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 clients 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. During the second quarter of 2016, we determined that certain finance receivables with a net investment of $35 million at December 31, 2015 classified as a sales type lease receivable should have been classified as loan receivables. Accordingly, prior period amounts have been revised to reflect this change.

Finance receivables at December 31, 2016 and 2015 consisted of the following:



	December 31, 2016									December 31, 2015
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,088,053		$	273,262		$	1,361,315		$	1,157,189		$	303,854		$	1,461,043
Unguaranteed residual values	90,190			13,655			103,845			100,000			15,709			115,709
Unearned income	(223,908		)	(60,458		)	(284,366		)	(247,854		)	(68,965		)	(316,819		)
Allowance for credit losses	(8,247		)	(2,647		)	(10,894		)	(6,606		)	(3,542		)	(10,148		)
Net investment in sales-type lease receivables	946,088			223,812			1,169,900			1,002,729			247,056			1,249,785
Loan receivables
Loan receivables	374,147			32,716			406,863			399,193			41,604			440,797
Allowance for credit losses	(8,517		)	(1,089		)	(9,606		)	(10,024		)	(1,518		)	(11,542		)
Net investment in loan receivables	365,630			31,627			397,257			389,169			40,086			429,255
Net investment in finance receivables	$	1,311,718		$	255,439		$	1,567,157		$	1,391,898		$	287,142		$	1,679,040

Loans receivable are due within one year. Maturities of gross sales-type lease finance receivables at December 31, 2016 were as follows:



	Sales-type Lease Receivables
	North America		International		Total
2017	$	545,429	$	113,195	$	658,624
2018	279,843		66,992		346,835
2019	164,616		45,895		210,511
2020	74,556		28,609		103,165
2021	19,211		15,719		34,930
Thereafter	4,398		2,852		7,250
Total	$	1,088,053	$	273,262	$	1,361,315

Allowance for Credit Losses

Activity in the allowance for credit losses for the years ended December 31, 2016, 2015 and 2014 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at December 31, 2013	$	14,165		$	9,703		$	11,165		$	1,916		$	36,949
Amounts charged to expense	4,346			866			10,237			1,626			17,075
Accounts written off	(8,386		)	(5,546		)	(10,334		)	(1,754		)	(26,020		)
Balance at December 31, 2014	10,125			5,023			11,068			1,788			28,004
Amounts charged to expense	1,189			890			8,286			1,023			11,388
Accounts written off	(4,708		)	(2,371		)	(9,330		)	(1,293		)	(17,702		)
Balance at December 31, 2015	6,606			3,542			10,024			1,518			21,690
Amounts charged to expense	5,136			1,161			6,238			836			13,371
Accounts written off	(3,495		)	(2,056		)	(7,745		)	(1,265		)	(14,561		)
Balance at December 31, 2016	$	8,247		$	2,647		$	8,517		$	1,089		$	20,500

Aging of Receivables

The aging of finance receivables at December 31, 2016 and 2015 was as follows:



	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
December 31, 2016
1 - 90 days	$	1,025,313	$	269,247	$	369,773	$	32,420	$	1,696,753
> 90 days	62,740		4,015		4,374		296		71,425
Total	$	1,088,053	$	273,262	$	374,147	$	32,716	$	1,768,178
Past due amounts > 90 days
Still accruing interest	$	8,831	$	972	$	—	$	—	$	9,803
Not accruing interest	53,909		3,043		4,374		296		61,622
Total	$	62,740	$	4,015	$	4,374	$	296	$	71,425

As of December 31, 2016, we had North American sales-type lease receivables aged greater than 90 days with a full contract value of $63 million. As of February 15, 2017, we have received payments with a contract value of $31 million related to these receivables.



	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
December 31, 2015
1 - 90 days	$	1,138,031	$	298,772	$	395,573	$	41,117	$	1,873,493
> 90 days	19,158		5,082		3,620		487		28,347
Total	$	1,157,189	$	303,854	$	399,193	$	41,604	$	1,901,840
Past due amounts > 90 days
Still accruing interest	$	5,041	$	1,617	$	—	$	—	$	6,658
Not accruing interest	14,117		3,465		3,620		487		21,689
Total	$	19,158	$	5,082	$	3,620	$	487	$	28,347

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 December 31, 2016 and 2015 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.



	December 31,
	2016		2015
Sales-type lease receivables
Low	$	879,823	$	886,198
Medium	135,953		192,645
High	22,600		37,573
Not Scored	49,677		40,773
Total	$	1,088,053	$	1,157,189
Loan receivables
Low	$	296,598	$	295,725
Medium	53,647		85,671
High	7,216		10,810
Not Scored	16,686		6,987
Total	$	374,147	$	399,193