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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
106
NOTEE.
INVENTORIES
($ inmillions)
At December 31: 2015 2014
Finished goods $ 352 $ 430
Work in process and raw materials 1,199 1,674
Total $1,551 $2,103
NOTEF.
FINANCING RECEIVABLES
The following table presents financing receivables, net of allow-
ances for credit losses, including residual values.
($ inmillions)
At December 31: 2015 2014
Current
Net investment in sales-type
and direct fi nancing leases $ 3,057 $ 3,781
Commercial fi nancing receivables 8,948 8,423
Client loan and installment
payment receivables (loans) 7,015 7,631
Total $19,020 $19,835
Noncurrent
Net investment in sales-type
and direct fi nancing leases $ 4,501 $ 4,449
Client loan and installment
payment receivables (loans) 5,512 6,660
Total $10,013 $11,109
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 $645million and $671million at December31, 2015 and
2014, respectively, and is reflected net of unearned income of
$536million and $517million, and net of the allowance for credit
losses of $213million and $165million at those dates, respectively.
Scheduled maturities of minimum lease payments outstanding at
December31, 2015, expressed as a percentage of the total, are
approximately: 2016, 44percent; 2017, 27percent; 2018, 18per-
cent; 2019, 8percent; and 2020 and beyond, 3percent.
Commercial financing receivables, net of allowance for credit
losses of $19million and $17million at December31, 2015 and
2014, 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 $377million and $396million
at December31, 2015 and 2014, 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 and installment payment financing contracts are
priced independently at competitive market rates. The company
has a history of enforcing these financing agreements.
The company utilizes certain of its financing receivables as col-
lateral for nonrecourse borrowings. Financing receivables pledged
as collateral for borrowings were $545million and $642million at
December31, 2015 and 2014, respectively. These borrowings are
included in noteJ, “Borrowings,” on pages 111 to 113.
The company did not have any financing receivables held for
sale as of December31, 2015 and 2014.
Financing Receivables by Portfolio Segment
The following tables present financing receivables on a gross
basis, excluding the allowance for credit losses and residual
value, by portfolio segment and by class, excluding commercial
financing receivables and other miscellaneous financing receiv-
ables at December31, 2015 and 2014. The company determines
its allowance for credit losses based on two portfolio segments:
lease receivables and loan receivables, and further segments the
portfolio into two classes: major markets and growth markets.
($ inmillions)
At December 31, 2015:
Major
Markets
Growth
Markets Total
Financing receivables
Lease receivables $ 5,517 $1,524 $ 7,041
Loan receivables 9,739 3,165 12,904
Ending balance $15,256 $4,689 $19,945
Collectively evaluated for impairment $15,180 $4,227 $19,406
Individually evaluated for impairment $ 76 $ 462 $ 539
Allowance for credit losses
Beginning balance at
January1, 2015
Lease receivables $ 32 $ 133 $ 165
Loan receivables 79 317 396
Total $ 111 $ 450 $ 561
Write-offs (14) (48) (62)
Provision 20 122 141
Other (8) (43) (51)
Ending balance at
December 31, 2015 $ 109 $ 481 $ 590
Lease receivables $ 25 $ 188 $ 213
Loan receivables $ 83 $ 293 $ 377
Collectively evaluated for impairment $ 43 $ 36 $ 79
Individually evaluated for impairment $ 65 $ 445 $ 511