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In banking, the Allowance for Loan and Lease Losses (ALLL), formerly known as the reserve for bad debts, is a calculated reserve that financial institutions establish in relation to the estimated credit risk within the institution's assets.
Also known as a bad debt reserve, this is a contra account listed within the current asset section of the balance sheet. The doubtful debt reserve holds a sum of money to allow a reduction in the accounts receivable ledger due to non-collection of debts. This can also be referred to as an allowance for bad debts.
Conservatism plays an important role in a number of accounting rules, including the allowance for doubtful debts [3] and the lower of cost or market rule, [4] which states that one should record inventory at the lower of either its acquisition cost or its current market value.
What separates good debt from bad debt is that bad debt funds depreciating assets, while good debt can give you access to an asset that will increase in value over time. In terms of interest rates ...
Current Expected Credit Losses (CECL) is a credit loss accounting standard (model) that was issued by the Financial Accounting Standards Board on June 16, 2016. [1] CECL replaced the previous Allowance for Loan and Lease Losses (ALLL) accounting standard. The CECL standard focuses on estimation of expected losses over the life of the loans ...
The total-debt-to-total-assets ratio is one of many financial metrics used to measure a company’s performance. In this case, the ratio shows how much of a company’s operations are funded by debt.
Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms [citation needed] or payment terms.
Our allowance for credit losses as a percent of loan receivables was 10.44%, which decreased approximately 35 basis points from the 10.79% in the third quarter.