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Analysis of Bad Debts

Difficulty: Advanced

Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company's 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.


Receivables Accounting Policy

Allowance for Doubtful Accounts

Adobe maintains an allowance for doubtful accounts which reflects the best estimate of potentially uncollectible trade receivables. The allowance is based on both specific and general reserves. Adobe regularly reviews the trade receivables allowances by considering such factors as historical experience, credit-worthiness, the age of the trade receivable balances and current economic conditions that may affect a customer's ability to pay and Adobe specifically reserves for those deemed uncollectible.

Source: Adobe Systems Inc., Annual Report

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Allowance for Doubtful Accounts Receivable

 
Dec 1, 2017 Dec 2, 2016 Nov 27, 2015 Nov 28, 2014 Nov 29, 2013 Nov 30, 2012
Selected Financial Data (USD $ in thousands)
Allowances for doubtful accounts
Trade receivables, gross
Ratio
Allowance as a percentage of trade receivables, gross1 % % % % % %

Source: Based on data from Adobe Systems Inc. Annual Reports

2017 Calculations

1 Allowance as a percentage of trade receivables, gross = 100 × Allowances for doubtful accounts ÷ Trade receivables, gross
= 100 × ÷ = %

Ratio Description The company
Allowance as a percentage of trade receivables, gross Allowance for doubtful accounts divided by the gross accounts receivable. Adobe Systems Inc.'s allowance as a percentage of trade receivables, gross declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

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