The ability of the Company to collect its receivables is principally dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators, or other customers, may experience financial difficulties that could result in their being unable to fulfill their payment obligations to the Company.

In order to mitigate the credit risk associated with its receivables, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The Company's internal credit quality classifications for theater operators are as follows:

•

Good Standing — The theater operator continues to be in good standing as payments and reporting are received on a regular basis.

•

Credit Watch — The theater operator has demonstrated a delay in payments, but continues to be in active communication with the Company. Theater operators placed on Credit Watch are subject to enhanced monitoring. In addition, depending on the size of the outstanding balance, length of time in arrears, and other factors, future transactions may need to be approved by management. These receivables are in better condition than those in the Pre-Approved Transactions Only category, but are not in as good condition as the receivables in the Good Standing category.

•

Pre-Approved Transactions Only — The theater operator has demonstrated a delay in payments with little or no communication with the Company. All services and shipments to the theater operator must be reviewed and approved by management. These receivables are in better condition than those in the All Transactions Suspended category, but are not in as good condition as the receivables in the Credit Watch category. In certain situations, a theater operator may be placed on nonaccrual status and all revenue recognition related to the theater may be suspended, including the accretion of Finance Income for Financing Receivables.

•

All Transactions Suspended — The theater operator is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater operator is classified within the All Transactions Suspended category, the theater is placed on nonaccrual status and all revenue recognitions related to the theater are suspended, including the accretion of Finance Income for Financing Receivables.

During the period when the accretion of Finance Income is suspended for Financing Receivables, any payments received from a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a reversal of the provision is recorded to the extent of the residual cash received. Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.

When a customer's aging exceeds 90 days, the Company's policy is to perform an enhanced review to assess collectability of the theater's past due accounts. The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues.

The Company develops an estimate of expected credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates, which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after considering management's internal credit quality classifications. Additional credit loss provisions are also recorded taking into account macro-economic and industry risk factors. The write-off of any billed receivable balance requires the approval of management.

On September 7, 2022, Cineworld, the parent company of Regal Entertainment Group, and certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. Based on its evaluation of its contracts with Cineworld, its assessment of the reorganization and its discussions with Cineworld to date, the Company has determined that no additional provision for expected credit losses is required. The Company also does not expect to see a material impact on its network of theaters with Cineworld resulting from this reorganization. There can, however, be no guarantees as to the ultimate outcome of a Chapter 11 proceeding. The Company has an unsecured claim of $11.4 million related to receivables from the entities included in the reorganization proceeding.

Management's judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company's customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company's judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2). The impacts of inflation, and rising interest rates may also impact future credit losses. The Company will continue to monitor for economic trends and conditions and portfolio performance and adjust its allowance for credit loss accordingly.

Accounts Receivable

Accounts receivable principally includes amounts currently due to the Company under theater sale and sales-type lease arrangements, contingent fees owed by theater operators as a result of box office performance, and fees for theater maintenance services. Accounts receivable also includes amounts due to the Company from movie studios and other content creators principally for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.

The following tables summarize the activity in the allowance for credit losses related to Accounts Receivable for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30, 2022												Nine Months Ended September 30, 2022
(In thousands of U.S. Dollars)	Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total
Beginning balance	$	10,704		$	1,744		$	907		$	13,355		$	8,867		$	1,994		$	1,085		$	11,946
Current period provision (reversal), net		211			30			382			623			2,326			(68	)		598			2,856
Write-offs		—			(4	)		—			(4	)		(43	)		(128	)		(394	)		(565	)
Foreign exchange		(216	)		(21	)		—			(237	)		(451	)		(49	)		—			(500	)
Ending balance	$	10,699		$	1,749		$	1,289		$	13,737		$	10,699		$	1,749		$	1,289		$	13,737

	Three Months Ended September 30, 2021												Nine Months Ended September 30, 2021
(In thousands of U.S. Dollars)	Theater Operators			Studios			Other			Total			Theater Operators			Studios			Other			Total
Beginning balance	$	8,597		$	2,517		$	1,192		$	12,306		$	8,368		$	4,481		$	1,446		$	14,295
Current period reversal, net		(489	)		(251	)		(24	)		(764	)		(111	)		(1,928	)		(269	)		(2,308	)
Write-offs		(43	)		(270	)		—			(313	)		(278	)		(522	)		—			(800	)
Foreign exchange		(89	)		2			—			(87	)		(3	)		(33	)		(9	)		(45	)
Ending balance	$	7,976		$	1,998		$	1,168		$	11,142		$	7,976		$	1,998		$	1,168		$	11,142

For the three months ended September 30, 2022, the Company's allowance for current expected credit losses related to Accounts Receivable increased by $0.4 million, principally due to the provision for certain receivables partially offset by foreign currency exchange rate movements. For the three months ended September 30, 2022, the Company recorded write-downs of $0.1 million directly to Credit Loss Expenses in the Company's Condensed Consolidated Statements of Operations for Studio-related receivables for which the Company did not have a previously established provision. For the nine months ended September 30, 2022, the Company's allowance for current expected credit losses related to Accounts Receivable increased by $1.8 million, principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

For the three and nine months ended September 30, 2021, the Company's allowance for current expected credit losses related to Accounts Receivable decreased by $1.2 million and $3.2 million, respectively, principally due to the reversal of previously recorded credit loss expense as a result of an improving outlook for theater operators following the reopening of theaters and the resumption of normal film release schedules as the theatrical exhibition industry began to recover from the COVID-19 global pandemic, as well as better than anticipated collection experience with respect to foreign theater and studio receivable balances.

