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Microsoft Excel LibreOffice Calc

Amazon.com Inc. (AMZN)


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

Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on Amazon.com’s consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2017 and 2018, customer receivables, net, were $6.4 billion and $9.4 billion, vendor receivables, net, were $2.6 billion and $3.2 billion, and seller receivables, net, were $692 million and $710 million. Seller receivables are amounts due from sellers related to Amazon.com’s seller lending program, which provides funding to sellers primarily to procure inventory.

Amazon.com estimates losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $237 million, $348 million, and $495 million as of December 31, 2016, 2017, and 2018. Additions to the allowance were $451 million, $626 million, and $878 million, and deductions to the allowance were $403 million, $515 million, and $731 million in 2016, 2017, and 2018.

Source: 10-K (filing date: 2019-02-01).


Allowance for Doubtful Accounts Receivable

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Allowance for doubtful accounts hidden hidden hidden hidden hidden
Accounts receivable, gross hidden hidden hidden hidden hidden
Ratio
Allowance as a percentage of accounts receivable, gross1 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).

2018 Calculations

1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Allowance as a percentage of accounts receivable, gross Allowance for doubtful accounts divided by the gross accounts receivable. Amazon.com Inc.’s allowance as a percentage of accounts receivable, gross declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.