The Brink’s Company (BCO), a cash management and security company, changed how it estimates the allowance for doubtful accounts in the first quarter of 2022. Previously, the company’s estimation of expected credit losses in receivables— the allowance— was heavily weighted on historical loss rates and what the company calls the riskiness of customer accounts.

The new methodology, according to Brink’s, includes:

“...an estimated allowance for accounts receivable significantly past due in order to adjust for at-risk receivables not captured in our previous method.”

Not surprisingly, the new methodology resulted in an increase in accounts receivable significantly past due. The company increased the allowance by $16.7 million.

Later in the latest quarterly filing, Brink’s translated the description above for investors. In a nutshell, the increase in bad debt expense is nothing more than Brink’s finally recognizing that old, unpaid receivables are never going to be collected. The company describes the expense as being:

“...associated with U.S. aged receivables.”

The company blamed the pandemic.

Though the increase is entirely due to U.S. customers not paying, Brink’s recorded the expense in “Other items not allocated to segments” so as not to harm its North America segment results.