Receivables, Net

Accounts Receivable

Accounts receivable, net were as follows:



	December 31,
	2011			2010
Amounts billed or billable	$	2,307		$	2,491
Unbilled amounts	395			447
Allowance for doubtful accounts	(102		)	(112		)
Accounts Receivable, net	$	2,600		$	2,826

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. 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, 2011 and 2010 were approximately $963 and $1,066, respectively.

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 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. These receivables are included in the caption “Other current assets” in the accompanying Consolidated Balance Sheets and were $97 and $90 at December 31, 2011 and December 31, 2010, respectively. Of the accounts receivables sold and derecognized from our Balance Sheet, $815 and $684 remained uncollected as of December 31, 2011 and 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 receivable sales were as follows:



	Year Ended December 31,
	2011		2010		2009
Accounts receivable sales	$	3,218	$	2,374	$	1,566
Deferred proceeds	386		307		—
Fees associated with sales	20		15		13
Estimated increase to operating cash flows⁽¹⁾	133		106		309

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(1)	Represents the difference between current and prior year-end 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

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,
	2011			2010
Gross receivables	$	7,583		$	7,914
Unearned income	(1,027		)	(1,093		)
Subtotal	6,556			6,821
Residual values	7			11
Allowance for doubtful accounts	(201		)	(212		)
Finance receivables, net	6,362			6,620
Less: Billed portion of finance receivables, net	166			198
Less: Current portion of finance receivables not billed, net	2,165			2,287
Finance Receivables Due After One Year, net	$	4,031		$	4,135

Contractual maturities of our gross finance receivables as of December 31, 2011 were as follows (including those already billed of $166):



2012		2013		2014		2015		2016		Thereafter		Total
$	2,832	$	2,073	$	1,469	$	859	$	315	$	35	$	7,583

Our finance receivable portfolios are primarily in the US, 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 improving economic conditions in those countries during 2011 and now are more comparable to pre-2008 rates. 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. However, although charge-offs in Europe were flat in 2011 as compared to 2010, loss rates increased in 2011 reflecting the economic challenges currently facing Europe particularly for those countries in the southern region. We expect 2012 loss rates to continue to be elevated within Europe as compared to prior years because of the on-going economic challenges in this 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, 2009	$	99		$	33		$	87		$	3		$	222
Provision	47			22			59			—			128
Charge-offs	(58		)	(23		)	(59		)	—			(140		)
Recoveries and other⁽¹⁾	3			5			(6		)	—			2
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 December 31, 2011	$	75		$	33		$	91		$	2		$	201
Finance Receivables Collectively Evaluated for Impairment:
December 31, 2010⁽²⁾	$	3,177		$	872		$	2,706		$	66		$	6,821
December 31, 2011⁽²⁾	$	2,993		$	825		$	2,630		$	108		$	6,556

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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 $7 and $11, and the allowance for credit losses of $201 and $212 at December 31, 2011 and 2010, 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 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:



	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

	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 receivables portfolio is based upon the number of days an invoice is past due. Receivables that were 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 our our billed finance receivables is as follows:



	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

	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

_____________________________


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


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.