Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company gross accounts receivable. The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-11-28), 10-K (reporting date: 2024-11-29), 10-K (reporting date: 2023-12-01), 10-K (reporting date: 2022-12-02), 10-K (reporting date: 2021-12-03), 10-K (reporting date: 2020-11-27).
1 2025 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances for doubtful accounts ÷ Trade receivables, gross
= 100 × ÷ =
The allowance for doubtful accounts receivable has exhibited a generally decreasing trend over the observed period. While fluctuations exist, the overall movement suggests a diminishing need for reserves against potential uncollectible accounts. This analysis details the observed patterns in the allowance and its relationship to gross trade receivables.
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts began at US$21 million in November 2020, decreased to US$16 million by December 2021, and then increased to US$23 million in December 2022. A subsequent decline to US$16 million occurred by December 2023, followed by further reductions to US$14 million in November 2024 and US$13 million in November 2025. This indicates a volatile pattern, but a clear downward trajectory over the entire six-year period.
- Gross Trade Receivables
- Gross trade receivables have generally increased over the period, moving from US$1,419 million in November 2020 to US$2,357 million in November 2025. Increases were observed between 2020 and 2022, followed by a slight decrease in 2024 before rising again in 2025. This growth in receivables suggests increased sales activity.
- Allowance as a Percentage of Gross Trade Receivables
- The ratio of the allowance for doubtful accounts to gross trade receivables has consistently decreased. Starting at 1.48% in November 2020, the ratio fell to 0.84% in December 2021, 1.10% in December 2022, 0.71% in December 2023, 0.67% in November 2024, and finally to 0.55% in November 2025. This consistent decline suggests improving credit quality of receivables or a more optimistic assessment of collectibility, despite the overall increase in receivable volume.
The decreasing percentage indicates that, even with growing receivables, the company anticipates a smaller proportion will ultimately prove uncollectible. This could be attributed to enhanced credit policies, more effective collection efforts, or a shift in the customer base towards entities with stronger credit profiles. The fluctuations in the absolute allowance amount may reflect periodic reviews and adjustments based on economic conditions or specific customer risks.