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 doubtful accounts ÷ Accounts receivable, gross
= 100 × 1,040 ÷ 81,916 = 1.27%
The financial data indicates a period of substantial growth in gross accounts receivable coupled with a managed increase in the allowance for doubtful accounts. While the absolute value of the allowance grew in the latter part of the period, the rate of growth was significantly outpaced by the expansion of total receivables, resulting in a general decline in the reserve percentage.
- Gross Accounts Receivable Growth
- A consistent upward trend is observed in gross accounts receivable, which increased from US$38,794 million in June 2021 to US$81,916 million by June 2026. This reflects a significant expansion of the credit extended to customers over the analyzed period.
- Allowance for Doubtful Accounts Trajectory
- The allowance for doubtful accounts experienced an initial decline, falling to US$633 million in June 2022 from US$751 million in June 2021. Following this dip, a steady increase was recorded from June 2023 through June 2026, with the balance reaching US$1,040 million.
- Allowance as a Percentage of Gross Receivables
- Despite the growth in the absolute amount of the allowance after 2022, the ratio of the allowance to gross receivables exhibited an overall downward trend. The percentage decreased from 1.94% in June 2021 to 1.27% in June 2026. Although a marginal increase to 1.44% was noted in June 2024, the long-term trajectory indicates a reduction in the proportion of receivables reserved for potential bad debts, suggesting improved credit quality or a more optimistic assessment of collectability.
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