In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected losses rather than incurred losses. The standard requires financial assets measured on the amortized cost basis to be presented at the net amount expected to be collected. The Company’s accounts receivable, financing receivables and variable consideration receivables are within the scope of ASU No. 2016-13. The Company adopted ASU No. 2016-13 and several associated ASUs on January 1, 2020 with no required cumulative-effect adjustment to accumulated deficit.

Accounts receivable principally includes amounts currently due to the Company under theater sale and sales-type lease arrangements, contingent fees owed by theater operators as a result of box office performance and fees for theater maintenance services. Accounts receivable also includes amounts due from movie studios and other content creators for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.

In order to mitigate the credit risk associated with accounts receivable, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The Company’s internal credit quality classifications for theater operators are as follows:

The ability of the Company to collect its accounts receivable balances is heavily dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators, or other customers, may experience financial difficulties, such as those imposed by the COVID-19 global pandemic, that could cause them to be unable to fulfill their payment obligations to the Company.

The Company develops its estimate of credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates which are then adjusted for specific receivables that are judged to have a higher than normal risk profile after taking into account management’s internal credit quality classifications, as well as macro-economic and industry risk factors.

The following table summarizes the activity in the allowance for credit losses related to accounts receivable for the three and nine months ended September 30, 2020:

	Three Months Ended September 30, 2020												Nine Months Ended September 30, 2020
	Theater Operators			Studios			Other			Total			Theater Operators			Studios		Other			Total
Beginning balance	$	6,317		$	5,455		$	838		$	12,610		$	3,302		$	893	$	942		$	5,137
Current period provision		1,623			(262	)		468			1,829			4,718			4,424		364			9,506
Write-offs		(614	)		—			—			(614	)		(614	)		—		—			(614	)
Recoveries		—			—			—			—			—			—		—			—
Foreign exchange		133			184			(9	)		308			53			60		(9	)		104
Ending balance	$	7,459		$	5,377		$	1,297		$	14,133		$	7,459		$	5,377	$	1,297		$	14,133

For the three and nine months ended September 30, 2020, the Company recorded provisions for current expected credit losses of $1.8 million and $9.5 million, respectively, reflecting a reduction in the credit quality of its theater and studio related accounts receivable, which management believes is primarily related to the COVID-19 global pandemic. For the three months ended September 30, 2020, the reduction to the provision for Studios is principally due to improved collection experience with a particular customer. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Notes 1 and 2).

Financing receivables are due from theater operators and consist of the Company’s net investment in sales-type leases and receivables associated with financed sales of IMAX Theater Systems. Similar to accounts receivable, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The internal credit quality classifications utilized by the Company for accounts receivable, as described above, are also used for financing receivables.

The ability of the Company to collect its financing receivable balances is heavily dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators may experience financial difficulties, such as those imposed by the COVID-19 global pandemic, that could cause them to be unable to fulfill their payment obligations to the Company.

As at September 30, 2020 and December 31, 2019, financing receivables consist of the following:

	September 30,			December 31,
	2020			2019
Net investment in leases
Gross minimum payments due under sales-type leases	$	18,476		$	16,766
Unearned finance income		(877	)		(1,005	)
Present value of minimum payments due under sales-type leases		17,599			15,761
Allowance for credit losses		(504	)		(155	)
Net investment in leases		17,095			15,606
Financed sales receivables
Gross minimum payments due under financed sales		144,394			146,660
Unearned finance income		(30,106	)		(33,313	)
Present value of minimum payments due under financed sales		114,288			113,347
Allowance for credit losses		(4,643	)		(915	)
Net financed sales receivables		109,645			112,432
Total financing receivables	$	126,740		$	128,038

Net financed sales receivables due within one year	$	34,197		$	27,595
Net financed sales receivables due after one year	$	75,448		$	84,837
Total financed sales receivables	$	109,645		$	112,432

