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: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of trade accounts receivable, gross = 100 × Allowances ÷ Trade accounts receivable, gross
= 100 × ÷ =
The allowance for doubtful accounts receivable remained relatively stable between 2021 and 2025, fluctuating within a narrow range. While the gross trade accounts receivable experienced some volatility, the relationship between the allowance and gross receivables exhibited a discernible pattern over the five-year period.
- Allowance for Doubtful Accounts
- The allowance remained consistently around US$500 million. It began at US$516 million in 2021, decreased slightly to US$502 million in 2023, increased to US$506 million in 2024, and concluded at US$495 million in 2025. This suggests a conservative and consistent approach to recognizing potential uncollectible accounts.
- Gross Trade Accounts Receivable
- Gross trade accounts receivable decreased from US$4,028 million in 2021 to US$3,912 million in 2023, representing a contraction in outstanding receivables. A subsequent increase to US$4,075 million occurred in 2024, followed by a more substantial decrease to US$3,533 million in 2025. This fluctuation may be attributable to changes in sales volume, credit terms, or collection efficiency.
- Allowance as a Percentage of Gross Trade Accounts Receivable
- This ratio began at 12.81% in 2021 and peaked at 12.89% in 2022. It then decreased to 12.42% in 2024, before rising to 14.01% in 2025. The increase in 2025, despite the decrease in the absolute allowance amount, indicates a potentially heightened risk perception regarding the collectability of the remaining receivables balance. The overall trend suggests a generally consistent risk assessment, with a slight increase in perceived risk at the end of the period.
The observed decrease in gross trade accounts receivable in 2025, coupled with the increase in the allowance percentage, warrants further investigation. It could indicate a shift in the customer base towards higher-risk entities, a tightening of credit standards, or an anticipation of increased payment difficulties.