Continuing from where I left off previously on one-off gain/loss, this round I’ll touch on:
1) Trade Receivable Written-off/Impaired
Trade receivables consists of monetary value generated through core business activities that has yet to be receive from customers. Usually, it comes with with aging analysis, which shows how long does the receivables take to be collected.
At times, there are a portion of receivables that can’t be collected anymore. This could due to customer bankruptcy, customer illuquidity, etc. The receivables will then be written-off as bad debt and would charge to P&L statement. Depending on the nature of business, a write-off may or may not be a one-off item. A look into the company’s previous financial statement will show you the pattern. If a company is showing significant write-off in trade receivables almost every year, it deserve a close attention!
2) FOREX Translation
It is a common term for business that has expanded to oversea market, which will likely be transacted in different currency. This is because during the financial reporting period, there would be a consolidation of result from oversea business entities, be it subsidiaries, associates or JV. Financial status will usually be reported using functional currency of the main holding company, while other currency will be translated (without physical exchange of money) to reflect their performance. This translation will be reflected in P&L statement (and can generally be found in the supplementary notes). It should be noted that the gain/loss from FOREX translation does not originate from business activities and should be excluded from the earning.
Stay tuned for more updates on one-off items! Have fun!
