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Oracle Corp. (ORCL)
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
Allowances for Doubtful Accounts
Oracle records allowances for doubtful accounts based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable, the collection history associated with the geographic region that the receivable was recorded in and current economic trends. Oracle writes-off a receivable and charges it against its recorded allowance when Oracle has exhausted the collection efforts without success.
Source: 10-K (filing date: 2019-06-21).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).
2019 Calculations
1 Allowance as a percentage of trade receivables, gross = 100 × Allowances for doubtful trade receivables ÷ Trade receivables, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of trade receivables, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Oracle Corp.’s allowance as a percentage of trade receivables, gross increased from 2017 to 2018 and from 2018 to 2019. |