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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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 2024 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses has shown a general upward trend over the analyzed period. Starting at 12,001 thousand US dollars in mid-2019, it slightly declined in 2020 to 11,822 thousand US dollars before rising significantly each subsequent year to reach 32,782 thousand US dollars by mid-2024. This indicates a growing provision for potential credit risk.
- Accounts Receivable, Gross
- Gross accounts receivable increased steadily from 1,002,114 thousand US dollars in mid-2019 to a peak of 1,832,508 thousand US dollars in mid-2022. There was a slight decline in the following year to 1,786,993 thousand US dollars and a moderate recovery to 1,865,823 thousand US dollars by mid-2024. This pattern suggests periods of expansion in credit sales or outstanding customer balances with some fluctuations in recent years.
- Allowance as a Percentage of Accounts Receivable, Gross
- The allowance as a percentage of gross accounts receivable started at 1.2% in 2019, decreased to a low of 1.06% in 2020, then increased again, exhibiting variability. It reached 1.36% in 2021, dipped to 1.13% in 2022, then rose notably to 1.88% in 2023 before slightly decreasing to 1.76% in 2024. These fluctuations imply adjustments in the assessment of credit risk relative to outstanding receivables, with a recent trend toward a higher provision ratio, reflecting more conservative credit loss expectations.