Trade receivables represent one of the most significant asset positions of a company. When presenting financial statements realistically, it is important to assess the security of collection of receivables and treat them accordingly in accounting. In most cases, their value adjustment can have a significant tax effect.

IFRS (International Financial Reporting Standard)- 9 defined a new model of expected credit losses that is directly related to impairment of trade receivables. It represents an estimate of possible losses from impairment of financial instruments (in this case trade receivables) before the deterioration of the financial and creditworthiness of the debtor.

When implementing the trade receivables impairment model, it is necessary to go through certain steps:

Determining the appropriate group of receivables into common credit risk categories

Determining the time period over which the aged loss rates are obtained in order to define an estimate of expected future loss rates

Determining the aged loss rates

Considering future economic impacts and adjusting rates

Calculating the expected tax loss (via tax loss calculation matrices)

For more detailed information about each step and assistance in implementing the expected credit loss model, you can contact us by phone at 033/719-400 or by email at info@respect.ba.