ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS

12 Months Ended

Dec. 31, 2020

ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS

Accounts receivable in the Consolidated Balance Sheets at December 31, 2020 and 2019 includes receivables from customers of $510 million and $1.2 billion, respectively, and receivables from marketing affiliates of $32 million and $110 million, respectively. The remaining balance principally relates to receivables from third-party payment processors. In addition, the Company had prepayments to certain customers of $107 million and $232 million at December 31, 2020 and 2019, respectively, which are included in "Prepaid expenses, net," and $45 million at December 31, 2020, which is included in "Other assets, net" in the Consolidated Balance Sheets. The amounts mentioned above are stated on a gross basis, before deducting the allowance for expected credit losses.

For periods prior to January 1, 2020, receivables from customers were recorded at the original invoiced amounts net of an allowance for doubtful accounts. On January 1, 2020, the Company adopted the accounting standards update on the measurement of expected credit losses, which requires the Company to estimate lifetime expected credit losses upon recognition of the financial assets.

The Company records a provision for expected credit losses on receivables from customers and marketing affiliates. The following table summarizes the activity of the allowance for expected credit losses on receivables (in millions):


	For the Year Ended December 31,
	2020		2019		2018
Balance, beginning of year	$	49	$	51	$	35
Provision charged to earnings	216		69		79
Write-offs and adjustments	(116)		(70)		(62)
Foreign currency translation adjustments	17		(1)		(1)
Balance, end of year	$	166	$	49	$	51

The allowance for expected credit losses on receivables as of December 31, 2020 includes a portion of the amounts related to refunds paid or payable to certain travelers without a corresponding estimated expected recovery from the travel service providers, primarily due to the impact of the COVID-19 pandemic (see Note 3). For the year ended December 31, 2020, the Company recorded a reduction in revenue of $37 million for such refunds, which is included in "Provision charged to earnings" in the table above.

In addition, the Company recorded an allowance for expected credit losses on prepayments to certain customers of $55 million and $6 million at December 31, 2020 and 2019, respectively, which are included in "Prepaid expenses, net" and "Other assets, net", as applicable, in the Consolidated Balance Sheets. For the year ended December 31, 2020, the Company recorded expected credit loss expenses of $51 million for the prepayments, which is included in "Sales and other expenses" in the Consolidated Statement of Operations.

Due to the impact of the COVID-19 pandemic (see Note 2), given the severe downturn in the global travel industry and the financial difficulties faced by many of the Company’s travel service provider and restaurant customers and marketing affiliates, the Company has increased its allowance for expected credit losses on receivables from and prepayments to its customers and marketing affiliates. Expected credit loss expenses included in "Sales and other expenses" in the Consolidated Statements of Operations, increased from $69 million for the year ended December 31, 2019 to $230 million for the year ended December 31, 2020. Significant judgments and assumptions are required to estimate the allowance for expected credit losses on receivables from and prepayments to customers and such assumptions may change in future periods, particularly the assumptions related to the impact of the COVID-19 pandemic on the business prospects and financial condition of customers and the Company’s ability to collect the receivable or recover the prepayment.