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.
Paying user area
Try for free
Gilead Sciences Inc. pages available for free this week:
- Income Statement
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Gilead Sciences Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
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 × Allowances for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowances for credit losses exhibited a fluctuating pattern over the five-year period. Initially increasing from 2021 to 2023, the allowance then decreased in 2024 and continued to decline in 2025. Simultaneously, gross accounts receivable also demonstrated variability, with increases in 2022 and 2025, and decreases in 2023 and 2024. The relationship between these two figures, as reflected in the allowance as a percentage of gross accounts receivable, provides further insight into the company’s credit risk management.
- Allowance for Credit Losses
- The allowance for credit losses increased from US$47 million in 2021 to US$56 million in 2023, representing a cumulative increase of approximately 19.1%. This suggests a potential increase in perceived credit risk during this period. However, a subsequent decrease was observed, with the allowance falling to US$41 million by 2025, indicating a reduction in anticipated uncollectible accounts.
- Gross Accounts Receivable
- Gross accounts receivable experienced an initial increase from US$4,540 million in 2021 to US$4,832 million in 2022. A subsequent decline to US$4,472 million in 2024 was noted, followed by a recovery to US$4,954 million in 2025. These fluctuations may be attributable to changes in sales volume, credit terms, or collection efficiency.
- Allowance as a Percentage of Gross Accounts Receivable
- This ratio, representing the proportion of accounts receivable potentially uncollectible, increased from 1.04% in 2021 to 1.19% in 2023. This rise suggests a growing concern regarding the collectability of receivables relative to the overall receivable balance. The ratio then decreased to 1.16% in 2024 and further to 0.83% in 2025. The decline in 2025 is the most significant, indicating improved credit quality or a more conservative approach to recognizing potential losses, or a faster growth in receivables than anticipated losses.
Overall, the trends suggest a period of increasing credit risk followed by a potential improvement in the collectability of accounts receivable. The decrease in the allowance as a percentage of gross accounts receivable in the later years warrants further investigation to determine the underlying drivers, such as changes in customer mix, collection practices, or economic conditions.