Tesla 2016 Annual Report Download - page 57

AccountsReceivableandAllowanceforDoubtfulAccounts
Accountsreceivableprimarilyincludeamountsrelatedtosalesofpowertrainsystems,receivablesfromfinancialinstitutionsandleasingcompaniesoffering
variousfinancingproductstoourcustomers,regulatorycreditstootherautomotivemanufacturers,andfrommaintenanceservicesonvehiclesownedbyleasing
companies.Weprovideanallowanceagainstamountsreceivabletotheamountwereasonablybelievewillbecollected.
Wetypicallydonotcarryaccountsreceivablerelatedtoourvehicleandrelatedsalesascustomerpaymentsareduepriortovehicledelivery,exceptforthe
amountsduefromcommercialfinancialinstitutionsforapprovedfinancingarrangementsbetweenourcustomersandthefinancialinstitutions.
ConcentrationofRisk
CreditRisk
Financialinstrumentsthatpotentiallysubjectustoaconcentrationofcreditriskconsistofcash,cashequivalents,restrictedcashandaccountsreceivable.
OurcashequivalentsareprimarilyinvestedinmoneymarketfundswithhighcreditqualityfinancialinstitutionsintheUnitedStates.Attimes,thesedepositsand
securitiesmaybeinexcessofinsuredlimits.Weinvestcashnotrequiredforuseinoperationsinhighcreditqualitysecuritiesbasedonourinvestmentpolicy.Our
investmentpolicyprovidesguidelinesandlimitsregardingcreditquality,investmentconcentration,investmenttype,andmaturitythatwebelievewillprovide
liquiditywhilereducingriskoflossofcapital.Ourinvestmentsarecurrentlyofashort-termnatureandincludecommercialpaperandU.S.treasurybills.
AsofDecember31,2015and2014,ouraccountsreceivablewerederivedprimarilyfromsalesofregulatorycredits,aswellasfundstobereceivedfrom
financialinstitutionsandleasingcompaniesofferingvariousfinancingproductstoourcustomers,thedevelopmentandsalesofpowertraincomponentsandsystems
toOEMs.Accountsreceivablealsoincludedamountstobereceivedfromcommercialfinancialinstitutionsforapprovedfinancingarrangementsbetweenour
customersandfinancialinstitutions.
Thefollowingsummarizestheaccountsreceivablefromourcustomersinexcessof10%ofourtotalaccountsreceivable:

 December 31, December 31,
2015 2014
CustomerA   15%  7%
CustomerB   8%  14%
CustomerC   6%  13%
CustomerD   —   19%

SupplyRisk
Althoughtheremaybemultiplesuppliersavailable,manyofthecomponentsusedinourvehiclesarepurchasedbyusfromasinglesource.Ifthesesingle
sourcesuppliersfailtosatisfyourrequirementsonatimelybasisatcompetitiveprices,wecouldsuffermanufacturingdelays,apossiblelossofrevenues,orincur
highercostofsales,anyofwhichcouldadverselyaffectouroperatingresults.
InventoriesandInventoryValuation
Inventoriesarestatedatthelowerofcostormarket.Costiscomputedusingstandardcost,whichapproximatesactualcostonafirst-in,first-outbasis.We
recordinventorywrite-downsforexcessorobsoleteinventoriesbasedoncurrentandfuturedemandforecasts.Ifourinventoryonhandisinexcessofourfuture
demandforecast,theexcessamountsarewrittenoff.
Wealsoreviewinventorytodeterminewhetheritscarryingvalueexceedsthenetamountrealizableupontheultimatesaleoftheinventory.Thisrequires
ustodeterminetheestimatedsellingpriceofourvehicleslesstheestimatedcosttoconvertinventoryonhandintoafinishedproduct.Onceinventoryiswritten-
down,anew,lower-costbasisforthatinventoryisestablishedandsubsequentchangesinfactsandcircumstancesdonotresultintherestorationorincreaseinthat
newlyestablishedcostbasis.
Shouldourestimatesoffuturesellingpricesorproductioncostschange,additionalandpotentiallymaterialincreasestothisreservemayberequired.A
smallchangeinourestimatesmayresultinamaterialchangetoourreportedfinancialresults.
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