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. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
  3. Bad Debt Recovery

    A debt from a loan, credit line or accounts receivable that is ...
  4. Actuarial Science

    Actuarial science is a discipline that assesses financial risks ...
  5. Alternative Minimum Cost Method

    An ERISA approved method of funding pension plans. Pension plan ...
  6. Bad Bank

    A bad bank is one that is set up to buy the bad loans of another ...
Related Articles
  1. Personal Finance

    Career advice: accounting versus actuary

    Read about what life is like as an actuary or as an accountant, how the two careers are different, and how to decide which is best for you.
  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. Personal Finance

    Sizing Up Debt

    Ever wonder if the different types of debt are good or bad? Read on and we'll tell you.
  4. Personal Finance

    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.
  5. Investing

    Introduction To Bonds

    Find out how this method of debt investment is used to finance various levels of government and private companies.
  6. Financial Advisor

    Career advice: Financial versus actuary analyst

    Read an in-depth comparison between financial analysts and actuaries, what it's like to work as each, and how to determine which is best for you.
  7. Personal Finance

    Good Debt Vs. Bad Debt

    Is there really such a thing as good debt and bad debt? Read on to find out.
  8. Personal Finance

    5 Reasons Why Debt Is Your Enemy

    Having debt can cost you both financially and mentally and can affect your retirement.
  9. Financial Advisor

    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.
  10. 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 ...
RELATED FAQS
  1. Why does the Internal Revenue Service (IRS) care about accounting practices?

    Learn why the Internal Revenue Service cares about accounting practices, as these ensure the accurate reporting of financial ... 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 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 >>
Hot Definitions
  1. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  2. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  3. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  4. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  5. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
  6. Sharpe Ratio

    The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.
Trading Center