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Net Charge to Provision vs Bad Debt Write Off

Kung Lao · 2015-02-05 14:11:41

I'm looking at a set of financial statements for a small financial institution. I've noticed in the provisions section of the accounting notes, that the entity increases the amounts provided for loan impairments and then also applies a net charge to this provision. In the current year, the amount provided for loan…

05-02-2015 03:11PM

#1

Kung Lao

Closed Accounts Posts: 50 ✭✭

Join Date: July 2013

Posts: 31

I'm looking at a set of financial statements for a small financial institution. I've noticed in the provisions section of the accounting notes, that the entity increases the amounts provided for loan impairments and then also applies a net charge to this provision. In the current year, the amount provided for loan impairments and the net charge against the provision are the same (so net = zero). In the previous yeae, the amount charged off is around half of the amount provided for. The increase in provision is charged to the P&L but the amount charged off does not appear as a bad debt write off in the P&L. Why is this? I would normally expect to see an increase/decrease in provision and the amount written off as a bad debt appearing in the P&L. Is there something different about a "net charge to provision" and a bad debt?

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