Finance Assets

Finance Receivables

Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type lease receivables are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our customers for postage and supplies. Loan receivables are generally due each month; however, customers may rollover outstanding balances. Interest is recognized on loan receivables using the effective interest method and related annual fees are initially deferred and recognized ratably over the annual period covered. Customer acquisition costs are expensed as incurred.

Finance receivables at September 30, 2015 and December 31, 2014 consisted of the following:



	September 30, 2015									December 31, 2014
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,219,242		$	318,369		$	1,537,611		$	1,286,624		$	366,669		$	1,653,293
Unguaranteed residual values	100,210			16,319			116,529			105,205			18,291			123,496
Unearned income	(255,747		)	(70,496		)	(326,243		)	(270,196		)	(83,110		)	(353,306		)
Allowance for credit losses	(7,531		)	(3,660		)	(11,191		)	(10,281		)	(5,129		)	(15,410		)
Net investment in sales-type lease receivables	1,056,174			260,532			1,316,706			1,111,352			296,721			1,408,073
Loan receivables
Loan receivables	355,106			48,454			403,560			376,987			47,665			424,652
Allowance for credit losses	(9,853		)	(1,650		)	(11,503		)	(10,912		)	(1,788		)	(12,700		)
Net investment in loan receivables	345,253			46,804			392,057			366,075			45,877			411,952
Net investment in finance receivables	$	1,401,427		$	307,336		$	1,708,763		$	1,477,427		$	342,598		$	1,820,025

Allowance for Credit Losses and Aging of Receivables

We estimate our finance receivable risks and provide an allowance for credit losses accordingly. We evaluate the adequacy of the allowance for credit losses based on historical loss experience, the nature and volume of our portfolios, adverse situations that may affect a client's ability to pay, prevailing economic conditions and our ability to manage the collateral and make adjustments to the allowance as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

We establish credit approval limits based on the credit quality of the client and the type of equipment financed. Our policy is to discontinue revenue recognition for lease receivables that are more than 120 days past due and for unsecured loan receivables that are more than 90 days past due. We resume revenue recognition when payments reduce the account balance aging to 60 days or less past due. Finance receivables deemed uncollectible are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We believe that our finance receivable credit risk is limited because of our large number of clients, small account balances for most of our clients, and geographic and industry diversification.

Activity in the allowance for credit losses for the nine months ended September 30, 2015 and 2014 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2015	$	10,281		$	5,129		$	10,912		$	1,788		$	28,110
Amounts charged to expense	802			183			6,171			867			8,023
Write-offs and other	(3,552		)	(1,652		)	(7,230		)	(1,005		)	(13,439		)
Balance at September 30, 2015	$	7,531		$	3,660		$	9,853		$	1,650		$	22,694

	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2014	$	14,165		$	9,703		$	11,165		$	1,916		$	36,949
Amounts charged to expense	3,232			35			7,759			1,366			12,392
Write-offs and other	(4,491		)	(4,252		)	(7,980		)	(1,381		)	(18,104		)
Balance at September 30, 2014	$	12,906		$	5,486		$	10,944		$	1,901		$	31,237

Aging of Receivables

The aging of gross finance receivables at September 30, 2015 and December 31, 2014 was as follows:



	September 30, 2015
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 30 days	$	1,153,935	$	301,527	$	340,106	$	46,409	$	1,841,977
31 - 60 days	26,887		5,635		8,565		1,167		42,254
61 - 90 days	19,165		3,543		2,978		370		26,056
> 90 days	19,255		7,664		3,457		508		30,884
Total	$	1,219,242	$	318,369	$	355,106	$	48,454	$	1,941,171
Past due amounts > 90 days
Still accruing interest	$	5,356	$	2,258	$	—	$	—	$	7,614
Not accruing interest	13,899		5,406		3,457		508		23,270
Total	$	19,255	$	7,664	$	3,457	$	508	$	30,884



	December 31, 2014
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 30 days	$	1,217,623	$	347,236	$	359,672	$	45,678	$	1,970,209
31 - 60 days	23,242		6,207		9,245		1,201		39,895
61 - 90 days	24,198		4,494		3,498		413		32,603
> 90 days	21,561		8,732		4,572		373		35,238
Total	$	1,286,624	$	366,669	$	376,987	$	47,665	$	2,077,945
Past due amounts > 90 days
Still accruing interest	$	5,931	$	2,517	$	—	$	—	$	8,448
Not accruing interest	15,630		6,215		4,572		373		26,790
Total	$	21,561	$	8,732	$	4,572	$	373	$	35,238

Credit Quality

The extension of credit and management of credit lines to new and existing clients uses a combination of an automated credit score, where available, and a detailed manual review of the client’s financial condition and, when applicable, payment history. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes. The portfolio management processes ensure that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed.

We use a third party to score the majority of the North America portfolio on a quarterly basis using a commercial credit score. We do not use a third party to score our international portfolio because the cost to do so is prohibitive, given that it is a localized process and there is no single credit score model that covers all countries.

The table below shows the North America portfolio at September 30, 2015 and December 31, 2014 by relative risk class (low, medium, high) based on the relative scores of the accounts within each class. The relative scores are determined based on a number of factors, including the company type, ownership structure, payment history and financial information. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk, as defined by the third party, refers to the relative risk that an account in the next 12 month period may become delinquent.


•	Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers.


•	Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers.


•	High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers.



	September 30, 2015		December 31, 2014
Sales-type lease receivables
Low	$	924,814	$	936,979
Medium	207,186		230,799
High	39,595		45,202
Not Scored	47,647		73,644
Total	$	1,219,242	$	1,286,624
Loan receivables
Low	$	248,542	$	259,436
Medium	85,716		96,243
High	10,445		10,913
Not Scored	10,403		10,395
Total	$	355,106	$	376,987