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Twenty-First Century Fox Inc. (FOXA)
Analysis of Bad Debts
Difficulty: Advanced
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company’s 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.
Receivables Accounting Policy
Receivables
Receivables are presented net of an allowance for returns and doubtful accounts, which is an estimate of amounts that may not be collectible. The allowance for doubtful accounts is estimated based on historical experience, receivable aging, current economic trends and specific identification of certain receivables that are at risk of not being paid. In determining the allowance for returns, management analyzes historical returns, current economic trends and changes in customer demand and acceptance of Twenty-First Century Fox’s products. Based on this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return.
Twenty-First Century Fox has receivables with original maturities greater than one year in duration principally related to Twenty-First Century Fox’s sale of program rights in the television syndication markets within the Filmed Entertainment segment. Allowances for credit losses are established against these non-current receivables as necessary. As of June 30, 2018 and 2017, these allowances were not material.
Source: 10-K (filing date: 2018-08-13).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2018-08-13), 10-K (filing date: 2017-08-14), 10-K (filing date: 2016-08-11), 10-K (filing date: 2015-08-13), 10-K (filing date: 2014-08-14), 10-K (filing date: 2013-08-19).
2018 Calculations
1 Allowance as a percentage of receivables, gross = 100 × Allowances for returns and doubtful accounts ÷ Receivables, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of receivables, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Twenty-First Century Fox Inc.’s allowance as a percentage of receivables, gross declined from 2016 to 2017 and from 2017 to 2018. |