the nature of the related party relationship as well as information about those transactions and outstanding balances (including commitments) necessary for an understanding of the potential effect of the relationship on its financial statements, as a minimum: (a) the amount of the transactions; (b) the amount of outstanding balances, including commitments, with their terms and conditions (including whether they are secured and the nature of the consideration to be provided in settlement) and details of any guarantees given or received; (c) provisions for doubtful debts related to the outstanding balances; (d) the expense recognised during the period in respect of bad or doubtful debts due from related parties.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• At year-end, Sorbier SA has a gross receivable of {gross_balance} from its subsidiary, against which it has recognised an allowance of {allowance}. Calculate the net balance of the receivable from the related party.L2
• On Mélèze SA's receivables from related parties, the cumulative allowance is {opening_allowance} at the beginning and {reported_closing} at the end of the year. During the year, {write_offs} of impaired receivables were written off, the corresponding allowance being used; there was no other movement. Calculate the allowance expense for the year to be disclosed.L3
• At year-end, Frêne SA estimates at {allowance_charge} the additional allowance to be recognised on the receivable held from its subsidiary. Post the allowance entry (case convention, IAS 24 requires no entry).L2