The accounting allowed for a long time a lender to use as his
bad debt provision his previous historical loss rate.
In liquor, earnings were crimped by bad
debt provisions in Western Australia and the cost of preparing for the launch of the container deposit scheme in NSW on December 1.
«These amounts accrued or receivable at 30 June 2013 total US$ 3,667,331 ($ 2,819,505)(31 December 2012: US$ 2,597,188, $ 1,965,333) before a bad
debt provision of US$ 2,276,225 ($ 1,750,000)(31 December 2012: US$ 991,125, $ 750,000).»
Dairy Crest is increasing its bad
debt provision by up to # 4 million after a customer, Quadro Foods, called in administrators.
For the moment, by default, I'm going to just presume the status quo — as I consider this change long overdue & I suspect the 2012 bad
debt provision simply reflected the aging of the AREO receivable.
In this case, for a number of reasons, their treatment's clearly preferable — $ 1.3 m of AREO revenue (which is contractually due) is recorded, but this amount's immediately written off as a bad
debt provision in the P&L.
The downside of a P / E is that it is based on historic earnings, and that those earnings could be low for a specific and not - to - be-repeated event (for example, a bank taking
bad debt provision, or san oil company paying compensation for environmental issues).
Yes, I've seen that & presumed it is a sloppy typo — it should say «after a bad
debt provision» as it does in the same text in the Dec - 12 final results, and in the Trade & Other Receivables and Related Party Transactions notes in both final & interim results.
FX), this should remain unchanged (i.e. fresh 2013 revenue receivable is offset by a similar bad
debt provision).
At least according to Argo's reporting the numbers are «before bad
debt provision»:
Combing through the accounts, I note the AREO receivable only increased by EUR 50 K, while Argo wrote off EUR 750 K as a bad
debt provision — which might imply AREO actually paid EUR 1.2 m of the annual fee.