Quarterly report pursuant to Section 13 or 15(d)

Credit Loss Reserve and Allowances

v3.20.2
Credit Loss Reserve and Allowances
3 Months Ended
Mar. 31, 2020
Credit Loss [Abstract]  
Credit Loss Reserve and Allowances
Credit Loss Reserve and Allowances

Upon adoption of ASC 326 as of January 1, 2020, the Company implemented an expected credit loss allowance methodology for accounts receivable using historical collection experience, current and future economic and market conditions, and a review of the current status of each customer’s trade accounts receivables. As a part of the implementation, the Company analyzed the prior history of credit losses on accounts receivable separately for each of the two business segments Media & Content and Connectivity, and within each segment, separately for Aviation, Land and Maritime verticals. Our business is managed between Media & Content and Connectivity, and therefore, it was deemed appropriate to first analyze losses separately for the two based on the nature of these segments and related customer base. Further, the Company noted that historically customers between the aviation, land and maritime groups exhibit common risk characteristics based upon the industries for which they operate in and believed a further breakdown of segments across aviation, land and maritime verticals was appropriate. The analysis resulted in the Company analyzing history of credit losses on accounts receivable for a total of six aggregation points and determining loss rates for each based on a five-year period average.

The Company used the average historical loss rates in estimating credit loss reserve. Additionally, the Company estimates loss reserve based on the aging of the accounts receivable balances and the financial condition of customers and provides for specific allowance amounts for those customers that have a higher probability of default. We regularly monitor the collection status of accounts receivable through account reconciliation, dispute resolution, payment tracking, customer’s financial condition and macroeconomic conditions. We write-off balances when determined to be uncollectible. We apply a similar methodology towards our current and non-current contract asset balances, which shares some common risks with accounts receivable. Specifically, for the three months ended March 31, 2020, we have reviewed and considered the current and future economic and market conditions resulting from the COVID-19 pandemic in determining our estimated credit losses.

A summary of our allowances for credit losses were as follows (in thousands):
 
Accounts Receivable
 
Prepaid and Other Current Assets
 
Other Non-Current Assets
 
Total
Balance at January 1, 2020
$
6,776

 
$

 
$

 
$
6,776

Cumulative-effect adjustment of ASC 326 adoption
503

 
111

 
672

 
1,286

Current-period provision for expected credit losses(1)
2,950

 
4

 
33

 
2,987

Write-offs and dispositions
(866
)
 

 

 
(866
)
Foreign currency rate changes
(870
)
 

 

 
(870
)
Balance at March 31, 2020
$
8,493

 
$
115

 
$
705

 
$
9,313


(1) The current-period provision for expected credit losses was due primarily to the impact of COVID-19. One international airline partner in particular accounted for approximately 45% of the provision recorded during the three-month period ended March 31, 2020 and three other airline partners accounted for approximately 43% of the provision recorded during the same period because of financial distress caused by COVID-19. We will continue to monitor the financial conditions of all customers and will record additional credit losses in the future, as appropriate.