PACCAR 2010 Annual Report Download - page 52

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Revenue Recognition:
Truck and Other: Substantially all sales and revenues of trucks and related aftermarket parts are recorded by the
Company when products are shipped to dealers or customers, except for certain truck shipments that are subject to
a residual value guarantee to the customer. Revenues related to these shipments are recognized on a straight-line
basis over the guarantee period (see Note E). At the time certain truck and parts sales to a dealer are recognized,
the Company records an estimate of the future sales incentive costs related to such sales. The estimate is based on
historical data and announced incentive programs.
Financial Services: Interest income from finance and other receivables is recognized using the interest method.
Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts,
generally 36 to 60 months, using the straight-line method which approximates the interest method. For operating
leases, rental revenue is recog nized on a straight-line basis over the lease term. Recognition of interest income and
rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the
contractual due date or earlier if some other event causes the Company to determine that collection is not probable.
Recognition is resumed if the receivable becomes contractually current by the payment of all amounts due under the
terms of the existing contract and collection of remaining amounts is considered probable (if not modified), or after
the customer has made scheduled payments for three months and collection of remaining amounts is considered
probable (if contractually modified). Payments received while the finance receivable is impaired or on non-accrual
status are applied to interest and principal in accordance with the contractual terms.
Cash and Cash Equivalents: Cash equivalents consist of liquid investments with a maturity at date of purchase of
three months or less.
Marketable Securities: The Company’s investments in marketable securities are classified as available-for-sale. These
investments are stated at fair value with any unrealized gains or losses, net of tax, included as a component of
accumulated other comprehensive income.
Receivables:
Trade and Other Receivables: The Company’s trade and other receivables are recorded at cost on the balance sheet
net of allowances.
Finance and Other Receivables:
Loans – Loans represent fixed- or floating-rate loans to customers collateralized by the vehicles purchased and are
recorded at amortized cost.
Financing leases – Finance leases represent retail direct financing and sales-type finance lease contracts that lease
equipment to retail customers and dealers, respectively. These leases are reported as the sum of minimum lease
payments receivable and estimated residual value of the property subject to the contracts, reduced by unearned
interest which is shown separately.
Dealer wholesale financing – Dealer wholesale financing represents floating-rate wholesale loans to PACCAR dealers
for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.
Interest and other – Interest and other receivables are interest due on loans and leases and other amounts due in the
normal course of business and are due within one year.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
December 31, 2010, 2009 and 2008 (currencies in millions)