As at September 30, 2020 and December 31, 2019, the weighted-average remaining lease term and weighted-average interest rate associated with the Company’s sales-type lease arrangements and financed sale receivables, as applicable, are as follows:

The following tables provide information on the Company’s net investment in leases by credit quality indicator as at September 30, 2020 and December 31, 2019:

	By Origination Year
As at September 30, 2020	2020		2019		2018		2017		2016		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	1,861	$	—	$	—	$	958	$	—	$	2,141	$	4,960
Credit Watch		—		8,106		3,087		—		—		707		11,900
Pre-approved transactions		—		—		—		—		—		9		9
Transactions suspended		—		—		—		—		—		730		730
Total net investment in leases	$	1,861	$	8,106	$	3,087	$	958	$	—	$	3,587	$	17,599

	By Origination Year
As at December 31, 2019	2019		2018		2017		2016		2015		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	7,874	$	3,045	$	989	$	—	$	—	$	3,186	$	15,094
Credit Watch		—		—		—		—		—		667		667
Pre-approved transactions		—		—		—		—		—		—		—
Transactions suspended		—		—		—		—		—		—		—
Total net investment in leases	$	7,874	$	3,045	$	989	$	—	$	—	$	3,853	$	15,761

The following tables provide information on the Company’s financed sale receivables by credit quality indicator as at September 30, 2020 and December 31, 2019:

	By Origination Year
As at September 30, 2020	2020		2019		2018		2017		2016		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	3,009	$	3,509	$	1,171	$	262	$	1,876	$	6,397	$	16,224
Credit Watch		701		8,242		13,545		15,584		14,388		41,424		93,884
Pre-approved transactions		—		—		—		—		599		668		1,267
Transactions suspended		—		—		—		924		905		1,084		2,913
Total financed sales receivables	$	3,710	$	11,751	$	14,716	$	16,770	$	17,768	$	49,573	$	114,288

	By Origination Year
As at December 31, 2019	2019		2018		2017		2016		2015		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	11,981	$	14,414	$	16,556	$	15,208	$	—	$	44,291	$	102,450
Credit Watch		—		—		637		1,687		—		6,955		9,279
Pre-approved transactions		—		—		250		295		—		285		830
Transactions suspended		—		—		—		165		—		623		788
Total financed sales receivables	$	11,981	$	14,414	$	17,443	$	17,355	$	—	$	52,154	$	113,347

The following tables provide an aging analysis for the Company’s net investment in leases and financed sale receivables as at September 30, 2020 and December 31, 2019:

	As at September 30, 2020
	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	132	$	161	$	1,053	$	1,346	$	16,253	$	17,599	$	(504	)	$	17,095
Financed sales receivables		1,686		2,359		13,312		17,357		96,931		114,288		(4,643	)		109,645
Total	$	1,818	$	2,520	$	14,365	$	18,703	$	113,184	$	131,887	$	(5,147	)	$	126,740

	As at December 31, 2019
	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	30	$	68	$	251	$	349	$	15,412	$	15,761	$	(155	)	$	15,606
Financed sales receivables		1,678		2,772		5,446		9,896		103,451		113,347		(915	)		112,432
Total	$	1,708	$	2,840	$	5,697	$	10,245	$	118,863	$	129,108	$	(1,070	)	$	128,038

The Company considers financing receivables with an aging between 60-89 days as indications of theaters with potential collection concerns. At this point, the Company will begin to focus its review on these financing receivables and increase its discussions internally and with the theater regarding payment status. Once a theater’s aging exceeds 90 days, the Company’s policy is to perform an enhanced review to assess collectibility of the theater’s past due accounts. The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues. Given the potential impacts of the COVID-19 global pandemic on the Company’s customers, management is enhancing its monitoring procedures with respect to overdue receivables.

