Accounts Receivable

9 Months Ended

Oct. 02, 2021

Accounts Receivable

Accounts receivable, net, consists of the following:


	October 2, 2021		December 31, 2020
Accounts receivable	$	9,407,642	$	9,298,135
Allowances for doubtful accounts	(78,215)		(92,792)
Accounts receivable, net	$	9,329,427	$	9,205,343

Changes in the allowance for doubtful accounts consists of the following:


	Nine Months Ended
	October 2, 2021		September 26, 2020
Balance at beginning of period	$	92,792	$	69,433
Effect of adoption of ASU No. 2016-13	—		47,011
Charged to income	5,760		22,139
Translation Adjustments	(1,164)		(1,215)
Writeoffs	(19,173)		(42,224)
Balance at end of period	$	78,215	$	95,144

The company has considered the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of October 2, 2021. The global economic impact from COVID-19 may adversely affect the credit condition of some customers. The impact of COVID-19 on customers’ credit condition is highly uncertain and will largely depend on the outcome of future events, which could cause credit losses to increase.

During 2020, the company entered into an EMEA (Europe, the Middle East, and Africa) asset securitization program under which it will continuously sell its interest in designated pools of trade accounts receivables of certain of its subsidiaries in the EMEA region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions ("unaffiliated financial institutions") on a monthly basis. The company may sell up to €400,000 under the EMEA asset securitization program, which matures in January 2023, subject to extension in accordance with its terms. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivables into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.

Sales of accounts receivables to unaffiliated financial institutions under the EMEA asset securitization program:


	Quarter Ended				Nine Months Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
EMEA asset securitization, sales of accounts receivables	$	546,125	$	447,958	$	1,608,388	$	1,425,324

Receivables sold to unaffiliated financial institutions under the program are excluded from “Accounts receivable, net” on the company’s consolidated balance sheets and cash receipts are reflected as cash provided by operating activities on the consolidated statements of cash flows. The purchase price is paid in cash when the receivables are sold. Certain unsold receivables held by Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” in the company’s consolidated balance sheets.

The company continues servicing the receivables, which were sold, and in exchange receives a servicing fee under the program. The company does not record a servicing asset or liability on the company’s consolidated balance sheets as the company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Other amounts related to the EMEA asset securitization program:





	October 2, 2021		December 31, 2020
Receivables sold to unaffiliated financial institutions that were uncollected	$	418,696	$	397,914
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.	754,564		551,843

Any accounts receivables held by Arrow EMEA Funding Corp B.V. would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings if there are outstanding balances under the EMEA asset securitization program. The assets of the special purpose entity cannot be used by the company for general corporate purposes. Additionally, the financial obligations of Arrow EMEA Funding Corp B.V. to the unaffiliated financial institution under the program are limited to the assets it owns and there is no recourse to the company for receivables that are uncollectible as a result of the insolvency or inability to pay of the account debtors.The EMEA asset securitization program includes terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of October 2, 2021, the company was in compliance with all such financial covenants.