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: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
1 2024 Calculation
Allowance as a percentage of receivables and contract assets, gross = 100 × Allowance for credit losses ÷ Receivables and contract assets, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses has shown a steady decline from 45,538 thousand US dollars in 2019 to 27,561 thousand US dollars in 2024. This trend indicates a consistent reduction in the anticipated credit losses over the analyzed period.
- Receivables and Contract Assets, Gross
- The gross amount of receivables and contract assets increased notably from 8,140,609 thousand US dollars in 2019 to 13,692,408 thousand US dollars in 2024. This reflects a substantial growth in the company's accounts receivable and contract assets, suggesting expansion in business activities or sales.
- Allowance as a Percentage of Receivables and Contract Assets, Gross
- The allowance as a percentage of gross receivables and contract assets decreased consistently from 0.56% in 2019 to 0.20% in 2024. Despite the growth in gross receivables, the company has managed to reduce the relative provision for credit losses, which may imply improving credit quality or more effective credit risk management.
- Overall Insight
- The data presents a clear pattern of rising receivables alongside a declining allowance for credit losses both in absolute terms and relative to total receivables. This suggests an improving risk profile regarding credit losses and possibly enhanced collection efficiency or stricter credit policies over the six-year period.