The following table provides information about the Company’s net investment in leases and financed sale receivables with billed amounts past due for which it continues to accrue finance income as at September 30, 2020 and December 31, 2019:

	As at September 30, 2020
	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	123	$	142	$	746	$	1,011	$	12,181	$	(290	)	$	12,902
Financed sales receivables		1,384		1,908		12,991		16,283		69,963		(2,211	)		84,035
Total	$	1,507	$	2,050	$	13,737	$	17,294	$	82,144	$	(2,501	)	$	96,937

	As at December 31, 2019
	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	9	$	19	$	251	$	279	$	578	$	—		$	857
Financed sales receivables		1,146		1,290		5,523		7,959		29,173		—			37,132
Total	$	1,155	$	1,309	$	5,774	$	8,238	$	29,751	$	—		$	37,989

The following table provides information about the Company’s net investment in leases and financed sale receivables that are on nonaccrual status as at September 30, 2020 and December 31, 2019:

	As at September 30, 2020							As at December 31, 2019
	Recorded Receivable		Allowance for Credit Losses			Net		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	730	$	(18	)	$	712	$	—	$	—		$	—
Net financed sales receivables		2,913		(1,187	)		1,726		788		(732	)		56
Total	$	3,643	$	(1,205	)	$	2,438	$	788	$	(732	)	$	56

A theater operator that is classified within the “All Transactions Suspended” category is placed on nonaccrual status and all revenue recognitions related to the theater are stopped. While the recognition of finance income is suspended, payments received by a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extent of the residual cash received. Once the collectibility issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of finance income.

For the nine months ended September 30, 2020, the Company recognized $0.1 million (2019 —$0.1 million) in finance income related to the net investment in leases with billed amounts past due. There was no such finance income recognized for the three months ended September 30, 2020 and 2019. For the three and nine months ended September 30, 2020, the Company recognized $1.4 million and $4.2 million, respectively (2019 —$1.5 million and $5.1 million, respectively) in finance income related to the financed sale receivables with billed amounts past due.

The following table summarizes the activity in the allowance for credit losses related to the Company’s net investment in leases and financed sale receivables for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
	Net Investment			Financed			Net Investment			Financed
	in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	459		$	3,709		$	155		$	915
Current period provision		105			1,201			409			4,014
Write-offs		(69	)		(330	)		(69	)		(330	)
Recoveries		—			—			—			—
Foreign exchange		9			63			9			44
Ending balance	$	504		$	4,643		$	504		$	4,643

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
	Net Investment			Net Financed			Net Investment			Net Financed
	in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	155		$	839		$	155		$	839
Charge-offs		—			—			—			—
Recoveries		—			—			—			—
Provision		—			76			—			76
Ending balance	$	155		$	915		$	155		$	915

For the three and nine months ended September 30, 2020, the Company recorded a provision for current expected credit losses of $1.3 million and $4.4 million, respectively, reflecting a reduction in the credit quality of its theater related financing receivables, which management believes is primarily related to the COVID-19 global pandemic. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Notes 1 and 2).

In sale arrangements, variable consideration may become due to the Company from theater operators if certain annual minimum box office receipt thresholds are exceeded. Such variable consideration is recorded as revenue in the period when the sale is recognized and adjusted in future periods based on actual results and changes in estimates. Variable consideration is only recognized to the extent the Company believes there is not a risk of significant revenue reversal.

The ability of the Company to collect its variable consideration receivables is heavily dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators may experience financial difficulties, such as those imposed by the COVID-19 global pandemic, that could cause them to be unable to fulfill their payment obligations to the Company.

The Company develops its estimate of credit losses by class of receivable and customer type through a calculation utilizing historical loss rates for financed sale receivables which are then adjusted for specific receivables that are judged to have a higher than normal risk profile after taking into account management’s internal credit quality classifications, as well as macro-economic and industry risk factors.

The following table summarizes the activity in the allowance for credit losses related to variable consideration receivables for the three and nine months ended September 30, 2020:

For the nine months ended September 30, 2020, the Company recorded a provision of $1.7 million for current expected credit losses, reflecting a reduction in the credit quality of its theater related variable consideration receivables, which management believes is primarily related to the COVID-19 global pandemic. Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Notes 1 and 2).