Hi Gully, my understanding is the following entries:In...

Hi Gully, my understanding is the following entries:

In FY2021

Debit - Bad debts (Impairment of trade receivables) $9.6 million
Credit - Trade receivables $9.6 million

Debit - Deferred tax asset $2.8 million (30% of 9.6 million)
Credit - Income tax $2.8 million

There will be a subsequent event disclosure that $5 million of bad debt to be recovered in FY2022

In FY2022

Debit - Cash (When the cash is paid from SMS) $5 million
Credit - Bad debt recovered $5 million

Debit - Income tax $1.5 million
Credit - Deferred tax asset $1.5 million

In other words in FY21 they will have written off the full $9.6 million which hits the P&L, they will recognise a Deferred tax asset of 2.8 million for paying income tax (Accrual basis) on the initial 9.6 million of income. Subsequent disclosure that $5 million of bad debt recovered

In FY22 they will record a reversal of expense in Bad debt recovered of $5 million. They will also reverse the deferred tax asset of $1.5 million.

So the net effect is $4.6 million loss on bad debt written off with a tax benefit of $1.4 million