Name: Anadarko Petroleum Corp. (NYSE:APC) | Analysis of Bad Debts
Creator: Stock Analysis on Net

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.

Allowance for Doubtful Accounts Receivable

Allowance for Doubtful Accounts Receivable

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Selected Financial Data (US$ in millions)
Allowance for uncollectible accounts	14)	11)	7)	5)	7)
Accounts receivable, gross	1,742)	2,480)	2,534)	2,727)	2,754)
Financial Ratio
Allowance as a percentage of accounts receivable, gross¹	0.80%	0.44%	0.28%	0.18%	0.25%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

¹ 2016 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for uncollectible accounts ÷ Accounts receivable, gross
= 100 × 14 ÷ 1,742 = 0.80%

The financial data indicates a divergent trend between the total volume of gross accounts receivable and the valuation of the allowance for uncollectible accounts from 2012 through 2016.

Gross Accounts Receivable Trends: A sustained downward trend is observed in gross accounts receivable, which decreased from 2,754 million US dollars in 2012 to 1,742 million US dollars by 2016. The most significant contraction occurred between 2015 and 2016, where the balance fell by approximately 30% within a single fiscal year.
Allowance for Uncollectible Accounts: In contrast to the declining receivable balances, the allowance for uncollectible accounts followed a general upward trajectory. After a slight decrease to 5 million US dollars in 2013, the allowance rose steadily to 14 million US dollars by 2016, representing a 100% increase relative to the 2012 baseline.
Allowance as a Percentage of Gross Receivables: The ratio of the allowance to gross receivables reflects a consistent increase in the estimated risk of non-payment. The percentage rose from 0.25% in 2012 to 0.80% in 2016, with the most rapid acceleration occurring after 2014. The simultaneous occurrence of shrinking gross receivables and a rising allowance percentage suggests a deterioration in the credit quality of the outstanding receivables or a more conservative approach to loss provisioning by management.

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