Analysis of Bad Debts
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.
Accounts receivable are stated net of an allowance for doubtful accounts. The accounts receivable balance primarily includes amounts due from third party providers (e.g., pharmacy benefit managers, insurance companies, governmental agencies and long-term care facilities), clients, members and private pay customers, as well as vendors and manufacturers. Charges to bad debt are based on both historical write-offs and specifically identified receivables.
Source: CVS Health Corp., Annual Report
|Dec 31, 2017||Dec 31, 2016||Dec 31, 2015||Dec 31, 2014||Dec 31, 2013|
|Selected Financial Data (USD $ in millions)|
|||Allowance for doubtful accounts receivable||307||286||161||256||256|
|||Accounts receivable, gross||13,488||12,450||12,049||9,943||8,985|
|||Allowance as a percentage of Accounts receivable, gross1||2.28%||2.30%||1.34%||2.57%||2.85%|
Source: Based on data from CVS Health Corp. Annual Reports
1 Allowance as a percentage of Accounts receivable, gross = 100 × Allowance for doubtful accounts receivable ÷ Accounts receivable, gross
= 100 × 307 ÷ 13,488 = 2.28%
|Allowance as a percentage of Accounts receivable, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||CVS Health Corp.'s allowance as a percentage of Accounts receivable, gross increased from 2015 to 2016 but then slightly declined from 2016 to 2017.|