Cisco 2013 Annual Report Download - page 102

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(b) Credit Quality of Financing Receivables
Financing receivables categorized by the Company’s internal credit risk rating as of July 27, 2013 and July 28, 2012 are
summarized as follows (in millions):
INTERNAL CREDIT RISK
RATING
July 27, 2013 1to4 5to6 7 and Higher Total
Residual
Value
Gross Receivables,
Net of Unearned
Income
Lease receivables ................................ $1,681 $1,482 $ 93 $3,256 $251 $3,507
Loan receivables ................................ 842 777 30 1,649 — 1,649
Financed service contracts and other ............... 1,876 1,141 119 3,136 — 3,136
Total .......................................... $4,399 $3,400 $242 $8,041 $251 $8,292
INTERNAL CREDIT RISK
RATING
July 28, 2012 1to4 5to6 7 and Higher Total
Residual
Value
Gross Receivables,
Net of Unearned
Income
Lease receivables ................................. $1,532 $1,342 $ 31 $2,905 $274 $3,179
Loan receivables ................................. 831 921 44 1,796 — 1,796
Financed service contracts and other .................. 1,552 1,030 69 2,651 — 2,651
Total ........................................... $3,915 $3,293 $144 $7,352 $274 $7,626
The Company determines the adequacy of its allowance for credit loss by assessing the risks and losses inherent in its
financing receivables by portfolio segment. The portfolio segment is based on the types of financing offered by the Company
to its customers: lease receivables, loan receivables, and financed service contracts and other.
The Company’s internal credit risk ratings of 1 through 4 correspond to investment-grade ratings, while credit risk ratings of 5
and 6 correspond to non-investment grade ratings. Credit risk ratings of 7 and higher correspond to substandard ratings and
constitute a relatively small portion of the Company’s financing receivables.
In circumstances when collectibility is not deemed reasonably assured, the associated revenue is deferred in accordance with
the Company’s revenue recognition policies, and the related allowance for credit loss, if any, is included in deferred revenue.
The Company also records deferred revenue associated with financing receivables when there are remaining performance
obligations, as it does for financed service contracts. Total allowances for credit loss and deferred revenue as of July 27, 2013
and July 28, 2012 were $2,453 million and $2,387 million, respectively, and were associated with financing receivables (net of
unearned income) of $8,292 million and $7,626 million as of their respective period ends. The Company did not modify any
financing receivables during the periods presented.
The following tables present the aging analysis of financing receivables as of July 27, 2013 and July 28, 2012 (in millions):
DAYS PAST DUE (INCLUDES
BILLED AND UNBILLED)
July 27, 2013 31-60 61-90 91+
Total
Past Due Current
Gross
Receivables,
Net of
Unearned
Income
Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Lease receivables ........................ $ 85 $48 $124 $257 $3,250 $3,507 $27 $22
Loan receivables ........................ 6 3 11 20 1,629 1,649 11 9
Financed service contracts and other ....... 75 48 392 515 2,621 3,136 18 11
Total .................................. $166 $99 $527 $792 $7,500 $8,292 $56 $42
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