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Intuit Inc. (INTU)
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 and Allowances for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and are not interest bearing. Intuit maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Intuit reviews the accounts receivable by aging category to identify significant customers or invoices with known disputes or collectibility issues. For those invoices not specifically identified as uncollectible, Intuit provides an allowance based on the age of the receivable. In determining the amount of the allowance, Intuit makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Intuit also considers the historical level of credit losses and current economic trends that might impact the level of future credit losses. When Intuit determines that amounts are uncollectible Intuit writes them off against the allowance.
Source: 10-K (filing date: 2019-08-30).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).
2019 Calculations
1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of accounts receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Intuit Inc.’s allowance as a percentage of accounts receivable, gross declined from 2017 to 2018 and from 2018 to 2019. |