Here you can find some tips on bad and doubtful debts provision calculation:

• Debtors are adjusted by provisions subject to probability of collection,

• The principle of prudent valuation requires updates of asset valuation => update of asset value (IAS 2 par.28, 33)

• provisions are recognized to debtors in liquidation, bankrupt debtors, those that question the debt, overdue and non-overdue when the probability of non-collection is significant (IAS 39, par.58, 59)

Example of errors:

• Most often debtors are overvalued

• Non-overdue debtors are not provided for although some of them may become doubtful in the future

• provision estimates are unrealistic, not related to the actual values of the written down balances.

The above can occur when:

• You have no precise idea how to calculate provisions for debtors

• You do not refer your calculation of the provision to what happened to the debtors in the past (aging analysis, written-off balances, etc.)

• You have scarce information and this is the only thing you can rely on in calculating the provisions for debtors

• You have no opportunity for an independent verification of your calculations

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