Accounts Receivable, Net

Accounts receivable, net were as follows:



	December 31,
	2012			2011
Amounts billed or billable	$	2,639		$	2,307
Unbilled amounts	335			395
Allowance for doubtful accounts	(108		)	(102		)
Accounts Receivable, Net	$	2,866		$	2,600

Unbilled amounts include amounts associated with percentage-of-completion accounting and other earned revenues not currently billable due to contractual provisions. Amounts to be invoiced in the subsequent month for current services provided are included in amounts billable, and at December 31, 2012 and 2011 were approximately $1,049 and $963, respectively.

We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for uncollectible accounts receivables is determined principally on the basis of past collection experience as well as consideration of current economic conditions and changes in our customer collection trends.

Accounts Receivable Sales Arrangements

Accounts receivable sales arrangements are utilized in the normal course of business as part of our cash and liquidity management. We have facilities in the U.S., Canada and several countries in Europe that enable us to sell certain accounts receivable without recourse to third-parties. The accounts receivables sold are generally short-term trade receivables with payment due dates of less than 60 days.

All of our arrangements involve the sale of our entire interest in groups of accounts receivable for cash. In most instances a portion of the sales proceeds are held back by the purchaser and payment is deferred until collection of the related receivables sold. Such holdbacks are not considered legal securities nor are they certificated. We report collections on such receivables as operating cash flows in the Consolidated Statements of Cash Flows because such receivables are the result of an operating activity and the associated interest rate risk is de minimis due to their short-term nature. Our risk of loss following the sales of accounts receivable is limited to the outstanding deferred purchase price receivable. These receivables are included in the caption “Other current assets” in the accompanying Consolidated Balance Sheets and were $116 and $97 at December 31, 2012 and 2011, respectively.

Under most of the agreements, we continue to service the sold accounts receivable. When applicable, a servicing liability is recorded for the estimated fair value of the servicing. The amounts associated with the servicing liability were not material.

Of the accounts receivables sold and derecognized from our balance sheet, $766 and $815 remained uncollected as of December 31, 2012 and 2011, respectively. Accounts receivable sales were as follows:



	Year Ended December 31,
	2012			2011		2010
Accounts receivable sales	$	3,699		$	3,218	$	2,374
Deferred proceeds	639			386		307
Loss on sale of accounts receivables	21			20		15
Estimated (decrease) increase to operating cash flows⁽¹⁾	(78		)	133		106

_____________________________


(1)	Represents the difference between current and prior year fourth quarter receivable sales adjusted for the effects of: (i) the deferred proceeds, (ii) collections prior to the end of the year and (iii) currency.

Finance Receivables, Net

Finance receivables include sales-type leases, direct financing leases and installment loans arising from the marketing of our equipment. These receivables are typically collateralized by a security interest in the underlying assets. Finance receivables, net were as follows:



	December 31,
	2012			2011
Gross receivables	$	6,290		$	7,583
Unearned income	(809		)	(1,027		)
Subtotal	5,481			6,556
Residual values	2			7
Allowance for doubtful accounts	(170		)	(201		)
Finance Receivables, Net	5,313			6,362
Less: Billed portion of finance receivables, net	152			166
Less: Current portion of finance receivables not billed, net	1,836			2,165
Finance Receivables Due After One Year, Net	$	3,325		$	4,031

Contractual maturities of our gross finance receivables as of December 31, 2012 were as follows (including those already billed of $152):



2013		2014		2015		2016		2017		Thereafter		Total
$	2,353	$	1,753	$	1,234	$	680	$	242	$	28	$	6,290

Sale of Finance Receivables

In 2012, we sold our entire interest in two separate portfolios of U.S. finance receivables from our Document Technology segment with a combined net carrying value of $682 (net of an allowance of $18) to a third-party financial institution for cash proceeds of $630 and beneficial interests from the purchaser of $101. The lease contracts, including associated service and supply elements, were initially sold to wholly-owned consolidated bankruptcy-remote limited purpose subsidiaries which in turn sold the principal and interest portions of such contracts to the third-party financial institution (the “ultimate purchaser”). As of December 31, 2012, the net carrying value of the receivables sold and derecognized from our balance sheet was $647.

A pre-tax gain of $44 was recognized on these sales and is net of fees and expenses of approximately $5. The gain was reported in Finance income in Document Technology segment revenues. We continue to service the sold receivables for which we receive a 1% servicing fee. We have concluded that the 1% servicing fee (approximately $12 over the expected life of the associated receivables) is adequate compensation and, accordingly, no servicing asset or liability was recorded.

The beneficial interests represent our right to receive future cash flows from the sold receivables which exceed the ultimate purchaser's initial investment and associated return on that investment as well as the servicing fee. The beneficial interests were initially recognized at an estimate of fair value based on the present value of the expected future cash flows. The present value of the expected future cash flows was calculated using management's best estimate of key assumptions including credit losses, prepayment rates and an appropriate risk adjusted discount rate (all unobservable Level 3 inputs) for which we utilized annualized rates of approximately 2.1%, 9.3% and 10.0%, respectively. These assumptions are supported by both our historical experience and anticipated trends relative to the particular portfolios of receivables sold. However, to assess the sensitivity on the fair value of the beneficial interests, we adjusted the credit loss rate, prepayment rate and discount rate assumptions individually by 10% and 20% while holding the other assumptions constant. Although the effect of multiple assumption changes was not considered in this analysis, a 10% or 20% adverse variation in any one of these three individual assumptions would each decrease the recorded beneficial interests by approximately $4 or less.

