Receivables, Net

Accounts Receivable Sales Arrangements

We have facilities in the U.S., Canada and several countries in Europe that enable us to sell to third-parties, on an on-going basis, certain accounts receivable without recourse. The accounts receivables sold are generally short-term trade receivables with payment due dates of less than 60 days. The agreements involve the sale of entire groups of accounts receivable for cash. In certain instances a portion of the sales proceeds are held back and deferred until collection of the related receivables by the purchaser. Such holdbacks are not considered legal securities nor are they certificated. We report collections on such receivables as operating cash flows in the Condensed 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 its short-term nature. These receivables are included in the caption “Other current assets” in the accompanying Condensed Consolidated Balance Sheets and were $93 and $90 at September 30, 2011 and December 31, 2010, 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. Accounts receivables sales were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Accounts receivable sales	$	754		$	574		$	2,303		$	1,586
Deferred proceeds	93			97			290			212
Fees associated with sales	5			3			14			10
Estimated decrease to operating cash flows⁽¹⁾	(35		)	(11		)	(29		)	(81		)

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

Finance Receivables – Allowance for Credit Losses and Credit Quality

Finance receivables include sales-type leases, direct financing leases and installment loans. 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. Our policy and methodology used to establish our allowance for doubtful accounts has been consistently applied over all periods presented.

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	7			4			11			—		22
Charge-offs	(10		)	(5		)	(8		)	—		(23		)
Recoveries and other⁽¹⁾	(1		)	2			3			—		4
Balance at March 31, 2011	87			38			87			3		215
Provision	1			3			14			—		18
Charge-offs	(6		)	(5		)	(11		)	—		(22		)
Recoveries and other⁽¹⁾	(1		)	—			(1		)	—		(2		)
Balance at June 30, 2011	81			36			89			3		209
Provision	4			1			18			—		23
Charge-offs	(7		)	(3		)	(19		)	—		(29		)
Recoveries and other⁽¹⁾	1			(1		)	(5		)	—		(5		)
Balance September 30, 2011	$	79		$	33		$	83		$	3	$	198
Finance receivables as of September 30, 2011 collectively evaluated for impairment⁽²⁾	$	2,943		$	793		$	2,714		$	95	$	6,545

Allowance for Credit Losses:
Balance at December 31, 2009	$	99		$	33		$	87		$	3	$	222
Provision	10			6			17			—		33
Charge-offs	(22		)	(6		)	(11		)	—		(39		)
Recoveries and other⁽¹⁾	1			2			(5		)	—		(2		)
Balance at March 31, 2010	88			35			88			3		214
Provision	15			6			12			—		33
Charge-offs	(17		)	(8		)	(19		)	—		(44		)
Recoveries and other⁽¹⁾	—			—			(6		)	—		(6		)
Balance at June 30, 2010	86			33			75			3		197
Provision	13			5			17			—		35
Charge-offs	(9		)	(5		)	(10		)	—		(24		)
Recoveries and other⁽¹⁾	2			2			7			—		11
Balance at September 30, 2010	$	92		$	35		$	89		$	3	$	219
Finance receivables as of September 30, 2010 collectively evaluated for impairment⁽²⁾	$	3,184		$	826		$	2,700		$	58	$	6,768

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(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 $8 and $13, and the allowance for credit losses of $198 and $219 at September 30, 2011 and 2010, respectively.


(3)	Includes developing market countries and smaller units.

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 and 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:



	September 30, 2011
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and Other Services	$	322	$	394	$	162	$	878
Government and Education	806		23		5		834
Graphic Arts	119		203		154		476
Industrial	187		82		34		303
Healthcare	125		43		27		195
Other	90		104		63		257
Total United States	1,649		849		445		2,943
Finance and Other Services	142		114		50		306
Government and Education	119		9		4		132
Graphic Arts	35		38		35		108
Industrial	54		40		32		126
Other	72		39		10		121
Total Canada	422		240		131		793
France	244		372		86		702
U.K./Ireland	193		170		56		419
Central⁽¹⁾	340		508		60		908
Southern⁽²⁾	242		291		48		581
Nordics⁽³⁾	62		38		4		104
Total Europe	1,081		1,379		254		2,714
Other	66		23		6		95
Total	$	3,218	$	2,491	$	836	$	6,545

	December 31, 2010
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and Other Services	$	360	$	401	$	190	$	951
Government and Education	849		21		7		877
Graphic Arts	147		217		156		520
Industrial	206		91		38		335
Healthcare	134		48		32		214
Other	102		109		69		280
Total United States	1,798		887		492		3,177
Finance and Other Services	150		127		56		333



Government and Education	127		12		3		142
Graphic Arts	32		35		48		115
Industrial	57		47		30		134
Other	88		47		13		148
Total Canada	454		268		150		872
France	219		374		82		675
U.K./Ireland	206		164		51		421
Central⁽¹⁾	297		551		65		913
Southern⁽²⁾	263		237		81		581
Nordics⁽³⁾	50		63		3		116
Total Europe	1,035		1,389		282		2,706
Other	33		33		—		66
Total	$	3,320	$	2,577	$	924	$	6,821

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


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.

The aging of our billed finance receivables is based upon the number of days an invoice is past due and is as follows:



	September 30, 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	$	19	$	4	$	1	$	24	$	854	$	878	$	21
Government and Education	22		4		3		29		805		834		35
Graphic Arts	17		2		1		20		456		476		12
Industrial	8		2		1		11		292		303		10
Healthcare	5		2		1		8		187		195		6
Other	7		1		1		9		248		257		12
Total United States	78		15		8		101		2,842		2,943		96
Canada	3		3		1		7		786		793		27
France	2		—		1		3		699		702		18
U.K./Ireland	3		2		3		8		411		419		14
Central⁽¹⁾	7		3		4		14		894		908		45
Southern⁽²⁾	17		12		18		47		534		581		115
Nordics⁽³⁾	1		—		—		1		103		104		—
Total Europe	30		17		26		73		2,641		2,714		192
Other	1		1		—		2		93		95		—
Total	$	112	$	36	$	35	$	183	$	6,362	$	6,545	$	315

	December 31, 2010
	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	$	23	$	5	$	2	$	30	$	921	$	951	$	23
Government and Education	26		6		3		35		842		877		40
Graphic Arts	21		3		1		25		495		520		16
Industrial	11		2		1		14		321		335		10
Healthcare	6		2		1		9		205		214		9
Other	8		2		—		10		270		280		8
Total United States	95		20		8		123		3,054		3,177		106
Canada	3		3		1		7		865		872		28
France	1		1		—		2		673		675		5
U.K./Ireland	4		1		1		6		415		421		7
Central⁽¹⁾	9		2		4		15		898		913		39
Southern⁽²⁾	32		10		15		57		524		581		99
Nordics⁽³⁾	1		—		—		1		115		116		2
Total Europe	47		14		20		81		2,625		2,706		152
Other	2		—		—		2		64		66		—
Total	$	147	$	37	$	29	$	213	$	6,608	$	6,821	$	286

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


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.