Accounts receivable - ASPE 3856

Question 1

Accounts receivable (ASPE)

Answer 1

• Considered a financial instrument (financial asset), as it represents a contractual right to receive cash or another financial asset from another party
• As such, accounts receivable must be tested for impairment at the end of the reporting period if significant adverse changes during the period cast doubt on collectability
• If impaired, then should be written down to the amount expected to be collected through the use of an allowance account
• The amount of the reduction shall be recognized as a bad debt expense in net income.

Reference: ASPE 3856.05(h), .16, .17