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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
99
Note F.
Financing Receivables
The following table presents financing receivables, net of allowances
for credit losses, including residual values.
($ in millions)
At December 31: 2012 2011
Current
Net investment in sales-type
and direct financing leases $ 3,862 $ 3,765
Commercial financing receivables 7,750 7,095
Client loan receivables 5,395 5,195
Installment payment receivables 1,031 846
To t a l $18,038 $16,901
Noncurrent
Net investment in sales-type
and direct financing leases $ 6,107 $ 5,406
Commercial financing receivables 534
Client loan receivables 5,966 4,925
Installment payment receivables 733 410
To t a l $12,812 $10,776
Net investment in sales-type and direct financing leases relates
principally to the company’s systems products and are for terms
ranging generally from two to six years. Net investment in sales-type
and direct financing leases includes unguaranteed residual values
of $794 million and $745 million at December 31, 2012 and 2011,
respectively, and is reflected net of unearned income of $728 million
and $733 million, and net of the allowance for credit losses of $114
million and $118 million at those dates, respectively. Scheduled
maturities of minimum lease payments outstanding at December 31,
2012, expressed as a percentage of the total, are approximately:
2013, 42 percent; 2014, 29 percent; 2015, 18 percent; 2016, 9 percent;
and 2017 and beyond, 3 percent.
Commercial financing receivables, net of allowance for credit
losses of $46 million and $53 million at December 31, 2012 and 2011,
respectively, relate primarily to inventory and accounts receivable
financing for dealers and remarketers of IBM and non-IBM products.
Payment terms for inventory and accounts receivable financing
generally range from 30 to 90 days.
Client loan receivables, net of allowance for credit losses of $155
million and $126 million at December 31, 2012 and 2011, respectively,
are loans that are provided primarily to clients to finance the pur-
chase of software and services. Separate contractual relationships
on these financing arrangements are for terms ranging generally
from one to seven years.
Installment payment receivables, net of allowance for credit
losses of $39 million and $51 million at December 31, 2012 and
2011, respectively, are loans that are provided primarily to clients
to finance hardware, software and services ranging generally from
one to three years.
Client loan receivables and installment payment receivables
financing contracts are priced independently at competitive market
rates. The company has a history of enforcing the terms of these
separate financing agreements.
The company utilizes certain of its financing receivables as col-
lateral for non-recourse borrowings. Financing receivables pledged
as collateral for borrowings were $650 million and $410 million at
December 31, 2012 and 2011, respectively. These borrowings are
included in note J, “Borrowings,” on pages 104 and 105.
The company did not have any financing receivables held for
sale as of December 31, 2012 and 2011.
Financing Receivables by Portfolio Segment
The following tables present financing receivables on a gross basis,
excluding the allowance for credit losses and residual value, by port-
folio segment and by class, excluding current commercial financing
receivables and other miscellaneous current financing receivables
at December 31, 2012 and 2011. The company determines its allow-
ance for credit losses based on two portfolio segments: lease
receivables and loan receivables, and further segments the portfolio
into two classes: major markets and growth markets.
($ in millions)
At December 31, 2012:
Major
Markets
Growth
Markets To ta l
Financing receivables
Lease receivables $ 7,036 $2,138 $ 9,174
Loan receivables 9,666 3,670 13,336
Ending balance $16,701 $5,808 $22,510
Collectively evaluated for impairment $16,570 $5,684 $22,254
Individually evaluated for impairment $ 131 $ 125 $ 256
Allowance for credit losses:
Beginning balance at
January 1, 2012
Lease receivables $ 79 $ 40 $ 118
Loan receivables 125 64 189
To t a l $ 203 $ 104 $ 307
Write-offs (14) (1) (15)
Provision (9) 38 28
Other 0 (2) (2)
Ending balance at
December 31, 2012 $ 180 $ 138 $ 318
Lease receivables $ 59 $ 55 $ 114
Loan receivables $ 121 $ 84 $ 204
Collectively evaluated for impairment $ 69 $ 29 $ 98
Individually evaluated for impairment $ 111 $ 109 $ 220