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: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Allowance as a percentage of accounts and notes receivable, gross = 100 × Allowance for credit losses ÷ Accounts and notes receivable, gross
= 100 × ÷ =
- Allowance for credit losses
- The allowance for credit losses increased from 32,700 thousand US dollars in 2018 to 42,200 thousand US dollars in 2019. It then slightly decreased in 2020 to 40,000 thousand US dollars and remained relatively stable in 2021 at 39,900 thousand US dollars. In 2022, there was an increase to 43,700 thousand US dollars. Overall, the allowance shows a generally increasing trend over the five-year period, with minor fluctuations in the middle years.
- Accounts and notes receivable, gross
- The gross accounts and notes receivable started at 2,711,900 thousand US dollars in 2018 and increased to 2,840,300 thousand in 2019. A significant decrease occurred in 2020, bringing the balance down to 2,242,100 thousand US dollars. This figure rose again in 2021 to 2,469,300 thousand and further increased substantially in 2022 to 2,823,800 thousand US dollars. The data indicate volatility, with a notable dip in 2020 likely reflecting external factors, followed by recovery and growth in the subsequent years.
- Allowance as a percentage of gross accounts and notes receivable
- This ratio increased from 1.21% in 2018 to 1.49% in 2019, then rose further to 1.78% in 2020. A decline to 1.62% occurred in 2021, followed by a slight decrease to 1.55% in 2022. The trend indicates that the allowance for credit losses grew at a faster rate relative to receivables through 2020, suggesting a cautious approach to provisioning during that period, before moderating somewhat in the following years.