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 notes and accounts receivable, gross = 100 × Reserves ÷ Notes and accounts receivable, gross
= 100 × ÷ =
The information presents a review of reserves and accounts receivable, with a specific focus on the allowance for doubtful accounts. A significant fluctuation in reserves is observed over the period, while accounts receivable demonstrate an overall increasing trend, albeit with some yearly variation. The allowance for doubtful accounts, expressed as a percentage of gross receivables, exhibits a decreasing trend initially, followed by a slight recovery.
- Reserves
- Reserves began at 540 US$ millions in 2021, increased to 570 US$ millions in 2022, then decreased substantially to 271 US$ millions in 2023. A partial recovery to 476 US$ millions occurred in 2024, followed by a slight decrease to 440 US$ millions in 2025. This indicates considerable volatility in reserve levels during the analyzed timeframe.
- Gross Accounts Receivable
- Gross accounts receivable increased from 32,923 US$ millions in 2021 to 42,319 US$ millions in 2022, representing a substantial rise. A decrease to 38,286 US$ millions was noted in 2023, followed by increases to 44,157 US$ millions in 2024 and 45,002 US$ millions in 2025. The overall trend suggests growing receivables, despite the dip in 2023.
- Allowance for Doubtful Accounts as a Percentage of Gross Receivables
- The allowance as a percentage of gross receivables started at 1.64% in 2021, decreasing to 1.35% in 2022 and further to 0.71% in 2023. A modest increase to 1.08% occurred in 2024, followed by a slight decrease to 0.98% in 2025. This suggests a decreasing risk assessment of uncollectible accounts, followed by a minor adjustment upwards in the later years. The percentage remains relatively low throughout the period.
The decreasing percentage of the allowance, despite increasing gross receivables, could indicate increased confidence in the collectability of accounts, improved credit policies, or a change in accounting practices. However, the substantial fluctuation in reserves warrants further investigation to understand its potential impact on overall financial health.