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.
Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of receivables, gross = 100 × Receivables allowances ÷ Receivables, gross
= 100 × 4,971 ÷ 57,686 = 8.62%
The allowance for doubtful accounts receivable has demonstrated a consistent upward trajectory over the five-year period. Simultaneously, gross receivables have also increased, though the rate of increase has varied. Analysis of the allowance as a percentage of gross receivables reveals a subtle, but potentially significant, shift in this relationship over time.
- Receivables Allowances
- The receivables allowances increased from US$1,947 million in 2021 to US$4,971 million in 2025. This represents a cumulative increase of approximately 155.8%. The largest single-year increase occurred between 2023 and 2024, with an addition of US$765 million. Growth was also substantial between 2022 and 2023 (US$774 million) and between 2024 and 2025 (US$1,122 million).
- Gross Receivables
- Gross receivables also exhibited growth, rising from US$30,029 million in 2021 to US$57,686 million in 2025, a cumulative increase of roughly 92.1%. The most significant increase in gross receivables was observed between 2022 and 2023, with an increase of US$9,294 million. Growth between 2023 and 2024 was also substantial, at US$10,249 million. The increase from 2024 to 2025 was comparatively smaller, at US$5,383 million.
- Allowance as a Percentage of Gross Receivables
- The allowance as a percentage of gross receivables began at 6.48% in 2021 and increased to 8.62% in 2025. While the percentage remained relatively stable between 2021 and 2024, fluctuating between 6.48% and 7.36%, a more pronounced increase is evident in the final year. This suggests a potentially increasing risk associated with collecting receivables, or a more conservative approach to estimating uncollectible accounts. The increase from 7.36% in 2024 to 8.62% in 2025 represents a 17.1% change in the percentage.
The consistent growth in both the allowance for doubtful accounts and gross receivables suggests overall business expansion. However, the increasing percentage of the allowance relative to gross receivables warrants further investigation to determine the underlying causes and potential implications for future financial performance.
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