3. Provision for credit losses:

The Company’s provision for credit losses are as follows (in thousands):


	Accounts Receivable Allowance for Doubtful Accounts				Valuation Adjustments on Financing Receivables		Total Allowance for Credit Losses
	Finance Leases		Operating Leases		Finance Leases
Balance December 31, 2009	$	—	$	4	$	—	$	4
Provision		—		4		—		4
Balance December 31, 2010		—		8		—		8
Provision		—		—		—		—
Balance June 30, 2011	$	—	$	8	$	—	$	8

Accounts Receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company.

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received. Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease payments outstanding less than 90 days. Based upon management’s judgment, such leases may be placed in non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.

Financing Receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on direct financing leases.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly.

As of June 30, 2011 and December 31, 2010, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded net investment in financing receivables were as follows (in thousands):


June 30, 2011	Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—
Financing receivables, net:
Ending balance	$	325	$	325
Ending balance: individually evaluated for impairment	$	325	$	325
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—


December 31, 2010	Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—
Financing receivables, net:
Ending balance	$	381	$	381
Ending balance: individually evaluated for impairment	$	381	$	381
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired leases as applicable.

At June 30, 2011 and December 31, 2010, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (in thousands):


	Finance Leases
	June 30, 2011		December 31, 2010
Pass	$	325	$	381
Special mention		—		—
Substandard		—		—
Doubtful		—		—
Total	$	325	$	381

At June 30, 2011 and December 31, 2010, net investment in financing receivables is aged as follows (in thousands):


June 30, 2011	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Finance leases	$	92	$	—	$	—	$	92	$	233	$	325	$	—


December 31, 2010	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Finance leases	$	94	$	—	$	—	$	94	$	287	$	381	$	—

There were no impaired financing receivables at both June 30, 2011 and December 31, 2010. Likewise, there were no financing receivables placed in non-accrual status as of June 30, 2011 and December 31, 2010.