What is Other Receivables?
1006 reads · Last updated: October 17, 2025
Other receivables refer to expected and short-term receivables generated when creditors demand funds or other assets from debtors during the operation of an enterprise.
Core Description
- Other receivables are short-term, non-trade claims owed to a business, arising from activities beyond routine sales.
- Effective management and disclosure of other receivables impact liquidity, risk, and financial reporting transparency.
- Regular monitoring, accurate classification, and internal controls are essential for minimizing risks and optimizing cash flows.
Definition and Background
Other receivables refer to amounts expected to be collected from entities other than a company’s normal customers, originating from non-core operating activities. These often include employee advances, refundable deposits, short-term loans, tax refunds, insurance claims, and settlements. Unlike accounts receivable, which emerge from the sale of goods or services, other receivables are typically driven by incidental business events or occasional transactions.
Throughout history, the category of other receivables evolved alongside commercial growth. As business dealings became more sophisticated during the industrial era, recording miscellaneous short-term claims became a key tool for transparency and resource tracking. Today, international financial standards (such as IFRS and US GAAP) offer clear guidelines for recognizing, measuring, and disclosing other receivables as part of current assets, expected to be converted into cash within one year.
Technological advancements, such as enterprise resource planning (ERP) systems, have further streamlined the management of these receivables, allowing for real-time reconciliation, automation, and robust control. Regulatory requirements mandate comprehensive documentation and periodic impairment assessments to minimize risks and ensure stakeholders receive an accurate financial picture.
Calculation Methods and Applications
Direct Write-off Method
This approach records bad debt expense only when a specific other receivable is determined to be uncollectible. The entry directly reduces the other receivables account and recognizes the loss in the period it is identified.
Allowance Method
Companies estimate uncollectible amounts in advance, using past experience or statistical models. They create an allowance for doubtful accounts, matching estimated losses to the same period as the related receivables.
Aging Analysis
Receivables are grouped by the length of time outstanding (for example, 0–30, 31–60, 61–90 days). Each age bracket is assigned a probability of default, and an overall provision is calculated for the portfolio.
| Age (days) | Balance | Default Rate | Estimated Loss |
|---|---|---|---|
| 0–30 | 10,000 | 2% | 200 |
| 31–60 | 5,000 | 5% | 250 |
Percentage of Sales
Bad debt is estimated as a fixed percentage of net sales, based on historical patterns. For example, if net sales are 100,000 and 1% is considered uncollectible, 1,000 is recorded as bad debt for the period.
Handling Currency Fluctuations
When other receivables are denominated in foreign currencies, they are remeasured using the closing exchange rate at period-end. Any exchange difference is reported as a gain or loss in the income statement.
Discounting
For receivables expected to be collected after more than one year, present value techniques are used to discount future cash flows, ensuring assets are not overstated.Formula: Present Value = Future Value / (1 + Discount Rate)^n
Application Example:
A global brokerage firm extends a 10,000 temporary loan to an employee, estimating 2% could be uncollectible. The company uses aging analysis for amounts unpaid after 60 days and revalues balances in foreign currencies at each period-end, ensuring accurate, up-to-date reporting.
Comparison, Advantages, and Common Misconceptions
Advantages
- Liquidity Support: Other receivables facilitate tracking and planned recovery of short-term non-trade funds, supporting working capital management.
- Transparency: Accurate recognition aids financial reporting transparency and supports stakeholders’ analysis of asset quality.
- Operational Efficiency: Timely recovery reduces idle cash and improves overall cash flows.
Disadvantages
- Higher Risk: Other receivables may lack the legal certainty of trade receivables, increasing the risk of non-collection or delays.
- Complexity: Monitoring diverse and miscellaneous items can complicate accounting processes and oversight.
- Potential for Misclassification: Vague definitions may lead to errors or intentional misuse, inflating assets or distorting expenses.
Comparison Table
| Type | Origin | Example | Characteristic |
|---|---|---|---|
| Other Receivables | Non-trade | Employee advance, tax refund | Non-core, short-term |
| Accounts Receivable | Core operations | Client payment for sales | Trade, short-term |
| Notes Receivable | Contract | Written promissory note | Formal, may bear interest |
| Advance Payments | Prepayment | Prepaid rent | Asset, no claim for return |
Common Misconceptions
- Catch-All Category: Some assume other receivables are trivial miscellaneous items, leading to misclassification of significant balances.
- Confusion with Trade Receivables: Not all short-term claims relate to sales. Advances and temporary loans should be recorded separately.
- Overlooking Impairment: Failing to write down uncollectible receivables leads to overstated assets and potential regulatory scrutiny.
