Allowance for Credit Losses

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses on trade receivables is determined based on a number of factors such as recent and historical write-off and delinquency trends, a specific analysis of significant receivable balances that are past due, the concentration of trade receivables among clients and the current state of the U.S. economy. As part of our analysis, we apply credit loss rates to outstanding receivables by aging category. For certain clients, we perform a quarterly credit review, which considers the client’s credit rating and financial position as well as our total credit loss exposure. Trade receivables are written off after all reasonable collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received and are immaterial for the three and nine months ended September 30, 2020.

The following table presents the activity within the allowance for credit losses on trade receivables for the nine months ended September 30, 2020 (in thousands):

Allowance for credit losses, January 1, 2020 (1)	$	1,843
Current period provision	2,723
Write-offs charged against the allowance, net of recoveries of amounts previously written off	(900)
Allowance for credit losses, September 30, 2020	$	3,666

(1) As a result of the adoption of the new credit losses accounting standard, we recorded a cumulative effect adjustment to increase the allowance for credit losses of $0.3 million as of January 1, 2020.

The allowances on trade receivables presented in the Unaudited Condensed Consolidated Balance Sheets include $0.4 million and $0.5 million at September 30, 2020 and December 31, 2019, respectively, for reserves unrelated to credit losses.Management considered the ongoing COVID-19 economic and health crisis and its impact on our clients’ ability to pay outstanding receivables. We analyzed receivables concentrated within specific industries considered to be most significantly impacted, reviewed specific clients with credit ratings that were in a higher risk category and applied higher credit loss rates in order to estimate our potential credit loss exposure, which resulted in an increase to our allowance for credit losses during the nine months ended September 30, 2020.