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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
107
NOTE E.
INVENTORIES
($ in millions)
At December 31: 2013 2012
Finished goods $ 444 $ 475
Work in process and raw materials 1,866 1,812
To t a l $2,310 $2,287
NOTE F.
FINANCING RECEIVABLES
The following table presents financing receivables, net of allowances
for credit losses, including residual values.
($ in millions)
At December 31: 2013 2012
Current
Net investment in sales-type
and direct financing leases $ 4,004 $ 3,862
Commercial financing receivables 8,541 7,750
Client loan receivables 5,854 5,395
Installment payment receivables 1,389 1,031
To t a l $19,787 $18,038
Noncurrent
Net investment in sales-type
and direct financing leases $ 5,700 $ 6,107
Commercial financing receivables —5
Client loan receivables 6,360 5,966
Installment payment receivables 695 733
To t a l $12,755 $12,812
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 $737 million and $794 million at December 31, 2013 and 2012,
respectively, and is reflected net of unearned income of $672 million
and $728 million, and net of the allowance for credit losses of $123
million and $114 million at those dates, respectively. Scheduled
maturities of minimum lease payments outstanding at December
31, 2013, expressed as a percentage of the total, are approximately:
2014, 44 percent; 2015, 30 percent; 2016, 17 percent; 2017, 6 per-
cent; and 2018 and beyond, 3 percent.
Commercial financing receivables, net of allowance for credit
losses of $23 million and $46 million at December 31, 2013 and 2012,
respectively, relate primarily to inventory and accounts receivable
financing for dealers and remarketers of IBM and OEM products.
Payment terms for inventory and accounts receivable financing gen-
erally range from 30 to 90 days.
Client loan receivables, net of allowance for credit losses of $201
million and $155 million at December 31, 2013 and 2012, 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 $41 million and $39 million at December 31, 2013 and
2012, 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 nonrecourse borrowings. Financing receivables pledged
as collateral for borrowings were $769 million and $650 million at
December 31, 2013 and 2012, respectively. These borrowings are
included in note J, “Borrowings,” on pages 112 to 114.
The company did not have any financing receivables held for
sale as of December 31, 2013 and 2012.
Financing Receivables by Portfolio Segment
The following tables present financing receivables on a gross basis,
excluding the allowance for credit losses and residual value, by port-
folio segment and by class, excluding current commercial financing
receivables and other miscellaneous current financing receivables
at December 31, 2013 and 2012. The company determines its allow-
ance for credit losses based on two portfolio segments: lease
receivables and loan receivables, and further segments the portfolio
into two classes: major markets and growth markets.
($ in millions)
At December 31, 2013:
Major
Markets
Growth
Markets To ta l
Financing receivables
Lease receivables $ 6,796 $2,200 $ 8,996
Loan receivables 10,529 4,012 14,542
Ending balance $17,325 $6,212 $23,537
Collectively evaluated for impairment $17,206 $6,013 $23,219
Individually evaluated for impairment $ 119 $ 199 $ 318
Allowance for credit losses:
Beginning balance at
January 1, 2013
Lease receivables $ 59 $ 55 $ 114
Loan receivables 121 84 204
To t a l $ 180 $ 138 $ 318
Write-offs (23) (10) (33)
Provision (21) 105 84
Other 1 (6) (5)
Ending balance at
December 31, 2013 $ 137 $ 228 $ 365
Lease receivables $ 42 $ 80 $ 123
Loan receivables $ 95 $ 147 $ 242
Collectively evaluated for impairment $ 45 $ 48 $ 93
Individually evaluated for impairment $ 93 $ 179 $ 272