Recoverables, in the context of accounting and finance, refer to assets or claims that are expected to be collected or recovered by a company or an individual. These assets can include outstanding loans, advances, or other receivables that are owed to the entity.
Recoverables are typically recorded on a company's balance sheet as an asset, representing the amount of money that is expected to be recovered from the borrowers or debtors. These assets are classified under current assets if their collection is expected to occur within a year and under non-current assets if the collection is expected to take longer than a year.
Managing recoverables is essential for businesses and individuals, as it directly affects their liquidity and financial health. The timely collection of recoverables ensures a steady cash flow and allows companies to meet their operational expenses, invest in growth, and fulfill their financial obligations.
To recover these assets, companies or individuals may engage in various strategies, including negotiation with debtors, legal actions, or selling their claims to third-party collection agencies. Effective recovery management involves establishing efficient credit and collection policies, tracking outstanding amounts, and monitoring the aging of receivables.
The valuation of recoverables may be subject to impairment considerations. If there are indications that a debtor may not be able to settle their obligation, a company may need to adjust the recoverable amount to reflect the estimated realizable value. Impairment charges are recorded as expenses on the income statement, ultimately reducing the recorded recoverable amount.
