Broadcom Inc. (AVGO)
Analysis of Bad Debts
High level of difficulty
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.
Accounting Policy on Receivables
Trade accounts receivable, net
Trade accounts receivable are recognized at the invoiced amount and do not bear interest. Accounts receivable are reduced by an allowance for doubtful accounts, which is Broadcom’s best estimate of the amount of probable credit losses in the existing accounts receivable. Broadcom determines the allowance based on customer-specific experience and the aging of such receivables, among other factors. Allowances for doubtful accounts were not material as of November 4, 2018 or October 29, 2017. Accounts receivable are also recognized net of sales returns and distributor credit allowances. These amounts are recognized when it is both probable and estimable that discounts will be granted or products will be returned. Allowances for sales returns and distributor credit allowances at November 4, 2018 and October 29, 2017 were $161 million and $208 million, respectively.
Source: 10-K (filing date: 2018-12-21).
Allowance for Doubtful Accounts Receivable
|Nov 4, 2018||Oct 29, 2017||Oct 30, 2016||Nov 1, 2015||Nov 2, 2014||Nov 3, 2013|
|Selected Financial Data (US$ in millions)|
|Allowances for doubtful accounts|
|Trade accounts receivable, gross|
|Allowance as a percentage of trade accounts receivable, gross1|
Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).
1 Allowance as a percentage of trade accounts receivable, gross = 100 × Allowances for doubtful accounts ÷ Trade accounts receivable, gross
= 100 × ÷ =
|Allowance as a percentage of trade accounts receivable, gross||Allowance for doubtful accounts divided by the gross accounts receivable.|