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Notes to Consolidated Financial Statements
6. Financing Receivables and Guarantees
(a) Financing Receivables
Financing receivables primarily consist of lease receivables, financed service contracts and loan receivables. Lease receivables
represent sales-type and direct-financing leases resulting from the sale of the Company’s and complementary third-party
products. These lease arrangements have terms of on average three years and are generally collateralized by a security interest in
the underlying assets. The revenue related to financed service contracts, which is primarily associated with technical support
services, is deferred and included in deferred service revenue. The revenue is recognized ratably over the period during which the
related services are to be performed, which is typically from one to three years.
A summary of the Company’s financing receivables is presented as follows (in millions):
Lease
Receivables
Financed
Service
Contracts
Loan
Receivables
Financing
ReceivablesJuly 31, 2010
Gross $ 2,411 $ 1,773 $ 1,249 $ 5,433
Unearned income (215) — — (215)
Allowances (207) (21) (73) (301)
Total, net $ 1,989 $ 1,752 $ 1,176 $ 4,917
Reported as:
Current $ 813 $ 989 $ 501 $ 2,303
Noncurrent 1,176 763 675 2,614
Total, net $ 1,989 $ 1,752 $ 1,176 $ 4,917
July 25, 2009
Lease
Receivables
Financed
Service
Contracts
Loan
Receivables
Financing
Receivables
Gross $ 1,996 $ 1,642 $ 861 $ 4,499
Unearned income (191) — — (191)
Allowances (213) (26) (88) (327)
Total, net $ 1,592 $ 1,616 $ 773 $ 3,981
Reported as:
Current $ 626 $ 940 $ 236 $ 1,802
Noncurrent 966 676 537 2,179
Total, net $ 1,592 $ 1,616 $ 773 $ 3,981
Contractual maturities of the gross lease receivables at July 31, 2010 are summarized as follows (in millions):
Fiscal Year Amount
2011 $ 961
2012 706
2013 454
2014 223
2015 63
Thereafter 4
Total $ 2,411
Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.
(b) Financing Guarantees
In the ordinary course of business, the Company provides financing guarantees that are generally for various third-party financing
arrangements extended to channel partners and end-user customers.
Channel Partner Financing Guarantees The Company facilitates arrangements for third-party financing extended to channel
partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. These financing
arrangements facilitate the working capital requirements of the channel partners and, in some cases, the Company guarantees a
portion of these arrangements. The volume of channel partner financing was $17.2 billion, $14.2 billion and $14.4 billion for fiscal
2010, 2009, and 2008, respectively. As of July 31, 2010 and July 25, 2009, the balance of the channel partner financing subject to
guarantees was $1.4 billion and $1.1 billion, respectively.
54 Cisco Systems, Inc.