Financing receivables are due from theater operators and consist of the Company's net investment in sales-type leases and receivables associated with financed sales of IMAX Theater Systems. As of September 30, 2022 and December 31, 2021, financing receivables consist of the following:


	September 30,			December 31,
(In thousands of U.S. Dollars)	2022			2021
Net investment in leases
Gross minimum payments due under sales-type leases	$	26,322		$	29,953
Unearned finance income		(661	)		(763	)
Present value of minimum payments due under sales-type leases		25,661			29,190
Allowance for credit losses		(670	)		(798	)
Net investment in leases		24,991			28,392
Financed sales receivables
Gross minimum payments due under financed sales		137,586			152,315
Unearned finance income		(29,000	)		(34,244	)
Present value of minimum payments due under financed sales		108,586			118,071
Allowance for credit losses		(10,959	)		(5,414	)
Net financed sales receivables		97,627			112,657
Total financing receivables	$	122,618		$	141,049

Net financed sales receivables due within one year	$	30,360		$	29,115
Net financed sales receivables due after one year		67,267			83,542
Total financed sales receivables	$	97,627		$	112,657

The tables below provide information on the Company's net investment in leases by credit quality indicator as of September 30, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


(In thousands of U.S. Dollars)	By Origination Year
As of September 30, 2022	2022		2021		2020		2019		2018		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	1,027	$	9,855	$	3,570	$	7,171	$	1,939	$	1,273	$	24,835
Credit Watch		—		—		—		—		425		—		425
Pre-approved transactions		—		—		—		—		—		—		—
Transactions suspended		—		—		—		—		—		401		401
Total net investment in leases	$	1,027	$	9,855	$	3,570	$	7,171	$	2,364	$	1,674	$	25,661

(In thousands of U.S. Dollars)	By Origination Year
As of December 31, 2021	2021		2020		2019		2018		2017		Prior		Total
Net investment in leases:
Credit quality classification:
In good standing	$	11,030	$	3,991	$	7,973	$	2,574	$	823	$	1,928	$	28,319
Credit Watch		—		—		—		—		—		—		—
Pre-approved transactions		—		—		—		—		—		—		—
Transactions suspended		—		—		—		—		—		871		871
Total net investment in leases	$	11,030	$	3,991	$	7,973	$	2,574	$	823	$	2,799	$	29,190

The tables below provide information on the Company's financed sale receivables by credit quality indicator as of September 30, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


(In thousands of U.S. Dollars)	By Origination Year
As of September 30, 2022	2022		2021		2020		2019		2018		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	4,517	$	10,506	$	7,659	$	8,466	$	11,248	$	44,289	$	86,685
Credit Watch		16		—		1		—		—		1,399		1,416
Pre-approved transactions		—		283		—		1,216		329		7,056		8,884
Transactions suspended		—		661		142		1,172		1,201		8,425		11,601
Total financed sales receivables	$	4,533	$	11,450	$	7,802	$	10,854	$	12,778	$	61,169	$	108,586

(In thousands of U.S. Dollars)	By Origination Year
As of December 31, 2021	2021		2020		2019		2018		2017		Prior		Total
Financed sales receivables:
Credit quality classification:
In good standing	$	12,520	$	8,251	$	10,593	$	13,278	$	12,615	$	47,950	$	105,207
Credit Watch		—		—		—		—		321		1,292		1,613
Pre-approved transactions		—		—		743		418		2,098		3,650		6,909
Transactions suspended		—		—		335		—		680		3,327		4,342
Total financed sales receivables	$	12,520	$	8,251	$	11,671	$	13,696	$	15,714	$	56,219	$	118,071

The balance of financed sale receivables classified within the Transactions Suspended category as of September 30, 2022 includes amounts due from exhibitors in Russia, Ukraine, and Belarus which were reclassified from other credit quality classifications in the first quarter of 2022 as a result of the ongoing Russia-Ukraine conflict.

The following tables provide an aging analysis for the Company's net investment in leases and financed sale receivables as of September 30, 2022 and December 31, 2021:


	As of September 30, 2022
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	235	$	192	$	2,066	$	2,493	$	23,168	$	25,661	$	(670	)	$	24,991
Financed sales receivables		1,441		1,086		11,469		13,996		94,590	$	108,586		(10,959	)		97,627
Total	$	1,676	$	1,278	$	13,535	$	16,489	$	117,758	$	134,247	$	(11,629	)	$	122,618

	As of December 31, 2021
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	225	$	156	$	1,267	$	1,648	$	27,542	$	29,190	$	(798	)	$	28,392
Financed sales receivables		1,750		989		8,378		11,117		106,954		118,071		(5,414	)		112,657
Total	$	1,975	$	1,145	$	9,645	$	12,765	$	134,496	$	147,261	$	(6,212	)	$	141,049

The following tables provide information about the Company's net investment in leases and financed sale receivables with billed amounts past due for which it continues to accrue finance income as of September 30, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.


