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7. Financing Receivables and Operating Leases
(a) Financing Receivables
Financing receivables primarily consist of lease receivables, loan receivables, and financed service contracts and other. Lease
receivables represent sales-type and direct-financing leases resulting from the sale of the Company’s and complementary third-
party products and are typically collateralized by a security interest in the underlying assets. Loan receivables represent financing
arrangements related to the sale of the Company’s products and services, which may include additional funding for other costs
associated with network installation and integration of the Company’s products and services. Lease receivables consist of
arrangements with terms of four years on average, while loan receivables generally have terms of up to three years. The financed
service contracts and other category includes financing receivables related to technical support and advanced services, as well as
receivables related to financing of certain indirect costs associated with leases. Revenue related to the technical support services
is typically deferred and included in deferred service revenue and is recognized ratably over the period during which the related
services are to be performed, which typically ranges from one to three years.
A summary of the Company’s financing receivables is presented as follows (in millions):
July 25, 2015
Lease
Receivables
Loan
Receivables
Financed Service
Contracts and Other Total
Gross .................................... $ 3,361 $ 1,763 $ 3,573 $ 8,697
Residual value .......................... 224 — — 224
Unearned income ....................... (190) — — (190)
Allowance for credit loss ................ (259) (87) (36) (382)
Total, net ...................... $ 3,136 $ 1,676 $ 3,537 $ 8,349
Reported as:
Current ............................ $ 1,468 $ 856 $ 2,167 $ 4,491
Noncurrent ......................... 1,668 820 1,370 3,858
Total, net ...................... $ 3,136 $ 1,676 $ 3,537 $ 8,349
July 26, 2014
Lease
Receivables
Loan
Receivables
Financed Service
Contracts and Other Total
Gross .................................... $ 3,532 $ 1,683 $ 3,210 $ 8,425
Residual value ........................... 233 — — 233
Unearned income ........................ (238) — — (238)
Allowance for credit loss ................. (233) (98) (18) (349)
Total, net ...................... $ 3,294 $ 1,585 $ 3,192 $ 8,071
Reported as:
Current ............................. $ 1,476 $ 728 $ 1,949 $ 4,153
Noncurrent .......................... 1,818 857 1,243 3,918
Total, net ...................... $ 3,294 $ 1,585 $ 3,192 $ 8,071
As of July 25, 2015 and July 26, 2014, the deferred service revenue related to “Financed Service Contracts and Other” was
$1,853 million and $1,843 million, respectively.
Future minimum lease payments to be received as of July 25, 2015 are summarized as follows (in millions):
Fiscal Year Amount
2016 ....................................................................................................... $ 1,613
2017 ....................................................................................................... 999
2018 ....................................................................................................... 503
2019 ....................................................................................................... 202
2020 ....................................................................................................... 44
Total ................................................................................................. $ 3,361
Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.
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