3. ACCOUNTS AND NOTES RECEIVABLE AND ALLOWANCES FOR DOUBTFUL ACCOUNTS

The Company has one portfolio segment, the gaming industry customer, and four classes of receivables including its trade receivables with a contract term less than one year, trade receivables with a contract term greater than one year, sales-type leasing arrangements, and notes receivable, which are related to development financing loans. Trade receivables with contract terms greater than one year relate to the sale of gaming equipment and systems transactions, and are generally collateralized by the related equipment sold, although the value of such equipment, if repossessed, may be less than the receivable balance outstanding. Sales-type leasing arrangements relate to gaming equipment and include options to purchase the equipment at the end of the lease term at established prices. Customers with sales-type leasing arrangements typically have a long-standing credit history with the Company.

The Company's accounts and notes receivable were as follows:

	Accounts and Notes Receivable as of June 30, 2013

	Accounts and Notes Receivable as of June 30, 2013						Accounts and Notes Receivable as of June 30, 2012
			Ending Balance Individually Evaluated for Impairment				Accounts and Notes Receivable as of June 30, 2012
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
	(in 000s)
Contract term less than one year:
Trade and other receivables, current	$	170,598	$	1,589	$	169,009	$	173,889	$	3,655	$	170,234
Contract term greater than one year:
Trade receivables, current		82,600		63,193		19,407		85,075		41,213		43,862
Trade receivables, noncurrent		40,178		17,961		22,217		30,476		7,213		23,263

		122,778		81,154		41,624		115,551		48,426		67,125
Lease receivables, current		6,701		6,701		—		14,763		14,763		—
Lease receivables, noncurrent		9,928		9,928		—		15,070		15,070		—

		16,629		16,629		—		29,833		29,833		—
Notes receivable, current		3,411		3,411		—		5,188		5,188		—
Notes receivable, noncurrent		17,114		17,114		—		13,269		13,269		—

		20,525		20,525		—		18,457		18,457		—
Total current		263,310		74,894		188,416		278,915		64,819		214,096
Total noncurrent		67,220		45,003		22,217		58,815		35,552		23,263

Total	$	330,530	$	119,897	$	210,633	$	337,730	$	100,371	$	237,359

The activity related to the allowance for doubtful accounts for the year ended June 30, 2013 is summarized below:

	Allowance for Doubtful Accounts

	Beginning Balance as of June 30, 2012			Charge- offs		Recoveries		Provision			Ending Balance as of June 30, 2013			Ending Balance Individually Evaluated for Impairment			Ending Balance Collectively Evaluated for Impairment
	(in 000s)
Contract term less than one year:
Trade and other receivables, current	$	(6,138	)	$	1,449	$	—	$	184		$	(4,505	)	$	(1,445	)	$	(3,060	)
Contract term greater than one year:
Trade receivables, current		(7,935	)		3,973		822		(7,168	)		(10,308	)		(8,101	)		(2,207	)
Trade receivables, noncurrent		(1,279	)		2,598		—		(3,083	)		(1,764	)		—			(1,764	)

		(9,214	)		6,571		822		(10,251	)		(12,072	)		(8,101	)		(3,971	)
Lease receivables, current		—			—		—		—			—			—			—
Lease receivables, noncurrent		—			—		—		—			—			—			—

		—			—		—		—			—			—			—
Notes receivable, current		—			—		—		—			—			—			—
Notes receivable, noncurrent		(1,750	)		2,856		—		(1,106	)		—			—			—

		(1,750	)		2,856		—		(1,106	)		—			—			—
Total current		(14,073	)		5,422		822		(6,984	)		(14,813	)		(9,546	)		(5,267	)
Total noncurrent		(3,029	)		5,454		—		(4,189	)		(1,764	)		—			(1,764	)

Total	$	(17,102	)	$	10,876	$	822	$	(11,173	)	$	(16,577	)	$	(9,546	)	$	(7,031	)

The activity related to the allowance for doubtful accounts for the year ended June 30, 2012 is summarized below:

	Allowance for Doubtful Accounts

	Beginning Balance as of June 30, 2011			Charge- offs		Recoveries		Provision			Ending Balance as of June 30, 2012			Ending Balance Individually Evaluated for Impairment			Ending Balance Collectively Evaluated for Impairment
	(in 000s)
Contract term less than one year:
Trade and other receivables, current	$	(5,875	)	$	1,550	$	243	$	(2,056	)	$	(6,138	)	$	(2,163	)	$	(3,975	)
Contract term greater than one year:
Trade receivables, current		(5,184	)		355		513		(3,619	)		(7,935	)		(4,867	)		(3,068	)
Trade receivables, noncurrent		(507	)		1,666		—		(2,438	)		(1,279	)		(118	)		(1,161	)

		(5,691	)		2,021		513		(6,057	)		(9,214	)		(4,985	)		(4,229	)
Lease receivables, current		—			—		—		—			—			—			—
Lease receivables, noncurrent		—			—		—		—			—			—			—

		—			—		—		—			—			—			—
Notes receivable, current		—			—		—		—			—			—			—
Notes receivable, noncurrent		—			—		—		(1,750	)		(1,750	)		(1,750	)		—

		—			—		—		(1,750	)		(1,750	)		(1,750	)		—
Total current		(11,059	)		1,905		756		(5,675	)		(14,073	)		(7,030	)		(7,043	)
Total noncurrent		(507	)		1,666		—		(4,188	)		(3,029	)		(1,868	)		(1,161	)

Total	$	(11,566	)	$	3,571	$	756	$	(9,863	)	$	(17,102	)	$	(8,898	)	$	(8,204	)

Gaming is a highly regulated industry requiring customers to obtain a licensing and verify with the applicable regulatory agency that they have the financial resources to operate a gaming establishment. Many of the Company's customers, including new casinos that have opened in recent years, are owned by existing multi-property customers that have established a favorable payment history with the Company. Customer accounts typically include a mix of trade receivables balances with terms for periods of 30 to 120 days and financing receivables resulting from extended payment terms.