The ultimate purchaser has no recourse to our other assets for the failure of customers to pay principal and interest when due beyond our beneficial interests of which $35 and $68 is included in “Other current assets” and “Other long-term assets”, respectively, in the accompanying Consolidated Balance Sheets at December 31, 2012. The beneficial interests are held by the bankruptcy-remote subsidiaries and therefore are not available to satisfy any of our creditor obligations. We will report collections on the beneficial interests as operating cash flows in the Consolidated Statements of Cash Flows because such beneficial interests are the result of an operating activity and the associated interest rate risk is de minimis considering their weighted average lives of less than 2 years.

Allowance for Credit Losses and Credit Quality

Our finance receivable portfolios are primarily in the U.S., Canada and Western Europe. We generally establish customer credit limits and estimate the allowance for credit losses on a country or geographic basis. We establish credit limits based upon an initial evaluation of the customer's credit quality and adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality.

The allowance for doubtful accounts and provision for credit losses represents an estimate of the losses expected to be incurred from the Company's finance receivable portfolio. The level of the allowance is determined on a collective basis by applying projected loss rates to our different portfolios by country, which represent our portfolio segments. This is the level at which we develop and document our methodology to determine the allowance for credit losses. This loss rate is primarily based upon historical loss experience adjusted for judgments about the probable effects of relevant observable data including current economic conditions as well as delinquency trends, resolution rates, the aging of receivables, credit quality indicators and the financial health of specific customer classes or groups. The allowance for doubtful finance receivables is inherently more difficult to estimate than the allowance for trade accounts receivable because the underlying lease portfolio has an average maturity, at any time, of approximately two to three years and contains past due billed amounts, as well as unbilled amounts. We consider all available information in our quarterly assessments of the adequacy of the allowance for doubtful accounts. The identification of account-specific exposure is not a significant factor in establishing the allowance for doubtful finance receivables. Our policy and methodology used to establish our allowance for doubtful accounts has been consistently applied over all periods presented.

Since our allowance for doubtful finance receivables is determined by country, the risk characteristics in our finance receivable portfolio segments will generally be consistent with the risk factors associated with the economies of those countries/regions. Loss rates declined in both the U.S. and Canada reflecting the effects of improved collections in those countries during 2011 and 2012 . Since Europe is comprised of various countries and regional economies, the risk profile within our European portfolio segment is somewhat more diversified due to the varying economic conditions among the countries. Charge-offs in Europe were flat in 2012 as compared to the prior years reflecting a stabilization of the credit issues noted in 2011. Loss rates peaked in 2011 as a result of the European economic challenges particularly for those countries in the southern region.

The following table is a rollforward of the allowance for doubtful finance receivables as well as the related investment in finance receivables:



	United States			Canada			Europe			Other⁽³⁾			Total
Allowance for Credit Losses:
Balance at December 31, 2010	$	91		$	37		$	81		$	3		$	212
Provision	15			11			74			—			100
Charge-offs	(31		)	(17		)	(59		)	(1		)	(108		)
Recoveries and other⁽¹⁾	—			2			(5		)	—			(3		)
Balance at December 31, 2011	75			33			91			2			201
Provision	11			9			52			3			75
Charge-offs	(21		)	(15		)	(59		)	(2		)	(97		)
Recoveries and other⁽¹⁾	3			4			1			1			9
Sale of finance receivables	(18		)	—			—			—			(18		)
Balance at December 31, 2012	$	50		$	31		$	85		$	4		$	170
Finance Receivables Collectively Evaluated for Impairment:
December 31, 2011⁽²⁾	$	2,993		$	825		$	2,630		$	108		$	6,556
December 31, 2012⁽²⁾	$	2,012		$	801		$	2,474		$	194		$	5,481

_____________________________


(1)	Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.


(2)	Total Finance receivables exclude residual values of $2 and $7 and the allowance for credit losses of $170 and $201 at December 31, 2012 and 2011, respectively.


(3)	Includes developing market countries and smaller units.

In the U.S. and Canada, customers are further evaluated or segregated by class based on industry sector. The primary customer classes are Finance & Other Services, Government & Education; Graphic Arts; Industrial; Healthcare and Other. In Europe, customers are further grouped by class based on the country or region of the customer. The primary customer classes include the U.K./Ireland, France and the following European regions - Central, Nordic and Southern. These groupings or classes are used to understand the nature and extent of our exposure to credit risk arising from finance receivables.

We evaluate our customers based on the following credit quality indicators:

•

Investment grade: This rating includes accounts with excellent to good business credit, asset quality and the capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. The rating generally equates to a Standard & Poors ("S&P") rating of BBB- or better. Loss rates in this category are normally minimal at less than 1%.


