Case 3: Loss on Receivables – IVA Remains
You grant a current account credit of USD 100,000. In 1998, changes in the economic situation lead to a credit risk amounting to USD 50,000. A fixed value adjustment of USD 50,000 is posted in 1998 as follows:
Fixed IVA amount before posting run |
50,000 |
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IVA posted before posting run |
0 |
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IVA on Receivables |
Write Off on Receivables |
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50,000 |
50,000 |
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Fixed IVA amount after posting run |
50,000 |
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IVA posted after posting run |
50,000 |
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Postings for loss on receivables depend on whether:
Loss on receivables is less than the posted IVA
Loss on receivables is greater than or equal to the posted IVA
Loss on Receivables is Less Than Posted IVA
In 1999, you need to write off receivables worth USD 30,000, which is less than the posted IVA amount of USD 50,000.
The system posts a payment item with transaction type 8070 (loss on receivables) and retains the value adjustment amount as follows:
Fixed IVA amount before posting run |
50,000 |
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IVA posted before posting run |
50,000 |
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Write Off on Receivables |
Clearing Payables/ Receivables Accounts |
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30,000 |
30,000 |
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Fixed IVA amount after posting run |
50,000 |
||||||
IVA posted after posting run |
50,000 |
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Outcome
The customer still owes USD 70,000. An individual value adjustment of USD 50,000 remains posted on the customer account.
Loss on Receivables Exceeds Posted IVA
In 1999, you need to write off receivables worth USD 80,000, which is greater than the posted IVA amount of USD 50,000.
The system posts a payment item with the following details:
Amount
Difference between the posted IVA (USD 50,000) and the amount to be written off (USD 80,000)
Transaction Type
8080 (loss on value adjusted receivables)
Fixed IVA amount before posting run
50,000
IVA posted before posting run
50,000
IVA on Receivables
Clearing Payables/ Receivables Accounts
30,000
30,000
Fixed IVA amount after posting run
50,000
IVA posted after posting run
20,000
The system posts another payment item with the following details:
Amount
Difference between the loss on receivables and the amount posted by the payment item in the previous step
Transaction Type
8070 (loss on receivables)
Fixed IVA amount before posting run
50,000
IVA posted before posting run
20,000
Write Off on Receivables
Clearing Payables/ Receivables Accounts
50,000
50,000
Fixed IVA amount after posting run
50,000
IVA posted after posting run
20,000
Outcome
The customer still owes USD 20,000. An individual value adjustment of USD 20,000 remains posted on the customer account.