Doubtful claim

from Wikipedia, the free encyclopedia

Doubtful claims is a term from commercial law and accounting that describes the uncertain collectibility of claims .

General

For accounting companies, the claim is, from a legal point of view, a payment or other performance claim against a debtor resulting from a concluded contract ( Section 241 BGB ). It arises when a delivery or service is made to a customer and this is not paid for immediately. In terms of commercial law , it is initially irrelevant whether the later payment was already contractually intended or actually occurred. The majority of the accounts receivable relate to trade accounts receivable and credit receivables from banks , which are to be accounted for in accordance with Section 266 (2) B HGB . Under commercial law, these receivables are part of current assets (reverse conclusion from Section 247 (2) HGB), for which the strict lowest value principle applies when valuing the assets .

Collectability of accounts receivable

The degree of their collectibility, i.e. the probability of their repayment, is of decisive importance for the evaluation of these receivables. A distinction is made between three levels.

Impeccable claims

In the case of flawless claims, full and timely repayment is expected. The degree of their collectibility is 100%. They must be shown in the balance sheet at their nominal value.

Doubtful (dubious) claims

These receivables are subject to a certain risk of default (which can be classified as greater than 0% and less than 100%), which makes the amount and / or timing of incoming payments uncertain. For this assessment of the default risk, there are indications why the full and / or timely repayment of a claim can be doubtful. Reasons can be that the debtor ( debtor or borrower ) has not paid after a corresponding reminder, there are complaints or the customer has even applied for insolvency proceedings. Because of the strict lower-of-cost-or-market principle , these receivables must be accounted for with their probable value. Here, the balancer is required to make a forecast of the probability of repayment. The depreciation or value adjustment is intended to absorb the part that is probably no longer recoverable as a decrease in value.

As long as a claim is to be treated as a "dubious claim", no sales tax adjustment may yet be made.

Uncollectible

In the case of these claims, it is finally clear that no more payment is to be expected (probability of repayment: 0%). This can be the case if a foreclosure has been unsuccessful (proof by means of an enforcement title required), the insolvency proceedings are discontinued due to lack of assets , the debtor has issued an affidavit and if his financial situation is not expected to improve in the foreseeable future, claims in court for be declared unjustified or the claim is statute-barred and will not be paid for this reason. These receivables must be written off in full and lead to a loss of receivables .

In terms of sales tax, the "irrecoverability" of the claim already occurs with the opening of insolvency proceedings. This means that sales tax can be corrected before a loss of income tax receivable occurs ( § 17 UStG, Section 17.1 Paragraph 11 Clause 5 UStAE).

Balance sheet consequences

According to IAS 39.58, receivables are considered to be impaired if there is objective evidence of an impairment loss. A receivable or a group of receivables is deemed to have been impaired and an impairment loss has arisen if:

  • there is objective evidence of impairment as a result of a loss event that occurred after the financial instrument was first recorded and up to the balance sheet date (loss event),
  • the loss event had an impact on the estimated future cash flows of the financial asset or group of financial assets, and
  • a reliable estimate of the loss amount can be made

In § 252 para. 1 no. 4 HGB is required that all foreseeable risks and losses to the balance sheet date incurred must be considered. Specifically, Section 253 (4) of the German Commercial Code (HGB) then requires that current assets be depreciated if the value on the balance sheet date is lower than at the time of posting. This requires value adjustments on receivables in the event that they have been classified as doubtful. According to the principle of individual valuation, each claim would have to be assessed individually with regard to its collectability. Exceptions are permitted in companies that have a large number of many claims (trading companies, credit institutions). These may deviate from the principle of individual valuation and evaluate their receivables as part of the general valuation allowance ( Section 340f HGB).

From the point of view of the tax balance sheet , dubious claims are to be stated at their probable value. The BFH set up criteria for this in August 2003 .

  • An individual value adjustment may only be carried out if a cautiously assessing businessman must conclude that there has been a partial loss of receivables due to general life experience from the respective circumstances of the individual case.
  • The debtor's individual ability and willingness to pay must be determined.
  • The circumstances prevailing on the balance sheet date must objectively justify the estimate, which is not overly pessimistic.

Individual evidence

  1. BFH, judgment of August 20, 2003, Az .: IR 49/02, BStBl. II 2004, 941