Credit losses or reversals of credit losses are estimates. Therefore, a reversal is recorded in the current period even if it relates to prior period income. It is not an error and would not result in a prior period adjustment.
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Jeanne David
Academic
University of Detroit Mercy
Farmington Hills MI
United States
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Original Message:
Sent: 01-07-2022 10:28 AM
From: Nupur Mahajan
Subject: A/Cs Rcvble - Sec A Part 1
ASC 326-20-35-1 states the following:
"At each reporting date, an entity shall record an allowance for credit losses on financial assets . . . An entity shall report in net income (as a credit loss expense or a reversal of credit loss expense) the amount necessary to adjust the allowance for credit losses for management's current estimate of ex- pected credit losses on financial asset(s)."
So i know if i need to create a credit expense, it will go through Income statement under head - Credit Loss Expense.
My question is about a reversal of credit loss expense:
1. Does it need to belong to only current period?
2. Will it be added to this year's net income if credit loss is recovered from past years?
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Nupur Mahajan
<maskemail>nupur1188@...</maskemail>
Hartford CT United States
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