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Analysis of Bad Debts

Difficulty: Advanced

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.


Receivables Accounting Policy

Allowance for Credit Losses

Receivables are recorded concurrent with billing and shipment of a product and/or delivery of a service to customers. A reasonable estimate of probable net losses on the value of customer receivables is recognized by establishing an allowance for credit losses.

Notes and Accounts Receivable—Trade

An allowance for uncollectible trade receivables is estimated based on a combination of write-off history, aging analysis and any specific, known troubled accounts.

Source: 10-K (filing date: 2018-02-27).


Allowance for Doubtful Accounts Receivable

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Allowances for doubtful notes and accounts receivable hidden hidden hidden hidden hidden
Notes and accounts receivable, gross hidden hidden hidden hidden hidden
Ratio
Allowance as a percentage of notes and accounts receivable, gross1 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).

2017 Calculations

1 Allowance as a percentage of notes and accounts receivable, gross = 100 × Allowances for doubtful notes and accounts receivable ÷ Notes and accounts receivable, gross
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Allowance as a percentage of notes and accounts receivable, gross Allowance for doubtful accounts divided by the gross accounts receivable. International Business Machines Corp.'s allowance as a percentage of notes and accounts receivable, gross declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Allowance for Credit Losses

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Allowance for credit losses hidden hidden hidden hidden hidden
Financing receivables, gross hidden hidden hidden hidden hidden
Ratio
Allowance as a percentage of financing receivables, gross1 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).

2017 Calculations

1 Allowance as a percentage of financing receivables, gross = 100 × Allowance for credit losses ÷ Financing receivables, gross
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Allowance as a percentage of financing receivables, gross Allowance for credit losses divided by the gross financing receivable. International Business Machines Corp.'s allowance as a percentage of financing receivables, gross declined from 2015 to 2016 and from 2016 to 2017.