Stryker Corp. (SYK)
Analysis of Bad Debts
High level of difficulty
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
Accounts receivable consists of trade and other miscellaneous receivables. An allowance is maintained for doubtful accounts for estimated losses in the collection of accounts receivable. Estimates are made regarding the ability of customers to make required payments based on historical credit experience and expected future trends. Accounts receivable are written off when all reasonable collection efforts are exhausted.
Source: 10-K (filing date: 2019-02-07).
Allowance for Doubtful Accounts Receivable
|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|
|Accounts receivable, gross|
|Allowance as a percentage of accounts receivable, gross1|
1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ Accounts receivable, gross
= 100 × ÷ =
|Allowance as a percentage of accounts receivable, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Stryker Corp.’s allowance as a percentage of accounts receivable, gross declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.|