Cisco 2015 Annual Report Download - page 101

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(b) Credit Quality of Financing Receivables
Gross receivables less unearned income categorized by the Company’s internal credit risk rating as of July 25, 2015 and July 26,
2014 are summarized as follows (in millions):
INTERNAL CREDIT RISK RATING
July 25, 2015 1to4 5to6 7 and Higher Total
Lease receivables ............................................... $ 1,688 $ 1,342 $ 141 $ 3,171
Loan receivables ................................................ 788 823 152 1,763
Financed service contracts and other .......................... 2,133 1,389 51 3,573
Total ......................................................... $ 4,609 $ 3,554 $ 344 $ 8,507
INTERNAL CREDIT RISK RATING
July 26, 2014 1to4 5to6 7 and Higher Total
Lease receivables ................................................ $ 1,615 $ 1,538 $ 141 $ 3,294
Loan receivables ................................................. 953 593 137 1,683
Financed service contracts and other ............................. 1,744 1,367 99 3,210
Total .......................................................... $ 4,312 $ 3,498 $ 377 $ 8,187
The Company determines the adequacy of its allowance for credit loss by assessing the risks and losses inherent in its financing
receivables by portfolio segment. The portfolio segment is based on the types of financing offered by the Company to its
customers, which consist of the following: lease receivables, loan receivables, and financed service contracts and other.
The Company’s internal credit risk ratings of 1 through 4 correspond to investment-grade ratings, while credit risk ratings of 5
and 6 correspond to non-investment grade ratings. Credit risk ratings of 7 and higher correspond to substandard ratings.
In circumstances when collectibility is not deemed reasonably assured, the associated revenue is deferred in accordance with the
Company’s revenue recognition policies, and the related allowance for credit loss, if any, is included in deferred revenue. The
Company also records deferred revenue associated with financing receivables when there are remaining performance obligations,
as it does for financed service contracts. Total allowances for credit loss and deferred revenue as of July 25, 2015 and July 26,
2014 were $2,253 million and $2,220 million, respectively, and they were associated with total financing receivables before
allowance for credit loss of $8,731 million and $8,420 million as of their respective period ends.
The following tables present the aging analysis of gross receivables less unearned income as of July 25, 2015 and July 26, 2014
(in millions):
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
July 25, 2015 31 - 60 61 - 90 91+
Total
Past Due Current Total
Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Lease receivables ...................... $ 90 $ 27 $ 185 $ 302 $ 2,869 $ 3,171 $ 73 $ 73
Loan receivables ...................... 21 3 25 49 1,714 1,763 32 32
Financed service contracts and other .. 396 152 414 962 2,611 3,573 29 9
Total ................................ $ 507 $ 182 $ 624 $ 1,313 $ 7,194 $ 8,507 $ 134 $ 114
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
July 26, 2014 31 - 60 61 - 90 91+
Total
Past Due Current Total
Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Lease receivables ....................... $ 63 $ 46 $ 202 $ 311 $ 2,983 $ 3,294 $ 48 $ 41
Loan receivables ....................... 3 21 27 51 1,632 1,683 19 19
Financed service contracts and other .... 268 230 220 718 2,492 3,210 12 9
Total ................................ $ 334 $ 297 $ 449 $ 1,080 $ 7,107 $ 8,187 $ 79 $ 69
Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data
in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding
receivable, and therefore past due amounts also include unbilled and current receivables within the same contract. The balances
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