What Is Sears ' Management Help Achieve Through Decisions With Respect For Financial Reporting For Uncollectible Accounts?

702 Words Jan 16th, 2016 3 Pages
What is Sears’ management trying to achieve through decisions with respect to financial reporting for uncollectible accounts? Management’s objective was to find alternatives to better manage the way credit card charges were collected. The new system that was being used allowed the company to charge off customers’ accounts that neglected to make a payment within eight billing cycles. The intention of the new system was to assist the company in better managing their collection efforts giving them the ability to identify accounts that could or would become delinquent earlier on. The previous system did not catch the delinquent accounts as fast as the new system. With the original system, accounts considered to be uncollectible were automatically charged-off when the balance that was past due was eight times the scheduled minimum monthly payment. Before the new system the company heavily marketed the new Sears Card. In 1995, the company responded to the rising charge-offs by increasing interest rates to 21 percent. Meanwhile, the company lowered the minimum monthly payment that customers were required to pay. Sears Company, by 1997, was listed as a creditor in one-third of personal bankruptcies in the United States. Through the end of 1997, Sears’ average credit card balance was over three times that amount of J.C. Penney Company’s, not to mention the company had delinquencies that exceeded the industry average by two percentage points (Nelson & Hoyt, 2000). In accordance with…

Related Documents