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.
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 2026 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × 31,030 ÷ 2,920,238 = 1.06%
The analysis of credit risk management reveals a period of significant expansion in gross receivables accompanied by fluctuating provisions for credit losses. While the absolute value of the allowance for credit losses increased over the majority of the period, the rate of increase did not keep pace with the growth of the total receivable balance in the final years.
- Gross Accounts Receivable Trends
- A consistent upward trajectory is observed in gross accounts receivable, which grew from US$1.32 billion in June 2021 to US$2.92 billion by June 2026. The most aggressive growth occurred between June 2024 and June 2026, indicating a substantial increase in credit exposure.
- Allowance for Credit Losses Evolution
- The allowance for credit losses experienced a notable surge between June 2022 and June 2023, rising from US$20.6 million to US$33.6 million. Following this peak, the allowance remained relatively stable through June 2025 before declining to US$31.0 million in June 2026, despite the concurrent rise in total receivables.
- Credit Loss Ratio Analysis
- The allowance as a percentage of gross accounts receivable peaked at 1.88% in June 2023, suggesting a period of heightened perceived credit risk. However, a steady downward trend followed, with the ratio decreasing to 1.06% by June 2026. This divergence—where the gross receivable balance continues to climb while the allowance percentage declines—indicates an improvement in the overall credit quality of the receivables portfolio or a strategic shift in the estimation of credit losses.
AI Ask an analyst for more