Accounts Receivable, Net

Accounts receivable, net were as follows:



	December 31,
	2015			2014
Amounts billed or billable	$	2,110		$	2,421
Unbilled amounts	289			318
Allowance for doubtful accounts	(80		)	(87		)
Accounts Receivable, Net	$	2,319		$	2,652

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, 2015 and 2014 were approximately $849 and $945, 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 $61 and $73 at December 31, 2015 and 2014, 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, $660 and $580 remained uncollected as of December 31, 2015 and 2014, respectively. Accounts receivable sales were as follows:



	Year Ended December 31,
	2015		2014			2013
Accounts receivable sales	$	2,467	$	2,906		$	3,401
Deferred proceeds	247		387			486
Loss on sale of accounts receivable	13		15			17
Estimated increase (decrease) to operating cash flows⁽¹⁾	120		(68		)	(55		)

__________


(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,
	2015			2014
Gross receivables	$	4,683		$	5,009
Unearned income	(577		)	(624		)
Subtotal	4,106			4,385
Residual values	—			—
Allowance for doubtful accounts	(118		)	(131		)
Finance Receivables, Net	3,988			4,254
Less: Billed portion of finance receivables, net	97			110
Less: Current portion of finance receivables not billed, net	1,315			1,425
Finance Receivables Due After One Year, Net	$	2,576		$	2,719

Contractual maturities of our gross finance receivables as of December 31, 2015 were as follows (including those already billed of $102):



2016		2017		2018		2019		2020		Thereafter		Total
$	1,717	$	1,295	$	922	$	530	$	201	$	18	$	4,683

Sale of Finance Receivables

In 2013 and 2012, we transferred our entire interest in certain groups of lease finance receivables to third-party entities for cash proceeds and beneficial interests. The transfers were accounted for as sales with derecognition of the associated lease receivables. There have been no transfers or sales of finance receivables since 2013. We continue to service the sold receivables and record servicing fee income over the expected life of the associated receivables. The following is a summary of our prior sales activity:



	Year Ended December 31,
	2013		2012
Net carrying value (NCV) sold	$	676	$	682
Allowance included in NCV	17		18
Cash proceeds received	635		630
Beneficial interests received	86		101

The principal value of the finance receivables derecognized from our balance sheet was $238 and $549 at December 31, 2015 and 2014, respectively (sales value of approximately $256 and $596, respectively).

Summary Finance Receivable Sales

The lease portfolios transferred and sold were all from our Document Technology segment and the gains on these sales were reported in Financing revenues within the Document Technology segment. 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 which were $38 and $77 at December 31, 2015 and 2014, respectively, and are included in "Other current assets" and "Other long-term assets" in the accompanying Consolidated Balance Sheets. Beneficial interests of $30 and $64 at December 31, 2015 and 2014, respectively, are held by the bankruptcy-remote subsidiaries and therefore are not available to satisfy any of our creditor obligations. We 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.

The net impact from the sales of finance receivables on operating cash flows is summarized below:




	2015			2014			2013			2012
Net cash received for sales of finance receivables⁽¹⁾	$	—		$	—		$	631		$	625
Impact from prior sales of finance receivables⁽²⁾	(342		)	(527		)	(392		)	(45		)
Collections on beneficial interests	56			94			58			—
Estimated (Decrease) Increase to Operating Cash Flows	$	(286	)	$	(433	)	$	297		$	580

____________


(1)	Net of beneficial interest, fees and expenses.


(2)	Represents cash that would have been collected if we had not sold finance receivables.

Finance Receivables - Allowance for Credit Losses and Credit Quality

Our finance receivable portfolios are primarily in the U.S., Canada and Europe. We generally establish customer credit limits and estimate the allowance for credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer's credit quality and we 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 the U.S. reflecting the effects of improved collections during 2015 and 2014 as well as the lower balance of finance receivables primarily due to sales in 2013 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 and within the countries. Charge-offs in Europe were $17 in 2015 as compared to $29 in the prior year, reflecting a significant improvement from the credit issues that began back in 2011. Loss rates peaked in 2011 as a result of the European economic challenges particularly for 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:



