Microsoft Excel LibreOffice Calc

Pfizer Inc. (PFE)

Analysis of Bad Debts

Advanced level

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.

Accounting Policy on Receivables

Trade Accounts Receivable

Trade accounts receivable are stated at their net realizable value. The allowance against gross trade accounts receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other current information. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.

Source: 10-K (filing date: 2019-02-28).

Allowance for Doubtful Accounts Receivable

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Allowance for doubtful accounts 541  584  609  384  412 
Trade accounts receivable, gross 8,566  8,805  8,834  8,560  9,081 
Allowance as a percentage of trade accounts receivable, gross1 6.32% 6.63% 6.89% 4.49% 4.54%

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-29), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Allowance as a percentage of trade accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Trade accounts receivable, gross
= 100 × 541 ÷ 8,566 = 6.32%

Ratio Description The company
Allowance as a percentage of trade accounts receivable, gross Allowance for doubtful accounts divided by the gross accounts receivable. Pfizer Inc.’s allowance as a percentage of trade accounts receivable, gross declined from 2016 to 2017 and from 2017 to 2018.