	As of September 30, 2022
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	199	$	192	$	2,066	$	2,457	$	18,743	$	(255	)	$	20,945
Financed sales receivables		1,099		937		9,533		11,569		46,826		(1,333	)		57,062
Total	$	1,298	$	1,129	$	11,599	$	14,026	$	65,569	$	(1,588	)	$	78,007

	As of December 31, 2021
(In thousands of U.S. Dollars)	Accrued and Current		30-89 Days		90+ Days		Billed		Unbilled		Allowance for Credit Losses			Net
Net investment in leases	$	143	$	132	$	825	$	1,100	$	12,619	$	(176	)	$	13,543
Financed sales receivables		959		729		6,190		7,878		41,439		(1,413	)		47,904
Total	$	1,102	$	861	$	7,015	$	8,978	$	54,058	$	(1,589	)	$	61,447

The following table provides information about the Company's net investment in leases and financed sale receivables that are on nonaccrual status as of September 30, 2022 and December 31, 2021:


	As of September 30, 2022							As of December 31, 2021
(In thousands of U.S. Dollars)	Recorded Receivable		Allowance for Credit Losses			Net		Recorded Receivable		Allowance for Credit Losses			Net
Net investment in leases	$	401	$	(47	)	$	354	$	871	$	(309	)	$	562
Net financed sales receivables		20,483		(9,653	)		10,830		8,642		(2,357	)		6,285
Total	$	20,884	$	(9,700	)	$	11,184	$	9,513	$	(2,666	)	$	6,847

The balances of net investment in leases and financed sale receivables that are on nonaccrual status as of September 30, 2022 include amounts due from exhibitors in Russia, Ukraine, and Belarus which were placed on nonaccrual status in the first quarter of 2022 as a result of the ongoing Russia-Ukraine conflict.

For the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million and $0.1 million, respectively, (2021 — less than $0.1 million and $0.1 million) in Finance Income related to the net investment in leases with billed amounts past due. For the three and nine months ended September 30, 2022 and 2021, the Company did not recognize Finance Income related to the net investment in leases on nonaccrual status. For the three and nine months ended September 30, 2022, the Company recognized $1.1 million and $3.1 million, respectively, (2021 — $1.3 million and $3.6 million, respectively) in Finance Income related to the financed sale receivables with billed amounts past due. For the three and nine months ended September 30, 2022, the Company recognized $0.1 million and $0.4 million, respectively, (2021 — $0.1 million and $0.1 million, respectively) in Finance Income related to the financed sales receivables on nonaccrual status.

The following tables summarize the activity in the allowance for credit losses related to the Company's net investment in leases and financed sale receivables for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Net Investment			Financed			Net Investment			Financed
(In thousands of U.S. Dollars)	in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	688		$	11,038		$	798		$	5,414
Current period (reversal) provision, net		(1	)		72			(95	)		5,847
Write-offs		—			—			—			—
Foreign exchange		(17	)		(151	)		(33	)		(302	)
Ending balance	$	670		$	10,959		$	670		$	10,959

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Net Investment			Net Financed			Net Investment			Net Financed
(In thousands of U.S. Dollars)	in Leases			Sales Receivables			in Leases			Sales Receivables
Beginning balance	$	579		$	7,113		$	557		$	7,274
Current period reversal, net		(84	)		(1,536	)		(64	)		(1,741	)
Write-offs		—			—			—			—
Foreign exchange		(1	)		(12	)		1			32
Ending balance	$	494		$	5,565		$	494		$	5,565

For the three and nine months ended September 30, 2022, the Company's allowance for current expected credit losses related to its net investment in leases and financed sale receivables decreased by $0.1 million and increased by $5.4 million, respectively. The increase in the nine months ended September 30, 2022 is principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

In sale arrangements, variable consideration may become due to the Company from theater operators if certain annual minimum box office receipt thresholds are exceeded. Such variable consideration is recorded as revenue in the period when the sale is recognized and adjusted in future periods based on actual results and changes in estimates. Variable consideration is only recognized to the extent the Company believes there is not a risk of significant revenue reversal.

The following table summarizes the activity in the allowance for credit losses related to Variable Consideration Receivables for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
(In thousands of U.S. Dollars)	Theater Operators			Theater Operators			Theater Operators			Theater Operators
Beginning balance	$	501		$	2,028		$	1,082		$	1,887
Current period provision (reversal), net		57			(933	)		(515	)		(771	)
Write-offs		—			—			—			—
Foreign exchange		(24	)		(1	)		(33	)		(22	)
Ending balance	$	534		$	1,094		$	534		$	1,094

For the three and nine months ended September 30, 2022, the Company's allowance for current expected credit losses related to Variable Consideration Receivables increased by less than $0.1 million and decreased by $0.5 million, respectively. The decrease in the nine months ended September 30, 2022 is principally due to the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.