Archer Company and Zorro Company both have significant amounts of accounts receivable at any time, and both experience bad debts from time to time. Archer uses the ageing- of- accounts method to account for bad debts, and Zorro uses the direct write- off method. Zorro Company's method complies with IFRS and produces a better matching of revenues and expenses than does Archer Company's method.

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The direct write-off method used by Zorro Company does not comply with IFRS and does not provide a better matching of revenues and expenses compared to the ageing-of-accounts method used by Archer Company. The ageing method estimates bad debts in advance, aligning expenses with related revenues, which is consistent with IFRS principles.

Archer Company and Zorro Company Both Have Significant Amounts of Accounts