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CANON ANNUAL REPORT 2015
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCE RECEIVABLES AND OPERATING LEASES
Finance receivables represent financing leases which consist
of sales-type leases and direct-financing leases resulting from
the sales of Canon’s and complementary third-party products
primarily in foreign countries. These receivables typically have
terms ranging from 1 year to 6 years.
The activity in the allowance for credit losses is as follows:
December 31 Millions of yen
2015 2014
Total minimum lease payments receivable ¥ 318,066 ¥ 308,733
Unguaranteed residual values 14,271 13,924
Executory costs (888) (1,680)
Unearned income (31,920) (31,919)
299,529 289,058
Less allowance for credit losses (2,878) (6,276)
296,651 282,782
Less current portion (109,220) (102,920)
¥ 187,431 ¥ 179,862
Years ended December 31 Millions of yen
2015 2014
Balance at beginning of year ¥ 6,276 ¥ 7,323
Charge-offs (1,343) (1,171)
Provision 55 154
Translation adjustments and other (2,110) (30)
Balance at end of year ¥ 2,878 ¥ 6,276
The components of the finance receivables, which are included in prepaid expenses and other current assets, and other assets
in the accompanying consolidated balance sheets, are as follows:
Canon has policies in place to ensure that its products are sold
to customers with an appropriate credit history, and continuously
monitors its customers’ credit quality based on information includ-
ing length of period in arrears, macroeconomic conditions, initia-
tion of legal proceedings against customers and bankruptcy filings.
The allowance for credit losses of finance receivables are evalu-
ated collectively based on historical experience of credit losses. An
additional reserve for individual accounts is recorded when Canon
becomes aware of a customer’s inability to meet its financial
obligations, such as in the case of bankruptcy filings. Finance
receivables which are past due or individually evaluated for impair-
ment at December 31, 2015 and 2014 are not significant.
The cost of equipment leased to customers under operating
leases included in property, plant and equipment, net at December
31, 2015 and 2014 was ¥108,746 million and ¥113,997 million,
respectively. Accumulated depreciation on equipment under oper-
ating leases at December 31, 2015 and 2014 was ¥82,916 million
and ¥87,338 million, respectively.
The following is a schedule by year of the future minimum lease payments to be received under financing leases and noncan-
celable operating leases at December 31, 2015.
Year ending December 31: Millions of yen
Financing leases Operating leases
2016 ¥ 127,714 ¥ 8,709
2017 90,137 5,307
2018 57,828 3,308
2019 30,501 1,786
2020 11,165 490
Thereafter 721 206
¥ 318,066 ¥ 19,806
current liabilities in the accompanying consolidated balance
sheets. Fixed assets presented in the consolidated statements
of cash flows include property, plant and equipment and
intangible assets.