28 Sep 2022


Signet Jewelers - The World's Leading Diamond Jeweler

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Academic level: College

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In most cases, recency and contractual accounting method are used when determining delinquency. Thus, recency delinquency is estimated based on the amount qualified amount deposited in the account. According to FAS 157, this approach has been described as a more lenient method of measurement as it does not take into account the payment of arrears. Also, it does account for an instant write-off of an unavoidable bad debt. As a result, it disproportionately increases the value of bad debts in the organization. On the other hand, contractual delinquency uses the total amount of the payments that were not paid by the customer (Han, et al. 2015). Though this method is considered to be more risky measurement, it provides the true value of the accounts. It adjusts the level of delinquency of the account rather than the amount in arrears, and it is the best method. The company uses these unusual accounting methods in assessing their client’s account which is past due and may be written as bad debts. However, the company fears that the approaches may overestimate the future incomes and underestimate losses as the credit business expands. In an attempt to reduce chances of losses, Signet Jewelry uses credit standards and skills they have earned over a decade. In the recency approach, the company considers the frequency in which the client's account remains active. Thus, if the clients are frequent depositor, they qualify for a loan and the dormant accounts, the loan qualification is minimal. Also, chances of the loan being written off as bad debt are high. On the other hand, the contractual approach also is applied in the Signet Jewelry to determine the credibility of the customer to repay the debt. In this case, the credibility of the customer depends on the frequency of making monthly payments before they fall due. Mostly, the company will focus on the failure of the customers to pay monthly bills on they accounts. For instance, a customer may make credit purchase on the terms that they will settle the purchase price through monthly payments. Before the purchase, the customer receives the statement of making monthly payments. Thus, if the customers fail to pay on the stated date, their accounts become delinquent. At this stage, if another payment due fails, the debt is written as a bad debt under the contractual accounting approach (Marouani, 2014).

Signet is a jewelry business, but it’s currently growing into a finance company. As a result, it is currently increasing the limit of credit and accounting business through offering credits to the current customers. In expanding credit operations to potential customers at a reduced credit risk, the company is assessing their credibility by assessing rejections by other lenders. Moreover, recency and contractual approaches have helped Signet Jewelers to be one of the leading jewel dealers in the world (Nugroho, 2014). However, its business success is built on consumer’s loan known as subprime debt in the financial institution.

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The opinion of the Signet on their accounting approach is that it is not aligning with the current U.S market regarding financing benefits. As a result, there is an increasing the non-performing account receivables by 0.2 percent. Similarly, the level of delinquencies of the company will only fall when out-source credit cards management to the banks. In my opinion, contractual delinquency approach stands to the only efficient methods of assessing bad debts. It provides a true reflection of the client’s account. Thus, Signet Jewelry should embrace this approach and improve their nature of monitoring these accounts.


Han, S., Keys, B. J., & Li, G. (2015). Information, contract design, and unsecured credit supply: Evidence from credit card mailings. 

Marouani, A. (2014). Predicting Default Probability Using Delinquency: The Case of French Small Businesses.    Browser Download This Paper

Nugroho, L. (2014). Role of Government Support to Micro Financing in Islamic Bank for Clean Water Connection to Low-Income Communities.    Research Journal of Finance and Accounting ,    5 (4), 57-63. 

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StudyBounty. (2023, September 15). Signet Jewelers - The World's Leading Diamond Jeweler.


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