Invacare 2012 Annual Report Download - page 93

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
For purposes of granting or extending credit, the company utilizes a scoring model to generate a composite
score that considers each customer’s consumer credit score and or D&B credit rating, payment history, security
collateral and time in business. Additional analysis is performed for customers desiring credit greater than
$250,000 which includes a detailed review of the customer’s financials as well as consideration of other factors
such as exposure to changing reimbursement laws.
Interest income is recognized on installment receivables based on the terms of the installment agreements.
Installment accounts are monitored and if a customer defaults on payments and is moved to collection, interest
income is no longer recognized. Subsequent payments received once an account is put on non-accrual status are
generally first applied to the principal balance and then to the interest. Accruing of interest on collection accounts
would only be restarted if the account became current again. All installment accounts are accounted for using the
same methodology regardless of the duration of the installment agreements. When an account is placed in
collection status, the company goes through a legal process of adjudication which typically approximates 18
months. Any write-offs are made after the legal process has been completed. The company has not made any
changes to either its accounting policies or methodology to estimation allowances for doubtful accounts in the
last twelve months.
Installment receivables as of December 31, 2012 and 2011 consist of the following (in thousands):
2012 2011
Current
Long-
Term Total Current
Long-
Term Total
Installment
receivables ........... $ 4,982 $ 1,506 $ 6,488 $ 8,990 $ 2,931 $ 11,921
Less:
Unearned interest ...... (71) — (71) (171) — (171)
4,911 1,506 6,417 8,819 2,931 11,750
Allowance for doubtful
accounts ............. (2,723) (1,100) (3,823) (2,148) (2,125) (4,273)
$ 2,188 $ 406 $ 2,594 $ 6,671 $ 806 $ 7,477
Installment receivables purchased from DLL during the twelve months ended December 31, 2012 increased
the gross installment receivables balance by $2,609,000 during the year compared to $3,806,000 in 2011. No
sales of installment receivables were made by the company during the year.
The movement in the installment receivables allowance for doubtful accounts was as follows (in thousands):
2012 2011
Balance as of January 1 ........................................... $ 4,273 $ 4,841
Current period provision ........................................... 458 1,215
Direct write-offs charged against the allowance ........................ (908) (1,783)
Balance as of December 31 ........................................ $ 3,823 $ 4,273
FS-13