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Analysis of Bad Debts
Difficulty: Advanced
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.
Receivables Accounting Policy
Allowance for Doubtful Accounts
Disney maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The allowance for doubtful accounts is estimated based on Disney’s analysis of trends in overall receivables aging, specific identification of certain receivables that are at risk of not being paid, past collection experience and current economic trends.
Source: 10-K (filing date: 2018-11-21).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 Allowance as a percentage of current receivables, gross = 100 × Allowance for doubtful accounts ÷ Current receivables, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of current receivables, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Walt Disney Co.’s allowance as a percentage of current receivables, gross increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |