B) PROVISION FOR DOUBTFUL ACCOUNTS

Provisions can be defined as unrealized losses, incurred obligations, or potential ones.

obligations, some examples of provisions are: provisions for valuing assets, provisions for warranties
granted, for social benefits, for doubtful collection accounts, provisions for vacations, etc.
Additionally, for the purpose of reasonably presenting financial information, the regulations
accounting establishes the recognition of certain provisions, one of which is the 'provision for accounts receivable'
doubtful collection", which consists of recognizing as "expense of the period" the evidence of uncollectibility of
certain accounts receivable. In this way, the amount of accounts receivable that will be shown on the balance
The general one is the one that is really expected to generate economic benefits for the company.

ACCOUNTING TREATMENT

In accordance with IAS 39 Financial Instruments: Recognition and Measurement, accounts receivable
they qualify as 'financial assets', and are classified within the category of loans and accounts receivable
originated by the company itself, that is, they are a right to receive cash or another financial asset
by another company.
Regarding its recognition and valuation, the aforementioned IAS states in paragraph 109 that the company
it must evaluate at the end of each period whether any or a group of them (financial assets) have deteriorated their
value. It is understood that a deterioration has occurred when the book value of the financial asset is
greater than its recoverable amount, under these circumstances, the asset is recognized at its value
recoverable, through one of the following two methods:
Directly decreasing your balance (also called punishment or direct cancellation), or;
Through a correcting account, that is, crediting to the provision account for accounts of
doubtful collection (Account 19 of the Revised General Accounting Plan), recognizing
consequently an expense account (68 Various Provisions).
Likewise, paragraph 110 of IAS 39 provides some facts that evidence that a financial asset
has deteriorated in value or has become uncollectible:
Significant financial difficulties on the part of the debtor.
Current breaches of contractual clauses, such as defaults or fraud in payment of
the interest or the principal.
Existence of concessions from the lender to the borrower, for economic or legal reasons
related to the borrower's financial difficulties, which the lender otherwise would not have
granted.
A high probability of bankruptcy or another type of financial insolvency of the issuer.
Recognition of an impairment loss for that asset in a specific accounting period.
previous.
The disappearance of an active market for the financial asset in question, due to difficulties
financial; or good
A historical pattern of behavior in the collection of commercial credits that indicates the
impossibility of recovering the full amount of the nominal value of a certain portfolio of
accounts receivable.

ACCOUNTING METHODS FOR ESTIMATING THE PROVISION

The estimation of uncollectible accounts at the end of the fiscal year is based on experiences and relationships.
historical, as well as future forecasts. To this end, the existence of the following methods is anticipated:
Percentage of sales: this method relates to the profit and loss statement, based on the
"Principle of correlation of income and expenses" (Also known as the Matching Principle).
Relate the credit sales made during the period to the corresponding bad debt expense.
by estimating a percentage of credit sales that will not be collectible.
Percentage of accounts receivable: this method takes into account the time in which the accounts receivable
collections take time to settle, it is oriented in the balance sheet, through a percentage analysis of the
Maturities of accounts receivable are compared with the balance of the provision account for collection.
doubtful and the amount of the adjustment entry for the period is determined.
Tax Treatment

According to paragraph i) of article 37 of the Income Tax Law, the following may be deducted as an expense.
those provisions that qualify as doubtful collection as long as it is fulfilled in a manner
concurrent with the conditions that we will detail below:
The taxpayer must verify the nature of the uncollectible debt at the time it is made.
accounting provision.
In this case, it is the creditor who is responsible for provisioning the accounts receivable in relation to a debtor.
regarding which there is certainty that it is facing financial difficulties that make the risk predictable
uncollectibility, this can be demonstrated for example with the debtor's declaration of insolvency or
through the periodic analysis of the granted credits.
The debt provisioned as bad debt must come from debtors who are experiencing financial difficulties.
This is verified by checking the age of the account or by the actions that are
they have exercised for the collection of the same, such as having sent notarized letters, titles
protested values, initiation of legal proceedings (executive processes), or that have elapsed more
12 months from the due date of the claim without it having been settled.
The provision must be reflected in the financial statements which are recorded in
the Book of Inventories and Balances. The provided accounts must be detailed and identified in order to
determine the origin of each account receivable. Deductions that are shown will not proceed.
generally in the respective Book.
Regarding the amount of the provision, it should relate to the portion or the total of the debt that is estimated.
of doubtful collection, the latter can be credited with control activities and accounting records
carried out by the creditor

CASES IN WHICH THE DEDUCTION OF DOUBTFUL ACCOUNTS IS NOT ADMITTED.

