Allowance for Credit Losses

9 Months Ended

Sep. 30, 2022

Allowance for Credit Losses

Allowance for Credit Losses

4. Allowance for credit losses

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of such receivables, the estimated accounts receivable that may not be collected is based on aging of the accounts receivable balances.

Customers are assessed for credit worthiness upfront through a credit review, which includes assessment based on the Company’s analysis of customers’ financial statements when a credit rating is not available. The Company evaluates contract terms and conditions, country, and political risk, and may require prepayment to mitigate risk of loss. Specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company monitors changes to the receivables balance on a timely basis, and balances are written off as they are determined to be uncollectable after all collection efforts have been exhausted.

Activity related to the allowance for credit losses was as follows (in thousands):

	2022		2021
Balance at January 1	$	419	$	370
Provision for credit losses, net of recoveries		102		275
Balance at September 30	$	521	$	645