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.
Paying user area
Try for free
Boston Scientific Corp. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Analysis of Revenues
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Boston Scientific Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Allowance as a percentage of trade accounts receivable, gross = 100 × Allowance for credit losses ÷ Trade accounts receivable, gross
= 100 × ÷ =
The financial data reveals several notable trends related to credit losses and accounts receivable over the five-year period from 2018 to 2022.
- Allowance for Credit Losses
- This figure shows a steady increase, rising from $68 million in 2018 to $109 million in 2022. The growth is gradual but consistent, with the allowance nearly doubling over the analyzed period. This indicates a rising expectation of potential credit defaults or worsening credit risk over time.
- Trade Accounts Receivable, Gross
- The gross trade accounts receivable amount fluctuates but generally trends upward. After an initial increase from $1,676 million in 2018 to $1,902 million in 2019, it drops to $1,637 million in 2020 but then rebounds to $2,079 million by 2022. This pattern suggests some volatility, possibly related to changes in sales volume or credit terms, but overall growth in receivables.
- Allowance as a Percentage of Trade Accounts Receivable, Gross
- Expressed as a percentage, the allowance starts at 4.06% in 2018 and slightly declines to 3.89% in 2019, indicating a relatively lower proportion of expected credit losses compared to receivables at that time. However, it rises sharply to 6.41% in 2020, then decreases to 5.73% in 2021 and 5.24% in 2022. The peak in 2020 suggests heightened credit risk or more conservative loss reserving during that year, followed by a moderate improvement or stabilization in subsequent years.
Overall, the data signals increasing attention to credit loss reserves in response to fluctuating gross receivables balances and possibly changing economic conditions influencing credit risk. The spike in the allowance percentage in 2020 corresponds with a period of volatility in receivables, highlighting a cautious approach to potential credit losses in that year. The subsequent reduction in percentage terms suggests some mitigation of credit risk or adjustment of allowances relative to receivables in recent years.