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Accounts Receivable, Net
3 Months Ended
Mar. 31, 2022
Receivables [Abstract]  
Accounts Receivable, Net Accounts Receivable, Net
Accounts receivable, net were as follows:
March 31,
2022
December 31,
2021
Invoiced$658 $660 
Accrued(1)
212 216 
Allowance for doubtful accounts(63)(58)
Accounts receivable, net$807 $818 
_____________
(1)Accrued receivables include amounts to be invoiced in the subsequent quarter for current services provided.
The allowance for doubtful accounts was as follows:
20222021
Balance at January 1st
$58 $69 
Provision
Charge-offs(3)(5)
Recoveries and other(1)
(1)
Balance at March 31st
$63 $68 
_____________
(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.

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 receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 7.2% at March 31, 2022 and 6.6% at December 31, 2021. The increase in the allowance is primarily due to an increased provision to cover expected write-offs of receivables in our Russian subsidiary.
Accounts Receivable Sales Arrangements
Accounts receivable sales arrangements are utilized in the normal course of business as part of our cash and liquidity management. The accounts receivable sold are generally short-term trade receivables with payment due dates of less than 60 days. We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse. Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser.
Of the accounts receivable sold and derecognized from our balance sheet, $87 and $102 remained uncollected as of March 31, 2022 and December 31, 2021, respectively.
Accounts receivable sales activity was as follows:
 Three Months Ended
March 31,
 20222021
Accounts receivable sales(1)
$116 $107 
____________
(1)Losses on sales were not material. Customers may also enter into structured-payable arrangements that require us to sell our receivables from that customer to a third-party financial institution, which then makes payments to us to settle the customer's receivable. In these instances, we ensure the sale of the receivables are bankruptcy-remote and the payment made to us is without recourse. The activity associated with these arrangements is not reflected in this disclosure, as payments under these arrangements have not been material and these are customer directed arrangements.
Finance Receivables, Net
Finance receivables include sales-type 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:
 March 31,
2022
December 31,
2021
Gross receivables$3,490 $3,568 
Unearned income(365)(380)
Subtotal3,125 3,188 
Residual values— — 
Allowance for doubtful accounts(120)(118)
Finance receivables, net3,005 3,070 
Less: Billed portion of finance receivables, net89 94 
Less: Current portion of finance receivables not billed, net1,023 1,042 
Finance receivables due after one year, net$1,893 $1,934 
Finance Receivables – Allowance for Credit Losses and Credit Quality
Our finance receivable portfolios are primarily in the U.S., Canada and EMEA. 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 credit losses is principally determined based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.8% at March 31, 2022 and 3.7% at December 31, 2021. In determining the level of reserve required, we critically assessed current and forecasted economic conditions in light of the COVID-19 pandemic to ensure we objectively included those expected impacts in the determination of our reserve. Our assessment also included a review of current portfolio credit metrics and the level of write-offs incurred over the past year of the COVID-19 pandemic.
Our allowance for doubtful finance receivables is effectively determined by geography. The risk characteristics in our finance receivable portfolio segments are generally consistent with the risk factors associated with the economies of the countries/regions included in those geographies. Since EMEA is comprised of various countries and regional
economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within the countries.
Although actual finance receivable write-offs incurred to date continue to lag expectations, we believe our current reserve position remains sufficient to cover expected future losses that may result from current and future macro-economic conditions. We continue to believe that uncertainties remain as economies continue to recover from the impacts of the COVID-19 pandemic including the cessation of government support as well as labor, interest rate and inflation risks and the potential for higher taxes. In addition, there is also considerable uncertainty regarding the impact the Russia/Ukraine war and related global sanctions will have on the macro or global economy. As a result of these uncertainties, our reserves as a percent of receivables have remained elevated and fairly consistent subsequent to the first quarter 2020 increase to initially record expected losses from the COVID-19 pandemic. We continue to monitor developments in future economic conditions, and as a result, our reserves may need to be updated in future periods.
The allowance for doubtful accounts as well as the related investment in finance receivables were as follows:
United StatesCanada
EMEA(1)
Total
Balance at December 31, 2021
$77 $11 $30 $118 
Provision— 
Charge-offs(2)(1)(1)(4)
Recoveries and other(2)
— (1)— 
Balance at March 31, 2022$78 $11 $31 $120 
Finance receivables as of March 31, 2022 collectively evaluated for impairment (3)
$1,863 $246 $1,016 $3,125 
Balance at December 31, 2020
$77 $15 $41 $133 
Provision
Charge-offs(2)— (1)(3)
Recoveries and other(2)
— (2)(1)
Balance at March 31, 2021$78 $16 $41 $135 
Finance receivables as of March 31, 2021 collectively evaluated for impairment(3)
$1,806 $288 $1,118 $3,212 
_____________
(1)Includes developing market countries.
(2)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.
(3)Total Finance receivables exclude the allowance for credit losses of $120 and $135 at March 31, 2022 and 2021, respectively.
In the U.S., customers are further evaluated by class based on the type of lease origination. The primary categories are direct, which primarily includes leases originated directly with end customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel and lease financing to end-user customers who purchased equipment we sold to distributors or resellers.
We evaluate our customers based on the following credit quality indicators:
Low Credit Risk: This rating includes accounts with excellent to good business credit, asset quality and 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 & Poor's (S&P) rating of BBB- or better. Loss rates in this category in the normal course are generally less than 1%.
Average Credit Risk: 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 in the normal course are generally in the range of 2% to 5%.
High Credit Risk: 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 low and average credit risk 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 in the normal course are generally in the range of 7% to 10%.
Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio.
Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows:
 March 31, 2022
 20222021202020192018PriorTotal
Finance
Receivables
United States (Direct)
Low Credit Risk$43 $128 $110 $85 $54 $15 $435 
Average Credit Risk24 47 39 52 20 189 
High Credit Risk12 86 66 27 12 208 
Total $79 $261 $215 $164 $86 $27 $832 
United States (Indirect)
Low Credit Risk$66 $205 $124 $83 $30 $$515 
Average Credit Risk55 200 99 69 31 460 
High Credit Risk24 14 56 
Total$129 $429 $237 $158 $64 $14 $1,031 
Canada
Low Credit Risk$$30 $26 $20 $11 $$95 
Average Credit Risk33 32 25 13 116 
High Credit Risk12 35 
Total$14 $71 $70 $51 $29 $11 $246 
EMEA(1)
Low Credit Risk$107 $190 $120 $90 $49 $11 $567 
Average Credit Risk76 126 86 69 30 395 
High Credit Risk15 13 11 54 
Total$192 $331 $219 $170 $84 $20 $1,016 
Total Finance Receivables
Low Credit Risk$221 $553 $380 $278 $144 $36 $1,612 
Average Credit Risk163 406 256 215 94 26 1,160 
High Credit Risk30 133 105 50 25 10 353 
Total$414 $1,092 $741 $543 $263 $72 $3,125 
 December 31, 2021
 20212020201920182017PriorTotal
Finance
Receivables
United States (Direct)
Low Credit Risk$148 $121 $98 $68 $21 $$459 
Average Credit Risk60 40 57 23 190 
High Credit Risk91 73 31 16 218 
Total $299 $234 $186 $107 $35 $$867 
United States (Indirect)
Low Credit Risk$235 $145 $100 $43 $11 $— $534 
Average Credit Risk201 103 74 35 10 — 423 
High Credit Risk24 15 — 52 
Total$460 $263 $182 $82 $22 $— $1,009 
Canada
Low Credit Risk$32 $27 $22 $13 $$$98 
Average Credit Risk34 34 27 15 117 
High Credit Risk12 — 36 
Total$74 $73 $56 $33 $13 $$251 
EMEA(1)
Low Credit Risk$229 $143 $121 $71 $22 $$592 
Average Credit Risk156 109 84 45 15 412 
High Credit Risk18 15 13 — 57 
Total$403 $267 $218 $124 $40 $$1,061 
Total Finance Receivables
Low Credit Risk$644 $436 $341 $195 $57 $10 $1,683 
Average Credit Risk451 286 242 118 39 1,142 
High Credit Risk141 115 59 33 14 363 
Total$1,236 $837 $642 $346 $110 $17 $3,188 
_____________
(1)Includes developing market countries.
The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed and is generally based on individual credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries, if any, are credited to the allowance.
We generally continue to maintain equipment on lease and provide services to customers that have invoices for finance receivables that are 90 days or more past due and, as a result of the bundled nature of billings, we also continue to accrue interest on those receivables. However, interest revenue for such billings is only recognized if collectability is deemed reasonably assured.
The aging of our billed finance receivables is as follows:
 March 31, 2022
 Current
31-90
Days
Past Due
>90 Days
Past Due
Total BilledUnbilled
Total
Finance
Receivables
>90 Days
and
Accruing
Direct $26 $$$39 $793 $832 $50 
Indirect23 33 998 1,031 — 
Total United States49 12 11 72 1,791 1,863 50 
Canada— 238 246 10 
EMEA(1)
11 1,005 1,016 
Total$63 $16 $12 $91 $3,034 $3,125 $69 
 December 31, 2021
 Current
31-90
Days
Past Due
>90 Days
Past Due
Total BilledUnbilled
Total
Finance
Receivables
>90 Days
and
Accruing
Direct$28 $$$42 $825 $867 $61 
Indirect28 37 972 1,009 — 
Total United States56 12 11 79 1,797 1,876 61 
Canada— 244 251 
EMEA(1)
12 1,049 1,061 13 
Total$71 $15 $12 $98 $3,090 $3,188 $83 
_____________
(1)Includes developing market countries
Secured Borrowings and Collateral
In January 2022, we sold $789 of U.S. based finance receivables to a consolidated special purpose entity (SPE). At March 31, 2022, the SPE held $758 of total Finance receivables, net, which are included in our Condensed Consolidated Balance Sheet as collateral for a secured loan.
In September 2021, we sold $331 of U.S. based finance receivables to a consolidated SPE. At March 31, 2022 and December 31, 2021, the SPE held $272 and $308, respectively, of total Finance receivables, net, which are included in our Condensed Consolidated Balance Sheet as collateral for a secured loan.
Refer to Note 13 - Debt, for additional information related to these arrangements.