UPS 2007 Annual Report Download - page 77

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cost
Estimated
Fair Value
Due in one year or less ............................................... $ 10 $ 10
Due after one year through three years ................................... 146 148
Due after three years through five years .................................. 22 22
Due after five years .................................................. 290 292
468 472
Equity securities .................................................... 130 138
$598 $610
NOTE 3. FINANCE RECEIVABLES
The following is a summary of finance receivables at December 31, 2007 and 2006 (in millions):
2007 2006
Commercial term loans .................................................. $351 $280
Investment in finance leases .............................................. 143 138
Asset-based lending ..................................................... 309 273
Receivable factoring .................................................... 109 131
Gross finance receivables ................................................ 912 822
Less: Allowance for credit losses .......................................... (13) (22)
Balance at December 31 ................................................. $899 $800
Outstanding receivable balances at December 31, 2007 and 2006 are net of unearned income of $30 and $29
million, respectively.
When we “factor” (i.e., purchase) a customer invoice from a client, we record the customer receivable as an
asset and also establish a liability for the funds due to the client, which is recorded in accounts payable on the
consolidated balance sheet. The following is a reconciliation of receivable factoring balances at December 31,
2007 and 2006 (in millions):
2007 2006
Customer receivable balances ............................................. $109 $131
Less: Amounts due to client .............................................. (74) (77)
Net funds employed .................................................... $ 35 $ 54
Non-earning finance receivables were $42 and $23 million at December 31, 2007 and 2006, respectively, of
which $19 and $2 million are U.S. government guaranteed portions of loans. The following is a rollforward of
the allowance for credit losses on finance receivables (in millions):
2007 2006
Balance at January 1 ..................................................... $22 $20
Provisions charged to operations ............................................ 2 8
Charge-offs, net of recoveries .............................................. (11) (6)
Balance at December 31 .................................................. $13 $22
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