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.
| Actual 2021 ($000) | Exchange transactions | Actual 2022 ($000) | Unaudited budget 2022 ($000) |
|---|---|---|---|
| Current assets - exchange transactions | |||
| Debtors | |||
| $6,419 | Accounts receivable | $3,742 | $5,330 |
| $(488) | Less allowance for credit losses | $(1,234) | $(1,200) |
| $390 | Other debtors | $493 | n/a |
| $6,321 | Net debtors | $3,001 | $4,130 |
| $10,346 | Prepayments | $15,310 | $6,500 |
| $16,667 | Total current assets - exchange transactions | $18,311 | $10,630 |
| Non-current assets - exchange transactions | |||
| $317 | Prepayments | $48 | $550 |
| $317 | Total non-current assets - exchange transactions | $48 | $550 |
| $16, 984 | Total debtors and prepayments - exchange transactions | $18,359 | $11,180 |
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.
| Year and period | Expected credit loss rate | Gross carrying amount ($000) | Lifetime expected credit loss ($000) |
|---|---|---|---|
| 2022 | |||
| Not past due | 0.10% | $1,961 | $2 |
| Past due 1 to 30 days | 2.72% | $147 | $4 |
| Past due 31 to 60 days | 2.94% | $68 | $2 |
| Past due 61 to 90 days | 23.44% | $64 | $15 |
| Past due > 90 days | 80.63% | $1,502 | $1,211 |
| Total | 32.99% | $3,742 | $1,234 |
| 2021 | |||
| Not past due | n/a | $1,904 | n/a |
| Past due 1 to 30 days | 0.65% | $1,501 | $10 |
| Past due 31 to 60 days | 0.35% | $1,490 | $5 |
| Past due 61 to 90 days | 35.04% | $8 | $3 |
| Past due > 90 days | 31.04% | $1,516 | $470 |
| Total | 7.61% | $6,419 | $488 |
Movements in the allowance for credit losses are as follows.
| Actual 2021 ($000) | Movement | Actual 2022 ($000) |
|---|---|---|
| $593 | Opening balance as at 1 July | $488 |
| $13 | Additional provisions made during the year | $820 |
| $(118) | Receivables written off during the year | $(74) |
| $488 | Closing balance as at 30 June | $1,234 |
The following table shows the effect of changes in the lifetime expected credit loss assumption.
| 2021 ($000) | Effect of change | 2022 ($000) |
|---|---|---|
| $(128) | Impact of a 2% increase on the lifetime expected credit loss assumption | $(75) |
| $128 | Impact of a 2% decrease on the lifetime expected credit loss assumption | $75 |