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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- Statement of Comprehensive Income
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for expected credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for expected credit losses exhibited an initial increasing trend followed by a slight decrease over the five-year period. Accounts receivable, gross, demonstrated consistent growth, with a minor dip in the latest reported year. The ratio representing the allowance as a percentage of gross accounts receivable decreased steadily, indicating a diminishing proportion of potential uncollectible accounts relative to overall receivables.
- Allowance for Expected Credit Losses
- The allowance for expected credit losses increased from US$101 million in 2021 to US$137 million in 2023, representing a 35.6% increase over the period. A further increase to US$146 million was observed in 2024, before decreasing to US$137 million in 2025, returning to the 2023 level. This suggests a period of increasing risk mitigation followed by stabilization and a slight pullback.
- Accounts Receivable, Gross
- Accounts receivable, gross, increased significantly from US$1,459 million in 2021 to US$3,390 million in 2023, a rise of 132.7%. Growth continued to US$3,345 million in 2024, followed by an increase to US$3,957 million in 2025. This consistent growth indicates expanding sales or changes in credit terms extending payment periods.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable decreased from 6.92% in 2021 to 3.46% in 2025. This represents a 50% reduction over the period. The decline from 6.92% to 4.99% between 2021 and 2022 was the most substantial. Subsequent decreases were more moderate, suggesting a maturing credit risk assessment process or improved collection efficiency as receivables grew.
The combined trends suggest that while the absolute amount of the allowance for expected credit losses increased initially, the growth in gross accounts receivable outpaced this increase, resulting in a decreasing percentage. This could indicate improved credit quality of receivables or a more conservative approach to recognizing potential losses relative to the expanding receivables balance.