Bad debt loss

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A bad debt loss ( bad debt default ) occurs when a creditor does not get his debts repaid in whole or in part by his debtor .


Creditors can be natural persons , companies or states . In the corporate sector, there is the group of creditors with commercial claims in the non- banking sector and credit institutions as lenders in the banking sector . States are also eligible as lenders. A bad debt loss is to be assumed if, according to a reasonable commercial assessment, incoming payments are not to be expected either from the debtor himself, from the realization of property securities or from third parties in the case of personal securities (such as guarantees ).


Causes of the bad debt loss can be, for example, unwillingness to pay ( e.g. due to fraudulent entry ) on the part of the debtor or his insolvency up to insolvency . The otherwise solvent debtor is unwilling to pay if he does not intend to settle his debts from the outset or afterwards . The insolvent debtor is willing to pay, but due to lack of means of payment, unable to settle his debt. In both cases, the obligee can take legal action to enforce his claim by force ( foreclosure ). A bad debt loss is only considered to have occurred after unsuccessful legal proceedings. Further events preceding the bad debt loss can be poor performance , forfeiture or statute of limitations of the claim.

Credit risk

Receivables are associated with a credit risk . The vendor's assessment of whether there is a repayment risk inherent in his receivables must be made within the framework of accounts receivable accounting and is the responsibility of accounts receivable management . Wherever receivables account for a high proportion of a company's total assets , a debtor rating that gives debtors a rating based on their collectibility is worthwhile . The degree of collectibility of a claim will have to be examined more closely in the case of doubtful claims . The debtor status provides information on whether and to what extent a bad debt loss is to be expected. The latent bad debt risk is countered with general bad debt allowances , specific bad debt risks are taken into account by individual bad debt allowances .

Loss occurrence

A general statement as to when a bad debt loss is to be viewed as probable can "not be made because of the different individual circumstances in each case". If the del credere risk materializes , the receivable is lost in its portfolio and is released in the balance sheet. Bad debt losses are associated with the destruction of assets. The loss of receivables that have already been individually adjusted leads to a reduction in the balance sheet . A depreciation creates an expense item in the income statement that reduces the profit or increases the loss.

The actual bad debt loss is determined as follows:

  Verbrauch der Einzelwertberichtigung
  + Direktabschreibungen
  - Eingänge auf abgeschriebene Forderungen
  = tatsächlicher Forderungsausfall


If the profitability is low , bad debts have an enormous impact on the earnings situation of a company, as they lead to a write-off. In order to compensate for a loss of receivables and to keep the return on sales constant, large increases in sales are necessary, as the following business key figure shows:

The amount to be written off is to be calculated from the net claim (excluding sales tax). In addition, a bad debt loss leads to a fee adjustment ( Section 17 (1) UStG ), because the sales tax that has already been paid is reimbursed. The sales tax is to be corrected in full when the insolvency proceedings are opened in accordance with Section 17 UStG in conjunction with No. 17.1 Paragraph 5 Clause 5 UStAE.

Protection against bad debts

A company might against bad debts through a trade credit insurance ( credit insurance , bad debt insurance) or real forfeiting protect. With the exception of a deductible , the del credere insurance takes on the entrepreneurial del credere risk. The insured event occurs in the event of a definitive bad debt loss, which must be proven by an unsuccessful enforcement attempt . In the case of genuine forfaiting , the buyer of the receivable (usually a bank or a forfaiting company) also takes on the seller's del credere risk. Another way of protecting against loss of receivables is to secure delivery receivables through retention of title . The risk of bad debts is a specific entrepreneurial risk that forms part of the imputed risk and - uninsured - can be taken into account in the price calculation as a cost ; it thus leads to a kind of self-insurance .

Individual evidence

  1. Jürgen Krummow, Accounting of the Credit Institutes , 1994, § 340e HGB, Item 225, p. 405 f.
  2. Grit S. Becker / Oliver Everling, Debitorenrating , 2010, p. 45
  3. Martin Czerweny-Arland / Martin Verdenich, Modernes Cash-Management , 2008, p. 38
  4. IDW BFA 1/1978, on the final examination at credit institutions , IV c, p. 488
  5. Gottfried Bähr / Wolf-F. Fischer-Winkelmann / Stephan List, bookkeeping and annual accounts , 2006, p. 126
  6. Christian Weiß, Successful in corporate debt collection , 2012, p. 26
  7. BFH, judgment of July 16, 1981, Az .: IV R 89/80, BStBl. II 1981, 766