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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
110
NOTE E.
INVENTORIES
($ in millions)
At December 31: 2014 2013
Finished goods $ 430 $ 444
Work in process and raw materials 1,674 1,866
Total $2,103 $2,310
NOTE F.
FINANCING RECEIVABLES
The following table presents financing receivables, net of allow-
ances for credit losses, including residual values.
($ in millions)
At December 31: 2014 2013
Current
Net investment in sales-type
and direct financing leases $ 3,781 $ 4,004
Commercial financing receivables 8,423 8,541
Client loan and installment
payment receivables (loans) 7,631 7,243
Total $19,835 $19,787
Noncurrent
Net investment in sales-type
and direct financing leases $ 4,449 $ 5,700
Client loan and installment
payment receivables (loans) 6,660 7,055
Total $11,109 $12,755
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 $671 million and $737 million at December31, 2014 and
2013, respectively, and is reflected net of unearned income of
$517 million and $672 million, and net of the allowance for credit
losses of $165 million and $123 million at those dates, respectively.
Scheduled maturities of minimum lease payments outstanding at
December31, 2014, expressed as a percentage of the total, are
approximately: 2015, 49percent; 2016, 28percent; 2017, 16per-
cent; 2018, 6percent; and 2019 and beyond, 2percent.
Commercial financing receivables, net of allowance for credit
losses of $17 million and $23 million at December31, 2014 and
2013, 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 generally range from 30 to 90 days.
Client loan and installment payment receivables (loans), net
of allowance for credit losses of $396 million and $242 million
at December31, 2014 and 2013, respectively, are loans that are
provided primarily to clients to finance the purchase of hardware,
software and services. Payment terms on these financing arrange-
ments are generally for terms up to seven 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 $642 million and $769 million at
December31, 2014 and 2013, respectively. These borrowings are
included in noteJ, “Borrowings,” on pages 115 to 117.
The company did not have any financing receivables held for
sale as of December31, 2014 and 2013.
Financing Receivables by Portfolio Segment
The following tables present financing receivables on a gross
basis, excluding the allowance for credit losses and residual
value, by portfolio segment and by class, excluding current com-
mercial financing receivables and other miscellaneous current
financing receivables at December31, 2014 and 2013. The com-
pany determines its allowance for credit losses based on two
portfolio segments: lease receivables and loan receivables, and
further segments the portfolio into two classes: major markets
and growth markets.
($ in millions)
At December 31, 2014:
Major
Markets
Growth
Markets Tota l
Financing receivables
Lease receivables $ 5,702 $1,943 $ 7,645
Loan receivables 10,049 4,639 14,687
Ending balance $15,751 $6,581 $22,332
Collectively evaluated for impairment $15,665 $6,156 $21,821
Individually evaluated for impairment $ 86 $ 425 $ 511
Allowance for credit losses:
Beginning balance at
January1, 2014
Lease receivables $ 42 $ 80 $ 123
Loan receivables 95 147 242
Total $ 137 $ 228 $ 365
Write-offs (18) (6) (24)
Provision 3 240 243
Other (12) (11) (23)
Ending balance at
December 31, 2014 $ 111 $ 450 $ 561
Lease receivables $ 32 $ 133 $ 165
Loan receivables $ 79 $ 317 $ 396
Collectively evaluated for impairment $ 42 $ 39 $ 81
Individually evaluated for impairment $ 69 $ 411 $ 480