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: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for credit losses exhibited an overall increasing trend between 2021 and 2025. While fluctuations occurred, the balance rose from US$146 million to US$226 million over the five-year period. Accounts receivable, gross, also generally increased, though with a notable decrease observed between 2022 and 2023. The relationship between these two items, as reflected in the allowance as a percentage of gross accounts receivable, reveals a strengthening of the allowance relative to outstanding receivables.
- Allowance for Credit Losses
- The allowance for credit losses increased from US$146 million in 2021 to US$167 million in 2022, representing a 14.4% increase. A slight decrease was then observed in 2023, falling to US$161 million. Subsequent increases were recorded in 2024 and 2025, reaching US$176 million and US$226 million respectively. The largest year-over-year increase occurred between 2024 and 2025, with a 28.4% rise.
- Accounts Receivable, Gross
- Gross accounts receivable increased from US$4,340 million in 2021 to US$4,612 million in 2022, a 6.3% increase. Further growth was seen in 2023, reaching US$4,853 million. However, a decrease of 8.3% was recorded in 2024, with the balance falling to US$4,452 million. Accounts receivable then rebounded in 2025, increasing to US$5,100 million, representing a 14.6% increase from the prior year.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio began at 3.36% in 2021 and increased to 3.62% in 2022. It experienced a slight decline to 3.32% in 2023, coinciding with the decrease in gross accounts receivable. The ratio then rose to 3.95% in 2024 and continued its upward trajectory, reaching 4.43% in 2025. This indicates that a larger proportion of accounts receivable is being reserved for potential credit losses as a percentage of the total outstanding balance.
The increasing percentage suggests a potentially more conservative approach to credit risk management, or a perceived increase in the risk of uncollectible accounts. The fluctuations in the gross accounts receivable balance may be attributable to changes in sales volume, collection efforts, or credit terms offered to customers.
Allowance for Credit Losses
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of equipment installment plan receivables, net of unamortized imputed discount = 100 × Allowance for credit losses ÷ Equipment installment plan receivables, net of unamortized imputed discount
= 100 × ÷ =
The allowance for credit losses exhibited fluctuating behavior over the five-year period. Initially increasing, it then decreased before rising again, ultimately reaching its highest value in the observed timeframe. This movement is accompanied by corresponding changes in the related receivables balance and the allowance percentage.
- Allowance for Credit Losses (US$ in millions)
- The allowance for credit losses increased from US$252 million in 2021 to US$328 million in 2022, representing a growth of approximately 29.76%. A subsequent decrease was noted in 2023, with the allowance falling to US$268 million. This was followed by a modest increase to US$290 million in 2024, and a more substantial rise to US$380 million in 2025. The 2025 value represents the highest recorded allowance during the period.
- Equipment Installment Plan Receivables (US$ in millions)
- Equipment installment plan receivables, net of unamortized imputed discount, remained relatively stable between 2021 and 2023, fluctuating between US$6,766 million and US$7,997 million. A slight decrease was observed from 2021 to 2023, followed by a recovery and increase to US$8,060 million in 2025. This indicates a potential resurgence in financing activity related to equipment purchases.
- Allowance as a Percentage of Receivables
- The allowance as a percentage of equipment installment plan receivables increased from 3.22% in 2021 to 4.10% in 2022, suggesting a more conservative approach to recognizing potential credit losses. Despite the decrease in the absolute allowance value in 2023, the percentage remained at 3.96%, indicating continued caution. The percentage further increased to 4.22% in 2024 and reached 4.71% in 2025. This consistent upward trend in the percentage suggests a growing expectation of credit losses relative to the outstanding receivables balance, potentially reflecting changing economic conditions or shifts in customer creditworthiness.
The increasing percentage in recent years, despite fluctuations in the absolute allowance amount, warrants further investigation. The combination of a rising allowance percentage and increasing receivables in 2025 suggests a potential need to monitor the quality of new receivables closely.