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Phillips 66 (NYSE:PSX)

This company has been moved to the archive! The financial data has not been updated since February 21, 2020.

Analysis of Bad Debts

Microsoft Excel

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.

Allowance for Doubtful Accounts Receivable

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Allowances 41 22 29 34 55
Accounts and notes receivable, gross 7,417 5,436 6,453 5,519 4,466
Financial Ratio
Allowance as a percentage of accounts and notes receivable, gross1 0.55% 0.40% 0.45% 0.62% 1.23%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 2019 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowances ÷ Accounts and notes receivable, gross
= 100 × 41 ÷ 7,417 = 0.55%

The analysis of the allowance for doubtful accounts indicates a period of generally declining credit risk exposure between 2015 and 2018, followed by a moderate increase in the estimated loss provision in 2019.

Allowance for Doubtful Accounts Trends
Absolute allowance values experienced a steady decline from 55 million USD in 2015 to a period low of 22 million USD in 2018. This downward trajectory was reversed in 2019, where the allowance rose to 41 million USD.
Gross Receivables Performance
Accounts and notes receivable, gross, exhibited a general upward trend over the five-year period, growing from 4,466 million USD in 2015 to 7,417 million USD in 2019. A temporary contraction occurred in 2018, where balances decreased to 5,436 million USD from a 2017 peak of 6,453 million USD.
Allowance as a Percentage of Gross Receivables
The ratio of allowances to gross receivables decreased significantly from 1.23% in 2015 to 0.40% in 2018, suggesting an improvement in the credit quality of the receivables portfolio or a shift in risk assessment methodologies. In 2019, this ratio increased to 0.55%, indicating a slight uptick in the anticipated percentage of uncollectible accounts relative to the total gross balance.

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