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: 2026-01-31), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31).
1 2026 Calculation
Allowance as a percentage of trade and other receivables, gross = 100 × Allowance for credit losses ÷ Trade and other receivables, gross
= 100 × ÷ =
The allowance for credit losses demonstrates a fluctuating pattern over the observed period. Initially decreasing, it shows a recent increase, while the gross trade and other receivables consistently increased throughout the period. The relationship between these two figures, as expressed by the allowance as a percentage of gross receivables, reveals a declining trend followed by a slight stabilization.
- Allowance for Credit Losses (US$ in millions)
- The allowance for credit losses began at 14 in 2021, decreased to a low of 9 in 2023, then increased to 11 in 2024, and finally rose to 16 in 2026. This suggests a potential shift in credit risk assessment or collection experiences in recent years.
- Trade and Other Receivables, Gross (US$ in millions)
- Gross trade and other receivables exhibited a consistent upward trend, increasing from 1,047 in 2021 to 2,348 in 2026. This growth indicates expanding sales or changes in payment terms, resulting in a larger outstanding receivables balance.
- Allowance as a Percentage of Trade and Other Receivables, Gross (%)
- This ratio declined from 1.36% in 2021 to 0.51% in 2025, indicating a decreasing proportion of receivables were deemed potentially uncollectible relative to the total outstanding balance. However, the ratio increased slightly to 0.68% in 2026. This suggests a potential reassessment of credit risk or a change in the aging of receivables.
The increasing receivables balance coupled with a relatively low and recently stabilizing allowance percentage warrants further investigation. While the allowance increased in absolute terms in the latest periods, its proportion relative to receivables remains low compared to the beginning of the period. Monitoring the aging of receivables and the effectiveness of collection efforts will be crucial in assessing the adequacy of the allowance.