The Company monitors the credit quality of its accounts receivable by reviewing an aging of customer invoices. Invoices are considered past due if a scheduled payment is not received within agreed upon terms. The Company's notes receivable are reviewed quarterly, at a minimum, for impairment. The Company also reviews a variety of other relevant qualitative information such as collection experience, economic conditions and specific customer financial conditions to evaluate credit risk in recording the allowance for doubtful accounts or as an indicator of an impaired loan.

The Company accrues interest, if applicable, on its accounts and notes receivables per the terms of the agreement. Interest is not accrued on past due accounts and notes receivable, or individual amounts that the Company has determined and specifically identified as not collectible.

The following summarizes the aging of past due receivables, excluding trade accounts receivable with a contract term less than one year, as of June 30, 2013:

	1 to 90 Days Past Due		91 to 180 Days Past Due		181 + Days Past Due		Total Past Due		Current		Total Receivable		Recorded Investment in Receivables on Nonaccrual Status		Recorded Investment 90 Days and Accruing

	(in 000s)
Trade receivables	$	9,636	$	2,851	$	6,869	$	19,356	$	103,422	$	122,778	$	19,356	$	—
Lease receivables		—		—		—		—		16,629		16,629		—		—
Notes receivable		—		—		—		—		20,525		20,525		—		—

Total	$	9,636	$	2,851	$	6,869	$	19,356	$	140,576	$	159,932	$	19,356	$	—

The following summarizes the aging of past due receivables, excluding trade accounts receivable with a contract term less than one year, as of June 30, 2012:

	1 to 90 Days Past Due		91 to 180 Days Past Due		181 + Days Past Due		Total Past Due		Current		Total Receivable		Recorded Investment in Receivables on Nonaccrual Status		Recorded Investment 90 Days and Accruing

	(in 000s)
Trade receivables	$	7,278	$	4,197	$	8,735	$	20,210	$	95,341	$	115,551	$	20,210	$	—
Lease receivables		—		—		—		—		29,833		29,833		—		—
Notes receivable		1,427		1,423		319		3,169		15,288		18,457		18,457		—

Total	$	8,705	$	5,620	$	9,054	$	23,379	$	140,462	$	163,841	$	38,667	$	—

The aging of customer invoices and note balances are based on their contractually agreed upon payment terms, which in certain rare circumstances have been modified from the original financing terms. The modification of original financing terms are infrequent and generally do not represent a concession as they result only in a delay of payment that is typically insignificant to total trade, lease and notes receivable balances.

The Company provided development financing to certain customers in the form of notes receivable. Notes receivable as of June 30, 2012, include $15.6 million, net of discounts of $3.3 million, and as of June 30, 2013, $19.5 million related to development financing loans made to HBG Connex S.P.A. ("HBG") to allow it to make advance payments necessary to obtain gaming licenses in the Italian Video Lottery Terminal ("VLT") market. The Company entered into a settlement agreement with HBG (see Note 12 to consolidated financial statements, Commitments and Contingencies) which, amongst other matters, resulted in the replacement of the existing non-interest bearing development financing notes receivable with a new note receivable bearing a stated interest rate of 4% per annum with graduated monthly installments over four years from July 2013 to June 2017. In connection with the settlement agreement, the discounts totaling $3.3 million associated with the original HBG notes receivable were reversed during the year ended June 30, 2013 and the $4.6 million in contract rights associated with HBG were derecognized (see Note 5 to consolidated financial statements, Goodwill and Intangible Assets). This resulted in a $1.3 million charge recorded to SG&A. There were no significant modifications of accounts receivable during the period.

Impairment is recognized when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of a note arrangement. During the year ended June 30, 2012, based on an individual customer's filing of a bankruptcy petition, the Company recognized an impairment charge on notes receivable and a related allowance of $1.8 million after estimating the fair value of the collateral less costs to sell. During the year ended June 30, 2013, the Company recognized an impairment charge of $1.1 million based on the actual proceeds received from the sale of the collateral. As a result, there were no recorded investments in impaired loans as of June 30, 2013.

The impaired loan balance as of June 30, 2012 was as follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment		Interest Income Recognized

	(in 000s)
With an allowance recorded:
Notes receivable	$	2,856	$	2,856	$	(1,750	)	$	2,856	$	—
With no related allowance recorded:
Notes receivable		—		—		—			—		—

Total	$	2,856	$	2,856	$	(1,750	)	$	2,856	$	—

The fair value of accounts and notes receivable, net, is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers, with similar credit ratings and remaining maturities. As of June 30, 2013 and 2012, respectively, the fair value of the accounts and notes receivable, net, approximate the carrying value.