There are accounts receivable that, even if they meet the described requirements, will not be recognized as
uncollectible and they are the following:
i. The debts incurred between related parties.
ii. If the debt were guaranteed with a bank guarantee, real rights of guarantee, such as pledges or
mortgages, cash deposits, or sale with retention of ownership. To the extent that the
debt is guaranteed by one of the described means and the guarantee is in force not
its provision will proceed.
iii. If the maturity of the debt had been renewed or extended, either by having agreed to a
refinancing of payments or rescheduling of terms, in which case the new one should be considered
expiration of the same

PRACTICAL CASE 1:

The accountant of the company SANTA GREYSY S.A.C. reviews its accounts receivable balances on 01/31/2015, finding
that there is an overdue debt that has not been paid by the client SIERRA ALTA SRL. Follow up on the invoice
finding the following:
On 14/01/2014, services were provided to SIERRA ALTA SRL, issuing invoice 001-4025 for 50,000 +
IGV. Record the entry.
The accountant checks with the collections department that 3 notarized letters have been sent and that it has already been passed to the department.
legal, performing the following analysis:
 SUPPOSED

It is demonstrated that the debtor faces financial difficulties that make the risk predictable.
uncollectibility, through periodic analysis of granted credits or by other means

Se demuestra la morosidad del deudor mediante la documentación que evidencie las gestiones de cobro
after the expiration of the debt.

The protest of documents has been made.

Collection judicial proceedings have been initiated.

c) The accountant decides to record the allowance for doubtful accounts with a date of 01/31/2015.

On 11/30/2015, the legal department reported that SIERRA ALTA SRL has begun its judicial liquidation process.
publishing such a situation in the newspaper El Comercio. Make the corresponding entry.

e) If the accounting profit was S/ 200,000 in the year 2015, calculate the income tax to be paid.

PRACTICAL CASE 2:

The company CONFIADO SAC, a distributor of pharmaceutical products, makes cash and credit sales.
credit. To value your accounts receivable, at the end of the fiscal year apply the treatment established by the IAS
39 "Financial Instruments: Recognition and Measurement", that is, it recognizes the loss in value of its
assets; in this regard, the company has an accounting policy to provide for its receivables based on a
annual percentage based on credit sales. During the year 2015, the total credit sales
amounted to S/. 200,000.00, the credit and collections department, based on experience
from previous exercises, it has estimated that 15% (S/. 30,000.00) will be uncollectible debts; therefore,
the accounting department made the corresponding provision. At the end of the fiscal year, there is
composition of accounts receivable balance.

Accounts receivable from previous periods not overdue (Invoices issued 2014). 15,000.00

Accounts Receivable older than one year from the date of their
maturity. (Invoices issued 2013)
Accounts receivable not overdue (Invoices issued 2015)

Protested promissory notes. 8,000.00

Accountsreceivablefromthecompany"CABEZASSAC",acompanythathasbeendeclaredin
insolvency. 4,000.00
Accounts receivable that have real guarantees (pledge, mortgage, etc.) 10,000.00

Accounts Receivable corresponding to refinanced credits

(new deadlines starting from 2016) 3,000.00
Accounts receivable from the company 'AMIGASAC.' (It should be noted that the manager of
CONFIADO SAC. is also the manager of AMIGA SAC.) 5,000.00

It is requested:

Determine the accounting and tax treatment regarding provisions for collection accounts
doubtful.
 PRACTICAL CASE 3:
The accountant of the company '100% AMIGO SAC' reviews its financial statements as of 12/31/2014, finding that as of that date they are
pending the following invoices:

Detail of accounts receivable balance as of 31.12.2014 Amount S/.

Accounts receivable from previous periods that are not due (issued 2013). 5,000.00
Accounts Receivable over one year old from the date of their 10,000.00
expiration. (issued 2012)
Accounts receivable from the year 2014 not due 50,000.00

Protested promissory notes. 1,000.00

Accountsreceivablefromthecompany'SINMEMORIASAC',acompanythathasbeen
declared insolvent. 2,000.00
Accounts receivable that have real guarantees (pledge, mortgage, 8,000.00
etc.)
Accounts Receivable corresponding to credits
refinanced (new maturities starting from 2015) 6,000.00
Accountsreceivablefromthecompany'AMERICASERVICESSAC.'(Head
indicatethatthecompany100%[Link] 4,000.00
SERVICES SAC has the same majority shareholder.
Total 86,000.00

According to the company's accounting policy based on IFRS, 5% is provisioned as doubtful collection.
sales of the year, which in 2015 amounted to S/ 1,000,000.

a) Determine and record the amount of provision according to IFRS

b) Determine the adjustment of the provision applying the tax criterion.

c) If the accounting profit was S/ 500,000 in 2014, calculate the income tax payable.