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Accenture PLC (ACN)
Analysis of Bad Debts
High level of difficulty
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.
Accounting Policy on Receivables
Allowances for Client Receivables
Accenture records the client receivables at their face amounts less allowances. On a periodic basis, Accenture evaluates the receivables and establishes allowances based on historical experience and other currently available information. As of August 31, 2019 and 2018, total allowances recorded for client receivables were $45,538 and $49,913, respectively. The allowance reflects Accenture’s best estimate of collectibility risks on outstanding receivables. In limited circumstances, Accenture agrees to extend financing to certain clients. The terms vary by contract, but generally payment for services is contractually linked to the achievement of specified performance milestones.
Source: 10-K (filing date: 2019-10-29).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
2019 Calculations
1 Allowance as a percentage of receivables, gross = 100 × Allowances for client receivables ÷ Receivables, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of receivables, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Accenture PLC’s allowance as a percentage of receivables, gross declined from 2017 to 2018 and from 2018 to 2019. |