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: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 2026 Calculation
Allowance as a percentage of trade receivables, gross = 100 × Allowances for credit losses ÷ Trade receivables, gross
= 100 × ÷ =
An analysis of the credit loss provisions and trade receivables from May 31, 2021, through May 31, 2026, reveals a period of consistent growth in gross receivables accompanied by a generally increasing, though non-linear, allowance for credit losses. The overall credit risk profile remained relatively stable for the majority of the period before showing a marked improvement in the final year.
- Gross Trade Receivables Trend
- Gross trade receivables exhibited a continuous upward trajectory throughout the entire six-year period. Starting at 5,782 million US dollars in 2021, the balance grew steadily to 10,927 million US dollars by 2026. This represents a substantial increase in the total volume of outstanding credit extended to customers, reflecting expanded business operations or a shift in credit terms.
- Allowances for Credit Losses
- The absolute value of allowances for credit losses generally increased, rising from 373 million US dollars in 2021 to a peak of 557 million US dollars in 2025. A slight contraction occurred between 2021 and 2022, and another minor decrease was observed in 2026, where the balance settled at 542 million US dollars. The upward trend through 2025 suggests that the organization increased its reserves to keep pace with the growth in gross receivables.
- Allowance as a Percentage of Gross Trade Receivables
- The ratio of allowances to gross receivables remained within a narrow band between 5.73% and 6.45% from 2021 to 2025, indicating a consistent approach to risk management and credit loss estimation. However, a significant shift occurred in 2026, where the ratio dropped to 4.96%. This represents the lowest percentage in the analyzed period, suggesting either a notable improvement in the quality of the receivables portfolio or a revision in the methodology used to calculate credit loss expectations.