ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS

12 Months Ended

Dec. 31, 2021

ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS

Accounts receivable in the Consolidated Balance Sheets at December 31, 2021 and 2020 includes receivables from customers of $1.1 billion and $510 million, respectively, and receivables from third-party payment processors of $310 million and $159 million, respectively. The remaining balance principally relates to receivables from marketing affiliates. The Company's receivables are short-term in nature. In addition, the Company had prepayments to certain customers of $67 million and $107 million at December 31, 2021 and 2020, respectively, which are included in "Prepaid expenses, net," and $18 million and $45 million at December 31, 2021 and 2020, respectively, 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.

In 2020, 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 increased its provision for expected credit losses on receivables from and prepayments to its customers and marketing affiliates. Significant judgments and assumptions are required to estimate the allowance for expected credit losses 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 marketing affiliates and the Company’s ability to collect the receivable or recover the prepayment. In 2021, based on its review of recent historical credit loss experience and stability in the economic conditions in certain markets, the Company revised its estimates of expected credit losses.

The following table summarizes the activity of the allowance for expected credit losses on receivables (in millions):


	For the Year Ended December 31,
	2021		2020		2019
Balance, beginning of year	$	166	$	49	$	51
Provision charged to earnings	48		216		69
Write-offs and adjustments	(107)		(116)		(70)
Foreign currency translation adjustments	(6)		17		(1)
Balance, end of year	$	101	$	166	$	49

The allowance for expected credit losses on receivables as of December 31, 2021 and 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. For the years ended December 31, 2021 and 2020, the Company recorded a reduction in revenue of $13 million and $37 million, respectively, for such refunds, which is included in "Provision charged to earnings" in the table above.

In addition to the allowance for expected credit losses on receivables, the Company recorded an allowance for expected credit losses on prepayments to certain customers, which are included in "Prepaid expenses, net" and "Other assets, net" in the Consolidated Balance Sheets. The following table summarizes the activity of the allowance for expected credit losses on prepayments to customers (in millions):


	For the Year Ended December 31,
	2021		2020		2019
Balance, beginning of year	$	55	$	6	$	10
Provision charged to expense	(4)		51		(4)
Write-offs and adjustments	(5)		(2)		—
Foreign currency translation adjustments	1		—		—
Balance, end of year	$	47	$	55	$	6