allowance for doubtful accounts

(redirected from Loss Reserves)

Allowance for Doubtful Accounts

Extra funds from sales, or another source, set aside in order to pay off bad debt if and when it arises. The allowance helps a company ward off any potential cash flow problems should its credit sales not be repaid as expected. On financial statements, it is important to note that an allowance for bad debts exists for fiscal conservatism and not because one expects a large amount of bad debt to accumulate. An allowance for doubtful accounts is also called a cushion. Banks call these funds the loan loss reserve. See also: Savings account.

allowance for doubtful accounts

A balance-sheet account established to offset expected bad debts. If a firm has made a sufficient provision in its allowance for doubtful accounts, reported earnings will not be penalized by bad debts when the bad debts occur. If uncollectible accounts are larger than expected, however, the firm will have to increase the size of the account and reduce reported income. Also called allowance for bad debts, reserve for bad debts.
References in periodicals archive ?
According to the company, the relationship came to light during the course of an i(https://www.insurancejournal.com/news/national/2018/12/09/511424.htm) nternal review into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Investment Management and its subsidiaries.
As previously announced, after being notified of governmental inquiries into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Investment Management Ltd and its subsidiaries, Markel Corporation engaged outside counsel to conduct an internal review.
Operating performance moderately improved for P/C (re)insurers during the first half of the year thanks to improved core loss ratios, lower catastrophe-related losses and lower taxes along with favorable movement in loss reserves. The group operating return climbed to 8.0%, up from 6.8% in the prior year.
Since 2010, roughly $60 billion of loss reserves have been released into earnings, according to Stephan Hochburger, senior vice president at Munich Reinsurance America.
The "Background" section provides institutional details and highlights prior literature on both insurer loss reserves and insurer financial strength ratings.
Proportionally, no other Arkansas bank committed more to its loan loss reserves during the first quarter than DeWitt Bank & Trust.
Loan quality continues to improve as the bank's total loan loss reserves skyrocketed from KD 32.6 million to KD 41.9 million, an increase of 29%, Gulf Bank's Chairman Omar Al-Ghanim said in a press statement.
Loan loss reserves remained more than enough to cover for all NPLs, the BSP said.
According to the firm, the improvement in profitability during 2Q14 primarily reflected the recapture of loan loss reserves of USD 500,000 and an increase of USD 147 thousand in net interest income before recapture of loan losses, which were partially offset by a decrease of USD 190,000 in non-interest income and an increase of USD 171,000 in non-interest expense.
The sector's loan loss reserves, however, went down to 69.90 percent compared to the previous year's 71.85 percent.
The ratings agency notes that several insurance groups announced in the fourth quarter they would be taking reserve charges to strengthen prior accident years' loss reserves.
By looking at claims data in its entirety, insurers will be better positioned to optimize loss reserves, increase productivity, and root out fraud.