4.	FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist of assets that we finance for our customers, which we manage as a portfolio of investments. Equipment financed for our customers is accounted for as investments in direct financing, sales-type or operating leases in accordance with Codification Topic 840, Leases. We also finance third-party software, maintenance, and services for our customers, which are classified as notes receivables. Our notes receivables are interest bearing and are often due over a period that corresponds with the terms of the leased products.

FINANCING RECEIVABLES—NET

Our financing receivables-net consist of the following (in thousands):

December 31, 2018	Notes Receivables			Lease-Related Receivables			Total Financing Receivables

Minimum payments	$	69,898		$	76,825		$	146,723
Estimated unguaranteed residual value (1)		-			13,180			13,180
Initial direct costs, net of amortization (2)		582			392			974
Unearned income		-			(10,228	)		(10,228	)
Reserve for credit losses (3)		(536	)		(509	)		(1,045	)
Total, net	$	69,944		$	79,660		$	149,604
Reported as:
Current	$	53,150		$	40,873		$	94,023
Long-term		16,794			38,787			55,581
Total, net	$	69,944		$	79,660		$	149,604

(1)

Includes estimated unguaranteed residual values of $8,407 thousand for direct financing leases, which have been sold and accounted for as sales.

(2)

Initial direct costs are shown net of amortization of $313 thousand.

(3)

For details on reserve for credit losses, refer to Note 6, “Reserves for Credit Losses.”

March 31, 2018	Notes Receivables			Lease-Related Receivables			Total Financing Receivables

Minimum payments	$	62,992		$	65,943		$	128,935
Estimated unguaranteed residual value (1)		-			11,226			11,226
Initial direct costs, net of amortization (2)		375			334			709
Unearned income		-			(8,251	)		(8,251	)
Reserve for credit losses (3)		(486	)		(640	)		(1,126	)
Total, net	$	62,881		$	68,612		$	131,493
Reported as:
Current	$	39,993		$	29,943		$	69,936
Long-term		22,888			38,669			61,557
Total, net	$	62,881		$	68,612		$	131,493

(1)

Includes estimated unguaranteed residual values of $6,004 thousand for direct financing leases that have been sold and accounted for as sales.

(2)

Initial direct costs are shown net of amortization of $341 thousand.

(3)

For details on reserve for credit losses, refer to Note 6, “Reserves for Credit Losses.”

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as direct financing leases. The components of the operating leases—net are as follows (in thousands):

	December 31, 2018			March 31, 2018

Cost of equipment under operating leases	$	22,451		$	15,683
Accumulated depreciation		(9,974	)		(8,729	)
Investment in operating lease equipment—net (1)	$	12,477		$	6,954

(1)

Includes estimated unguaranteed residual values of $3,133 thousand and $1,921 thousand as of December 31, 2018 and March 31, 2018, respectively.

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as sales or secured borrowings in accordance with Codification Topic 860, Transfers and Servicing. For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of December 31, 2018, and March 31, 2018, we had financing receivables of $68.3 million and $52.0 million, respectively, and operating leases of $8.5 million and $5.3 million, respectively, which were collateral for non-recourse notes payable. See Note 8, “Notes Payable and Credit Facility.”

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During each of the three months ended December 31, 2018 and 2017, we recognized net gains of $2.4 million and $1.2 million, respectively, and total proceeds from these sales were $95.2 million and $32.8 million, respectively. During the nine months ended December 31, 2018 and 2017, we recognized net gains of $5.0 million and $4.6 million, respectively, and total proceeds from these sales were $189.2 million and $166.9 million, respectively.

For certain assignments of financial assets, we retain a servicing obligation. For assignments accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of December 31, 2018, and March 31, 2018, we had deferred revenue of $0.4 million and $0.5 million, respectively, for servicing. In a limited number of such sales, we indemnified the assignee if the lessee elected to terminate the lease early. As of December 31, 2018, our maximum potential future payments related to such guarantees is $0.3 million. We believe the likelihood of making any such payments to be remote.