Bad debt provision

An estimate of the receivables that will never be collected, charged to profit and deducted from the receivables balance.

Provide 4.5% against ₹640 crore of receivables and the company carries ₹28.8 crore.

Under the current standard the provision follows an expected credit loss approach, providing for likely future losses before any evidence of default arrives. For trade receivables Ind AS allows a simplified approach that provides lifetime expected loss from the start, so the staging that lenders use doesn't apply. In practice the provision is set from an ageing matrix with a loss rate for each bucket, all of it disclosed.

Watch the provision as a percentage of receivables against the ageing trend. If the ageing is deteriorating and the percentage is flat, the two disclosures contradict each other. Ask which one to believe.