Nonaccrual Experience Method - NAE

DEFINITION of 'Nonaccrual Experience Method - NAE'

An accounting procedure allowed by the Internal Revenue Code for handling bad debts. This method can only be applied to bad debts for services performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law or the performing arts. The company also must have average annual gross receipts for any three prior tax years of less than $5 million.

BREAKING DOWN 'Nonaccrual Experience Method - NAE'

A company incurs a bad debt when it can't collect money it is owed. Bad debts that cannot be claimed on the business's tax return using the nonaccrual experience method may be claimed using the specific charge-off method, which is more common.

RELATED TERMS
  1. Bad Debt Expense

    An entry found on a business's income statement that represents ...
  2. Actuarial Science

    A discipline that assesses financial risks in the insurance and ...
  3. Actuary

    A professional dealing with the assessment and management of ...
  4. Actuarial Service

    Method by which corporations determine, assess and plan for the ...
  5. Modified Cash Basis

    An accounting method that combines elements of the two major ...
  6. Debt Avalanche

    A method that involves making the minimum payment on each debt, ...
Related Articles
  1. Economics

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  2. Personal Finance

    Insure Your Future with a Career as an Actuary

    If you've got excellent math skills, they can add up to a lucrative career as an actuary.
  3. Investing Basics

    The Top 5 Skills Every Actuary Needs

    The actuary profession is growing fast. Here's a look at the majors and top skills one needs to become a successful actuary.
  4. Fundamental Analysis

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  5. Credit & Loans

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
  6. Investing

    Introduction To Bonds

    Find out how this method of debt investment is used to finance various levels of government and private companies.
  7. Investing

    Why a Rise In the National Debt Is Good for You

    In the first quarter of the year, the household national debt for Americans was $129 billion. Yet contrary to popular belief, debt is not always a bad thing.
  8. Professionals

    A Day In The Life Of An Actuary

    We take a look at the typical workday of three actuaries who work for different types of companies and who are at different stages in their careers.
  9. Investing

    Debt Ratio

    The debt ratio divides a company’s total debt by its total assets to tell us how highly leveraged a company is—in other words, how much of its assets are financed by debt. The debt component ...
  10. Budgeting

    Good Debt Vs. Bad Debt

    Is there really such a thing as good debt and bad debt? Read on to find out.
RELATED FAQS
  1. Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total ... Read Answer >>
  2. What's the average salary of an actuary?

    Get insight into the intriguing career of risk analysis and forecasting. How much do actuaries make, and how is this field ... Read Answer >>
  3. Why do banks write off bad debt?

    Learn more about the practice of banks writing off bad debts and removing them from their books, including a hypothetical ... Read Answer >>
  4. Why would you look at a company's net debt rather than its gross debt?

    Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
  5. What is the difference between the debt ratio of a company and the debt ratio of ...

    Discover the different financial evaluation measures that are most commonly applied to individuals and corporations, respectively. Read Answer >>
  6. What's the difference between debt consolidation and debt management or debt settlement?

    Learn about different ways of handling debt when you become overwhelmed, including debt consolidation, debt management and ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center