Allowance for Credit Losses:	United States			Canada			Europe			Other⁽³⁾			Total
Balance at December 31, 2013	$	45		$	22		$	81		$	6		$	154
Provision	—			9			15			9			33
Charge-offs	(5		)	(14		)	(29		)	(3		)	(51		)
Recoveries and other⁽¹⁾	1			3			(9		)	—			(5		)
Balance at December 31, 2014	41			20			58			12			131
Provision	5			6			10			7			28
Charge-offs	(5		)	(10		)	(17		)	(4		)	(36		)
Recoveries and other⁽¹⁾	1			1			(6		)	(1		)	(5		)
Balance at December 31, 2015	$	42		$	17		$	45		$	14		$	118
Finance Receivables Collectively Evaluated for Impairment:
December 31, 2014⁽²⁾	$	1,728		$	424		$	1,835		$	398		$	4,385
December 31, 2015⁽²⁾	$	1,731		$	365		$	1,509		$	501		$	4,106

__________


(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 the allowance for credit losses of $118 and $131 at December 31, 2015 and 2014, 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, 2015								December 31, 2014
	Investment Grade		Non-investment Grade		Sub-standard		Total Finance Receivables		Investment Grade		Non-investment Grade		Sub-standard		Total Finance Receivables
Finance and other services	$	191	$	184	$	58	$	433	$	195	$	159	$	55	$	409
Government and education	536		13		4		553		589		13		3		605
Graphic arts	145		86		119		350		148		79		90		317
Industrial	84		44		18		146		92		41		18		151
Healthcare	83		24		13		120		84		26		14		124
Other	52		48		29		129		55		38		29		122
Total United States	1,091		399		241		1,731		1,163		356		209		1,728
Finance and other services	55		35		9		99		54		31		12		97
Government and education	59		7		2		68		76		8		2		86
Graphic arts	45		35		21		101		58		49		36		143
Industrial	23		12		3		38		24		13		4		41
Other	33		23		3		59		34		19		4		57
Total Canada⁽¹⁾	215		112		38		365		246		120		58		424
France	203		207		101		511		253		234		129		616
U.K/Ireland	235		91		3		329		255		101		6		362
Central⁽²⁾	206		186		25		417		230		278		30		538
Southern⁽³⁾	36		138		17		191		60		148		36		244
Nordic⁽⁴⁾	24		35		2		61		25		49		1		75
Total Europe	704		657		148		1,509		823		810		202		1,835
Other	165		257		79		501		195		163		40		398
Total	$	2,175	$	1,425	$	506	$	4,106	$	2,427	$	1,449	$	509	$	4,385

__________


(1)	Historically, the Company had included certain Canadian customers with graphic arts activity in their industry sector. In 2014, these customers were reclassified to Graphic Arts to better reflect their primary business activity.


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


(3)	Italy, Greece, Spain and Portugal.


(4)	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, 2015
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed		Unbilled		Total Finance Receivables		>90 Days and Accruing
Finance and other services	$	7	$	2	$	2	$	11	$	422	$	433	$	14
Government and education	11		1		4		16		537		553		37
Graphic arts	12		2		1		15		335		350		8
Industrial	4		1		1		6		140		146		7
Healthcare	3		1		1		5		115		120		9
Other	2		1		1		4		125		129		7
Total United States	39		8		10		57		1,674		1,731		82
Canada	3		—		—		3		362		365		9
France	—		—		—		—		511		511		25
U.K./Ireland	1		—		—		1		328		329		1
Central⁽¹⁾	3		1		1		5		412		417		7
Southern⁽²⁾	8		2		3		13		178		191		10
Nordic⁽³⁾	1		—		—		1		60		61		4
Total Europe	13		3		4		20		1,489		1,509		47
Other	19		2		1		22		479		501		—
Total	$	74	$	13	$	15	$	102	$	4,004	$	4,106	$	138



	December 31, 2014
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed		Unbilled		Total Finance Receivables		>90 Days and Accruing
Finance and other services	$	7	$	2	$	1	$	10	$	399	$	409	$	13
Government and education	14		4		3		21		584		605		25
Graphic arts	12		1		1		14		303		317		6
Industrial	4		1		1		6		145		151		9
Healthcare	3		1		—		4		120		124		5
Other	3		1		—		4		118		122		6
Total United States	43		10		6		59		1,669		1,728		64
Canada	9		2		1		12		412		424		17
France	—		1		2		3		613		616		35
U.K./Ireland	1		—		—		1		361		362		1
Central⁽¹⁾	2		2		1		5		533		538		15
Southern⁽²⁾	14		4		4		22		222		244		17
Nordic⁽³⁾	1		—		—		1		74		75		2
Total Europe	18		7		7		32		1,803		1,835		70
Other	13		1		—		14		384		398		—
Total	$	83	$	20	$	14	$	117	$	4,268	$	4,385	$	151

___________


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


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.