Sears: Accounting for Uncollectible Accounts

Sarah Simons, an investment analyst for the retail industry, has just received the Sears, Roebuck and Co. 1999 Annual Report. Sears has had trouble in the past with the collectibility of receivables from customer credit purchases using the Sears Card. These problems have led to past write-offs, as well as legal problems, which have depressed the stock. Sarah must evaluate the provisions that the Company has made for possible problems in collecting its receivables. The case provides background information on Sears’ business and past problems, an introduction to accounting for contingencies, and financial information from public sources on Sears and the industry.