Accounts Receivables |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Accounts and Nontrade Receivable |
Allowance for Doubtful Accounts
The Company generates trade receivables in the ordinary course of its business and provides for estimated bad debts on such receivables. The Company adopted the new accounting guidance, ASU 2016-13, Measurement of Credit Losses on Financial Instruments on January 1, 2020. As a result of adopting the new guidance, the Company recorded a $10 million (net of a $2 million income tax benefit) cumulative effect adjustment to retained earnings at January 1, 2020. Since adoption, the Company measures the expected credit losses of its receivables on a collective (pool) basis which aggregates receivables with similar risk characteristics and uses historical collection attrition rates for periods ranging from to ten years to estimate its expected credit losses. As such, the Company measures the expected credit losses of its receivables by segment and geographical area. Beginning January 1, 2020, the Company provides an estimate of expected credit losses for its receivables immediately upon origination or acquisition and may adjust this estimate in subsequent reporting periods as required. When the Company determines that an account is not collectible, the account is written-off to the allowance for doubtful accounts. The Company also considers whether the historical economic conditions are comparable to current economic conditions. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, the Company would adjust the allowance for doubtful accounts to reflect the expected effects of the current environment on the collectability of the Company’s trade receivables which may be material.
The following table sets forth the activity in the Company’s allowance for doubtful accounts on trade accounts receivables for the years ended:
The Consolidated Statements of Cash Flows have been revised to separately disclose the provision for doubtful accounts of $16 million for the year ended December 31, 2019. This revision had no effect on the Company’s net cash provided by operating activities, as previously reported for the year ended December 31, 2019.
Notes Receivable As of December 31, 2021 and 2020, the Company had notes receivable of $4 million and $9 million, respectively, net of a $3 million and $4 million allowance, respectively. For a significant portion of such notes receivable, the Company has received personal guarantees from the owners of these hotels. In addition, the Company had $20 million and $18 million of notes receivable as of December 31, 2021 and 2020, respectively, which are fully offset by a corresponding amount in deferred revenues.
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