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: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
- Allowance for Doubtful Accounts
- The allowance for doubtful accounts initially increased from 12,717 thousand US dollars at the end of 2017 to a peak of 14,417 thousand in 2019. Subsequently, it declined in the following years, reaching 11,870 thousand by the end of 2021. This indicates a reduction in anticipated credit losses after 2019.
- Accounts Receivable, Gross
- The gross accounts receivable exhibited a fluctuating but upward trend overall. It decreased from 228,968 thousand US dollars at the end of 2017 to 205,264 thousand in 2018, then rose in subsequent years to reach 284,432 thousand by the end of 2021. This suggests an expansion in sales or credit extended to customers over the period.
- Allowance as a Percentage of Accounts Receivable, Gross
- The ratio of allowance for doubtful accounts to gross accounts receivable demonstrated a declining trend from 5.55% in 2017 to 4.17% in 2021. After peaking at 6.45% in 2018, the percentage gradually decreased, indicating improved credit quality or more effective receivables management during the later years.