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Accounts receivable and other debtors transactions are considered to be exchange transactions. Debtor Crown transactions are considered to be non-exchange transactions.

Debtors and receivables are recorded at their face value, less an allowance for credit losses. Inland Revenue applies the simplified expected credit loss model of recognising lifetime expected credit losses for receivables.

In measuring credit losses, receivables have been assessed both on a collective basis, where they possess shared credit risk characteristics, and on an individual basis, where we had specific information about cost recoveries. They have been grouped based on the days past due.

Short-term receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include the debtor being in liquidation.

The total of debtors and prepayments were $7.179 million higher than budget, mainly due to additional prepaid software maintenance contracts. This was slightly offset by a lower-than-budgeted amount for net debtors due to a lower level of court compliance activity, and therefore a lower level of court costs recoveries than budgeted.

The expected credit loss rates for accounts receivable are based on the payment profile of receivables over the previous periods and the corresponding historical credit losses experienced for that period. The historical loss rates are adjusted for current and forward-looking economic factors, including COVID-19, that might affect the recoverability of receivables.

There have been no changes during the reporting period in the estimation techniques or significant assumptions used in measuring the expected credit loss allowance.

The allowance for credit losses at 30 June 2022 and 30 June 2021 was determined as follows.

Movements in the allowance for credit losses are as follows.

The following table shows the effect of changes in the lifetime expected credit loss assumption.

Last updated: 22 Aug 2022
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