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Current expected credit losses | 12 Months Ended
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Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Current expected credit losses | Current expected credit losses The CECL model applies to our external trade receivables, related party receivables and other financial assets carried at amortized cost. Our external customers are international oil companies, national oil companies and large independent oil companies. The following table summarizes the movement in the allowance for credit losses for the year ended December 31, 2020.
(In $ millions) |  | Allowance for credit losses - trade receivables |  | Allowance for credit losses - other current assets |  | Allowance for credit losses - related party ST |  | Allowance for credit losses related party LT |  | Total Allowance for credit losses
January 1, 2020 |  | — |  |  | — |  |  | 15 |  |  | 128 |  |  | 143 |
Credit loss expense |  | — |  |  | 3 |  |  | 154 |  |  | 9 |  |  | 166 |
December 31, 2020 |  | — |  |  | 3 |  |  | 169 |  |  | 137 |  |  | 309 |
The below table shows the classification of the credit loss expense within the Consolidated Statements of Operations.
(In $ millions) |  | Year ended December 31, 2020
Management contract expenses |  | 142
Other financial items |  | 24
Total |  | 166
Changes in expected credit loss allowance for external and related party trade receivables and reimbursable amounts due are included in operating expenses, while changes in the allowances for related party loan receivables are included in other financial items. The increase in the allowance for the year ended December 31, 2020 was caused by a decline in credit ratings of our contemporaries, driven by deteriorated market conditions in the period especially following the outbreak of COVID-19, Seadrill Partners going into insolvency and an increase in expected maturities for receivables due from certain related parties. These factors led to a higher probability of default for certain related party receivables. Management applied risk overlay to receivables from Northern Ocean and Seadrill Partners. Refer to Note 32 – "Related party transactions" for details.

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- Definition The entire disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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