Credit Losses

6 Months Ended

Jul. 04, 2021

Credit Loss [Abstract]

Credit Losses

Credit Losses Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. Upon adoption, we recorded a noncash cumulative effect adjustment to retained earnings of $2.9 million. Of this amount, $1.0 million related to our continuing operations and $1.9 million related to our discontinued operations.

We are exposed to credit losses primarily through sales of products and services. Our 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 receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.

Estimates are used to determine the allowance, which is based upon an assessment of anticipated payments as well as other information that is reasonably available. The following table presents the activity in the trade receivables allowance for doubtful accounts for our continuing operations for the three and six months ended July 4, 2021 and June 28, 2020, respectively:

	2021		2020
	(In thousands)
Beginning balance at January 1	$	5,150	$	2,569
Adoption adjustment	—		1,011
Current period provision	82		(172)
Write-offs	(57)		—
Recoveries collected	(23)		(9)
Fx impact	(17)		(213)
Q1 ending balance	5,135		3,186
Current period provision	305		2,621
Disposals	(192)		—
Write-offs	(20)		(52)
Recoveries collected	(36)		(100)
Fx impact	(25)		37
Q2 ending balance	$	5,167	5,692