Balance Sheet Reporting of Receivables

Presentation of receivables on the balance sheet as well as in the notes to financial statements includes identifying each major class of receivables, classifying receivables as short-term or long-term, and disclosing any significant concentrations of credit risk.

Accounting standards provide for certain presentation and disclosure requirements for receivables. For one, each major type of receivable must be presented on the balance sheet or disclosed in the notes to the financial statements. Receivables must also be properly classified as either short-term or long-term. Short-term classification would be used for receivables becoming due and payable within one year of the balance sheet date. Accounts receivable, which are often expected to be collected within 30 to 60 days, would generally be classified as short-term. Long-term classification would be used for receivables due beyond one year of the balance sheet date. Notes receivable, for example, often include extended payment terms and, therefore, might warrant this type of balance sheet classification. The gross amount of receivables and allowance for doubtful accounts are also required to be presented and/or disclosed.

The illustration below provides an excerpt from Deere & Company's balance sheet, which further examines the company's net receivables. When receivables comprise a significant percent of a company's total assets (as with Deere & Company), reviewing their composition is of particular interest to financial statement users.

Balance Sheet Excerpt
Net Receivables (in millions)
     Receivables from unconsolidated subsidiaries $30
     Trade accounts and notes receivable $3,278
     Financing receivables $27,583
     Restricted financing receivables $4,616
     Other receivables $1,500
Total receivables $37,007
Less: Allowance for doubtful trade receivables $175
Net receivables $36,832

Companies must also disclose any significant concentration of credit risk in the notes to their financial statements. This disclosure addresses any threat the company may face as it relates to default or nonpayment of receivables derived from a single large customer or class of customers, which might adversely impact the company's current and/or future operating ability.