•	Non-investment grade: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. This rating generally equates to a BB S&P rating. Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by

the fact that our leases are fairly well dispersed across a large and diverse customer base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases. Loss rates in this category are generally in the range of 2% to 4%.

•

Substandard: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include customers who were downgraded during the term of the lease from investment and non-investment grade evaluation when the lease was originated. Accordingly there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category are around 10%.

Credit quality indicators are updated at least annually, and the credit quality of any given customer can change during the life of the portfolio. Details about our finance receivables portfolio based on industry and credit quality indicators are as follows:



	December 31, 2012
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and other services	$	252	$	147	$	59	$	458
Government and Education	750		15		4		769
Graphic arts	92		90		137		319
Industrial	115		31		17		163
Healthcare	109		37		14		160
Other	70		39		34		143
Total United States	1,388		359		265		2,012
Finance and other services	151		116		40		307
Government and education	117		10		2		129
Graphic arts	37		34		30		101
Industrial	66		40		29		135
Other	75		43		11		129
Total Canada	446		243		112		801
France	274		294		134		702
U.K./Ireland	215		155		50		420
Central⁽¹⁾	315		445		56		816
Southern⁽²⁾	139		230		73		442
Nordics⁽³⁾	49		36		9		94
Total Europe	992		1,160		322		2,474
Other	148		39		7		194
Total	$	2,974	$	1,801	$	706	$	5,481

____________________________


(1)	Switzerland, Germany, Austria, Belgium and Holland.


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.



	December 31, 2011
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and other services	$	349	$	380	$	160	$	889
Government and education	821		20		4		845
Graphic arts	126		200		172		498
Industrial	180		83		32		295
Healthcare	130		42		28		200
Other	97		93		76		266
Total United States	1,703		818		472		2,993
Finance and other services	153		118		51		322
Government and education	121		9		4		134
Graphic arts	36		39		35		110
Industrial	56		41		34		131
Other	74		42		12		128
Total Canada	440		249		136		825
France	246		354		92		692
U.K./Ireland	201		162		54		417
Central⁽¹⁾	330		494		57		881
Southern⁽²⁾	219		256		63		538
Nordics⁽³⁾	60		39		3		102
Total Europe	1,056		1,305		269		2,630
Other	75		26		7		108
Total	$	3,274	$	2,398	$	884	$	6,556

____________________________


(1)	Switzerland, Germany, Austria, Belgium and Holland.


(2)	Italy, Greece, Spain and Portugal.

Sweden, Norway, Denmark and Finland.

The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed and is generally based on individual credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries, if any, are credited to the allowance.

We generally continue to maintain equipment on lease and provide services to customers that have invoices for finance receivables that are 90 days or more past due and, as a result of the bundled nature of billings, we also continue to accrue interest on those receivables. However, interest revenue for such billings is only recognized if collectability is deemed reasonably assured. The aging of our billed finance receivables is as follows:



	December 31, 2012
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed Finance Receivables		Unbilled Finance Receivables		Total Finance Receivables		Finance Receivables >90 Days and Accruing
Finance and other services	$	12	$	3	$	2	$	17	$	441	$	458	$	18
Government and education	21		5		3		29		740		769		42
Graphic arts	16		1		1		18		301		319		12
Industrial	5		2		1		8		155		163		6
Healthcare	6		2		1		9		151		160		9
Other	5		1		1		7		136		143		6
Total United States	65		14		9		88		1,924		2,012		93
Canada	2		3		2		7		794		801		30
France	—		5		1		6		696		702		22
U.K./Ireland	2		—		2		4		416		420		2
Central⁽¹⁾	3		2		4		9		807		816		30
Southern⁽²⁾	20		8		14		42		400		442		72
Nordics⁽³⁾	1		—		—		1		93		94		—
Total Europe	26		15		21		62		2,412		2,474		126
Other	2		1		—		3		191		194		—
Total	$	95	$	33	$	32	$	160	$	5,321	$	5,481	$	249

	December 31, 2011
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed Finance Receivables		Unbilled Finance Receivables		Total Finance Receivables		Finance Receivables >90 Days and Accruing
Finance and other services	$	18	$	4	$	1	$	23	$	866	$	889	$	15
Government and education	21		5		2		28		817		845		29
Graphic arts	16		2		1		19		479		498		7
Industrial	7		2		1		10		285		295		6
Healthcare	5		2		—		7		193		200		5
Other	8		1		—		9		257		266		4
Total United States	75		16		5		96		2,897		2,993		66
Canada	3		2		1		6		819		825		27
France	1		1		1		3		689		692		16
U.K./Ireland	3		2		3		8		409		417		4
Central⁽¹⁾	7		2		3		12		869		881		46
Southern⁽²⁾	31		4		13		48		490		538		82
Nordics⁽³⁾	1		—		—		1		101		102		—
Total Europe	43		9		20		72		2,558		2,630		148
Other	2		1		—		3		105		108		—
Total	$	123	$	28	$	26	$	177	$	6,379	$	6,556	$	241

_____________________________


(1)	Switzerland, Germany, Austria, Belgium and Holland.


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.