Tesla 2016 Annual Report Download - page 36

Vehiclesalestocustomerswitharesidualvalueguarantee
Weofferresalevalueguaranteesorsimilarbuy-backtermstoallcustomerswhopurchasevehiclesandwhofinancetheirvehiclethroughoneofour
specifiedbankingpartners.Underthisprogram,customershavetheoptionofsellingtheirvehiclebacktousduringtheguaranteeperiodforapre-determined
resalevalue.Guaranteeperiodsgenerallyrangefrom36to39months.Althoughwereceivefullpaymentforthevehiclesalespriceatthetimeofdelivery,weare
requiredtoaccountfortheseasoperatingleases.Theamountofsaleproceedsequaltotheresidualvalueguaranteeisdeferreduntiltheguaranteeexpiresoris
exercised.Theremainingsaleproceedsaredeferredandrecognizedonastraightlinebasisoverthestatedguaranteeperiod.Theguaranteeperiodexpiresatthe
earlieroftheendoftheguaranteeperiodorthepay-offoftheinitialloan.WecapitalizethecostofthesevehiclestoleasedvehiclesonourConsolidatedBalance
Sheetsanddepreciatetheirvalue,lesssalvagevalue,tocostofautomotiverevenueoverthesameperiod.
Incaseswhencustomerretainsownershipofthevehicleattheendoftheguaranteeperiod,theresalevalueguaranteeliabilityandanyremainingdeferred
revenuebalancesrelatedtothevehiclearesettledtoautomotiverevenueandthenetbookvalueoftheleasedvehicleisexpensedtocostsofautomotive
revenue.Incaseswhencustomersreturnthevehiclebacktousduringtheguaranteeperiod,wepurchasethevehiclefromthecustomeratanamountequaltothe
resalevalueguaranteeandsettleanyremainingdeferredbalancestoautomotiverevenueandwereclassifythenetbookvalueofthevehicleonourbalancesheetto
pre-ownedvehicleinventory.AsofDecember31,2015,$136.8millionofguaranteesareexercisablebycustomerswithinthenexttwelvemonths.
Vehiclesalestoleasingpartnerswitharesidualvalueguarantee
Inthefourthquarterof2014,wealsobeganofferingresidualvalueguaranteesinconnectionwithautomobilesalestocertainbankleasingpartners.Aswe
haveguaranteedthevalueofthesevehiclesandasthevehiclesareleasedtoend-customers,weaccountforthesetransactionsasinterestbearingcollateralized
borrowingsasrequiredunderASC840-Leases.Underthisprogram,cashisreceivedforthefullpriceofthevehicleandisrecordedwithinresalevalueguarantee
forthelong-termportionanddeferredrevenueforthecurrentportion.Weaccretethedeferredrevenueamounttoautomotiverevenueonastraightlinebasisover
theguaranteeperiodandaccrueinterestexpensebasedonourborrowingrate.WecapitalizevehiclesunderthisprogramtoleasedvehiclesonourConsolidated
BalanceSheetsandrecorddepreciationfromthesevehiclestocostofautomotiverevenuesduringtheperiodthevehicleisunderaleasearrangement.Cash
receivedforthesevehicles,netofrevenuerecognizedduringtheperiod,isclassifiedascollateralizedleaseborrowingswithincashflowsfromfinancingactivities
inourConsolidatedStatementsofCashFlows.
Attheendoftheleaseterm,wesettleourliabilityincashbyeitherpurchasingthevehiclefromtheleasingpartnerfortheresidualvalueguaranteeamount,
orpayingashortfalltotheguaranteeamounttheleasingpartnermayrealizeonthesaleofthevehicle.Anyremainingbalanceswithindeferredrevenueandresale
valueguaranteewillbesettledtoautomotiverevenue.Incaseswherethebankretainsownershipofthevehicleaftertheendofourguaranteeperiod,weexpense
thenetvalueoftheleasedvehicletocostsofautomotiverevenue.Themaximumcashwecouldberequiredtopayunderthisprogram,assumingwerepurchaseof
allvehiclesunderthisprogramis$348.2millionatDecember31,2015.
AsofDecember31,2015andDecember31,2014,wehad$527.5millionand$16.7millionofsuchborrowingsrecordedintheresalevalueguarantee
liabilityand$120.5millionand$3.9millionrecordedindeferredrevenueliability.
Atleastannually,weassesstheestimatedmarketvaluesofvehiclesunderourresalevalueguaranteeprogramtodetermineifwehavesustainedalosson
anyofthesecontracts.Asweaccumulatemoredatarelatedtotheresalevaluesofourvehiclesorasmarketconditionschange,theremaybesignificantchangesto
theirestimatedvalues.
DirectVehicleLeasingProgram
WeofferavehicleleasingprogramincertainlocationsintheUnitedStates,CanadaandGermany.Qualifyingcustomersarepermittedtoleaseavehicle
directlyfromTeslafor36or48months.Attheendoftheleaseterm,customershavetheoptionofeitherreturningthevehicletousorpurchasingifforapre-
determinedresidualvalue.Weaccountfortheseleasingtransactionsasoperatingleasesandrecognizeleasingrevenuesoverthecontractualtermandrecordthe
depreciationofthesevehiclestocostofautomotiverevenues.AsofDecember31,2015andDecember31,2014,wehaddeferred$25.8millionand$9.4millionof
lease-relatedupfrontpaymentswhichwillberecognizedonastraight-linebasisoverthecontractualtermoftheindividualleases.Leaserevenuesarerecordedin
automotiverevenueandfortheyearendedDecember31,2015andDecember31,2014,werecognized$41.2millionand$4.4million
MaintenanceandServicePlans
Weofferaprepaidmaintenanceprogramforourvehicles,whichincludesplanscoveringmaintenanceforuptoeightyearsorupto100,000miles,provided
theseservicesarepurchasedwithinaspecifiedperiodoftime.Themaintenanceplanscoverannualinspectionsandthereplacementofwearandtearparts,
excludingtiresandthebattery.Paymentscollectedinadvanceoftheperformanceofserviceareinitiallyrecordedindeferredrevenuesontheconsolidatedbalance
sheetsandrecognizedinautomotivesalesaswefulfillourperformanceobligations.
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