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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of notes and accounts receivable, gross = 100 × Allowance for expected credit losses on notes and accounts receivable ÷ Notes and accounts receivable, gross
= 100 × ÷ =
- Allowance for expected credit losses on notes and accounts receivable
- This allowance showed a fluctuating trend over the analyzed period, starting at 379 million USD in 2020, decreasing significantly to 242 million USD in 2021, then rising again to 322 million USD in 2022. In 2023, it slightly declined to 301 million USD, followed by a more pronounced decrease to 145 million USD in 2024. Overall, the allowance demonstrates variability with a notable reduction in the final year.
- Notes and accounts receivable, gross
- Gross notes and accounts receivable showed a general declining trend with minor fluctuations. Values moved from 8,225 million USD in 2020 to 7,998 million USD in 2021, and further down to 7,680 million USD in 2022. In 2023, there was a partial recovery to 8,155 million USD, but this was followed by a decrease to 7,896 million USD in 2024. The overall movement indicates a contraction in gross receivables over this period.
- Allowance as a percentage of notes and accounts receivable, gross
- The allowance percentage relative to gross receivables reveals a downward trend, starting at 4.61% in 2020 and dropping sharply to 3.03% in 2021. It increased again to 4.19% in 2022, declined to 3.69% in 2023, and then fell significantly to 1.84% in 2024. This suggests a decreasing proportion of allowances relative to gross receivables, especially pronounced in the last year.
- Overall Analysis
- The data indicate a general decline in both the gross notes and accounts receivable and the associated allowance for credit losses over the five-year period. The allowance shows considerable volatility but ends much lower both in absolute terms and as a percentage of gross receivables. This could imply improved credit quality or changes in risk assessment practices. The decline in gross receivables towards the end of the period may suggest tighter credit policies or a reduction in sales on credit.
Allowance for Credit Losses
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of financing receivables, gross = 100 × Allowance for credit losses ÷ Financing receivables, gross
= 100 × ÷ =
- Allowance for Credit Losses
- The allowance for credit losses displays a consistent downward trajectory over the five-year period. Starting at 263 million USD in 2020, it decreased annually to reach 128 million USD by 2024. This decline suggests improved credit risk management or a reduction in anticipated credit losses.
- Financing Receivables, Gross
- Gross financing receivables demonstrate a downward trend as well. Beginning at 18,241 million USD in 2020, they steadily declined each year, reaching 11,740 million USD by 2024. This pattern may indicate a contraction in lending activities or a strategic reduction in credit exposure.
- Allowance as a Percentage of Financing Receivables, Gross
- This ratio experienced fluctuations but generally followed a decreasing trend with a slight peak in 2021. It increased marginally from 1.44% in 2020 to 1.56% in 2021, before declining to 1.09% in 2024. The initial increase could reflect heightened credit risk perceptions during 2021, whereas the subsequent decline suggests improved credit quality or lower risk exposure relative to the gross receivables base over time.
- Overall Insights
- The combined trends of decreasing allowance for credit losses and gross financing receivables, alongside the declining allowance percentage, imply enhanced credit portfolio performance and risk management. The reduction in the financing receivables base coupled with a proportionally smaller allowance indicates a potentially more secure or less risky lending environment in the later years under review.