- Assuming Guaranteed Recovery: Regulatory or tax claims may not always be collectible, so provisions are necessary.
Audit cases show that improper classification or lack of timely impairment can severely distort a company’s finance. For example, a major European company’s overlooked overdue receivables led to inflated asset values and penalties.
Practical Guide
Understanding the Nature of Other Receivables
Other receivables reflect amounts owed to a company apart from the sale of core products or services, such as employee reimbursements, short-term loans, and refundable deposits.
Scenarios and Best Practices
- Employee advances for travel or projects
- Refundable deposits for utilities or office leases
- Claims receivable from insurance companies or governments
- Short-term loans to related parties
Documentation:
Each transaction should be well-documented (receipts, agreements) and regularly reviewed per internal policies.
Internal Controls
Effective processes include strict approval protocols, periodic reconciliations, aging analysis to identify overdue items, and prompt follow-up actions.
Collection and Review
A structured collection policy specifies responsible staff, timelines, and escalation steps, with scheduled reviews to track performance. Impairment assessments help recognize potential losses early.
Case Study
A US-based tech firm implements an automated system sending reminders for overdue employee advances and rental deposits. This practice reduced outstanding receivables by 40% in one year and minimized write-offs, boosting operational cash flow.
Role of Digital Tools
Leading brokerage platforms, such as Longbridge, deploy integrated digital monitoring and risk alerts. This technology helps minimize manual error, enhances compliance, and ensures prompt recovery of miscellaneous claims.
Resources for Learning and Improvement
- Literature: Key accounting standards like IFRS 9 Financial Instruments and US GAAP ASC 310 clarify treatment, recognition, and impairment procedures for other receivables.
- Books: Receivables Management: An Integrated Approach, Accounts Receivable Management Best Practices
- Journals: The Accounting Review, Journal of Accounting Research
- Regulatory Guidance: Publications from the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB)
- Industry Practice Guides: Sector-specific recovery and reporting manuals are widely available
- Online Resources: Leading audit firms and universities offer FAQs, case studies, and up-to-date articles explaining practical solutions
- Case Studies: International auditors publish detailed analyses on improving collections and risk control, such as European manufacturing companies’ restructuring for compliance
- Professional Training: Continuing Professional Education (CPE) programs with a focus on receivables management
- Brokerage Practice: Platforms like Longbridge serve as benchmarking references for digital receivable monitoring and risk management
FAQs
What are typical types of other receivables?
These include employee advances, deposits, tax refunds, interest receivables, insurance claims, and temporary loans. Each should be clearly documented and regularly reviewed for collectability.
How do other receivables differ from accounts receivable?
Accounts receivable arise from sales, while other receivables are non-trade, such as advances or claims on governments and employees. Clear classification reveals actual liquidity and risk.
How are other receivables presented in financial statements?
They appear under current assets, separately from accounts receivable. Notes often detail their composition, aging, and significant balances to support transparency.
What risks are associated with other receivables?
Major risks include late payment, default, misclassification, or inadequate impairment. It is important to monitor these exposures to avoid cash flow disruptions.
How should companies handle impairments or write-offs?
Companies should regularly assess collectability and, where necessary, record provisions or write-offs against uncollectible sums based on actual risk evidence.
Can other receivables affect liquidity?
Yes. Large outstanding other receivables can reduce available cash for daily operations, underscoring the need for active collection and risk management policies.
Are there industry-specific considerations?
Sectors like finance or construction often hold significant other receivables (loans, interest, or project advances), which may require tailored reporting and risk strategies.
How do international standards apply?
IFRS and US GAAP require fair value measurement at initial recognition, regular impairment review, and transparent disclosures. Platforms like Longbridge follow stringent standards for compliance.
What is the impact of currency changes?
Receivables in foreign currencies are revalued each period-end using current exchange rates, with gains or losses impacting the income statement. Effective FX risk management is essential.
How often should other receivables be reconciled?
Monthly or quarterly reviews are advised to validate entries, track overdue amounts, and ensure swift recovery or impairment, maintaining solid internal controls.
Conclusion
Other receivables are an important aspect of financial management, representing non-trade claims due within the short term. Their proper identification, classification, and management significantly affect a firm’s liquidity, risk profile, and financial transparency. Failure to recognize, document, and monitor these assets can lead to operational inefficiencies, misstatements, regulatory scrutiny, and loss of stakeholder confidence. Through clear internal policies, regular reconciliation, digital monitoring tools, and adherence to international standards, firms can optimize the value of other receivables, maintain robust cash flows, and support sustainable, accurate reporting. By instilling rigor in the process, from initial recognition to final collection, companies exemplify financial discipline and reinforce stakeholder trust in the reliability of their financial statements.
