Loans Receivable, Net

12 Months Ended

Dec. 31, 2022

Loans receivable, net


	December 31,
	2022		2021
	(In millions)
Loans receivable	$	2,778	$	1,607
Allowance for doubtful accounts	(1,074)		(408)
Current loans receivable, net	$	1,704	$	1,199


	December 31,
	2022		2021
	(In millions)
Loans receivable	$	62	$	88
Allowance for doubtful accounts	(30)		(27)
Non current loans receivable, net	$	32	$	61

The Company classifies loans receivable as “On-line merchant”, “Consumer”, “In-store merchant” and “Credit Cards”. As of December 31, 2022 and December 31, 2021, Loans receivable, net were as follows:


	December 31, 2022
	Loans receivable		Allowance for doubtful accounts		Loans receivable, net
	(In millions)
On-line merchant	$	394	$	(120)	$	274
Consumer	1,568		(614)		954
In-store merchant	267		(145)		122
Credit Cards	611		(225)		386
Total	$	2,840	$	(1,104)	$	1,736


	December 31, 2021
	Loans receivable		Allowance for doubtful accounts		Loans receivable, net
	(In millions)
On-line merchant	$	361	$	(79)	$	282
Consumer	851		(232)		619
In-store merchant	187		(76)		111
Credit Cards	296		(48)		248
Total	$	1,695	$	(435)	$	1,260

The allowance for doubtful accounts with respect to the Company’s loans receivable amounts to $1,112 million (which includes $8 million related to unused agreed loan commitment on credit cards portfolio presented in Other liabilities of the Consolidated Balance Sheet) and $435 million as of December 31, 2022 and 2021, respectively.

The following tables summarize the allowance for doubtful accounts activity during the years ended December 31, 2022, 2021 and 2020:


	December 31, 2022
	On-line merchant		Consumer		In-store merchant		Credit Cards		Total
	(In millions)
Balance at beginning of year	$	79	$	232	$	76	$	48	$	435
Net charged to Net Income	109		600		139		210		1,058
Currency translation adjustments	1		(9)		(1)		(1)		(10)
Write-offs	(69)		(209)		(69)		(32)		(379)
Balance at end of year	$	120	$	614	$	145	$	225	$	1,104

	December 31, 2021
	On-line merchant		Consumer		In-store merchant		Credit Cards		Total
	(In millions)
Balance at beginning of year	$	20	$	45	$	13	$	—	$	78
Net charged to Net Income	75		234		74		51		434
Currency translation adjustments	(3)		(7)		(3)		—		(13)
Write-offs	(13)		(40)		(8)		(3)		(64)
Balance at end of year	$	79	$	232	$	76	$	48	$	435

The increase in write-offs, for the year ended December 31, 2022 compared to the same period in 2021, is mainly generated by higher originations of loans receivable in 2022.


	December 31, 2020
	On-line merchant		Consumer		In-store merchant		Total
	(In millions)
Balance at beginning of year	$	9	$	8	$	3	$	20
Adoption of ASC 326	2		2		1		5
Net charged to Net Loss	25		51		15		91
Currency translation adjustments	5		2		—		7
Write-offs	(21)		(18)		(6)		(45)
Balance at end of year	$	20	$	45	$	13	$	78

As of December 31, 2022, the Company is exposed to off-balance sheet unused agreed loan commitment on credit cards portfolio which expose the Company to credit risks. For the year ended December 31, 2022 the Company recognized in Provision for doubtful accounts $8 million as expected credit losses.

The Company closely monitors credit quality for all loans receivable on a recurring basis to assess and manage its exposure to credit risk. To assess merchants and consumers seeking a loan under the Mercado Credito solution, the Company uses, among other indicators, risk models internally developed, as a credit quality indicator to help predict the merchant’s and consumer’s ability to repay the principal balance and interest related to the credit. The risk model uses multiple variables as predictors of the merchant’s and consumer’s ability to repay the credit, including external and internal indicators. Internal indicators consider user behavior related to credit/payment history, and with lower weight in the risk models, the Company uses number of transactions in the Company’s ecosystem and merchant’s annual sales volume, among other indicators. In addition, the Company considers external bureau information to enhance the model and the decision making process.

The amortized cost of the loans receivable classified by the Company’s credit quality internal indicator was as follows:


	December 31, 2022		December 31, 2021
	(In millions)
1-30 days past due	$	118	$	90
31-60 days past due	88		47
61 -90 days past due	86		37
91 -120 days past due	103		37
121 -150 days past due	110		31
151 -180 days past due	112		25
181 -210 days past due	100		24
211 -240 days past due	93		23
241 -270 days past due	89		21
271 -300 days past due	73		21
301 -330 days past due	85		30
331 -360 days past due	75		25
Total past due	1,132		411
To become due	1,708		1,284
Total	$	2,840	$	1,695

As described in Note 2,“ Summary of significant accounting policies”, the Company places loans on non-accrual status at 90 days past due. There are no loans receivable on non-accrual status for which there is no related allowance for doubtful accounts.