If a specific customer’s Account Receivable is identified as uncollectible, it is written off by removing the amount from Account Receivable as bad debts expense. For Japan tax purpose, when is it recognized as uncollectible? In principle, 1 year after the latest payment from the debtor is the timing to write off as bad debt. At least 1 JPY needs to be recognized for Account Receivable as memorandum value.
Other cases such as when reorganization plan comes into place are timing to use the allowance method. Check with your accounting office to see what steps can be taken depending on the legal status of debtor. Provision Fund for Bad Dept has strict guidelines.
Please note that if you do not recognize bad debt at the year that is applicable under Japan tax code, you will not be able to go back in retrospect for tax purpose.
In case Account Receivable is in currency other than Japanese Yen, you may need to convert at year end. Be sure to confirm with your tax accountant on the requirement of yearend conversion.