Quarterly report pursuant to Section 13 or 15(d)

Accounts Receivable Accounts Receivable

v3.20.2
Accounts Receivable Accounts Receivable
 6 Months Ended
Jun. 30, 2020
Credit Loss [Abstract]  
Accounts Receivable
5. ACCOUNTS 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 $2 million of an 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 seven 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 six months ended:
 
June 30, 2020
Beginning balance
$
47

Cumulative effect of change in accounting standard
12

Provision for doubtful accounts
21

Bad debt write-offs
(13
)
Ending balance
$
67



Notes receivable

The Company had notes receivables of $15 million, net of a $2 million allowance as of June 30, 2020 and for a significant portion of such notes receivables, the Company has received personal guarantees from the owners of these hotels. In addition, the Company had $18 million of notes receivables which are fully offset in deferred revenues.