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, 2017 and December 31, 2016 consisted of the following:



	September 30, 2017									December 31, 2016
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,023,206		$	284,099		$	1,307,305		$	1,088,053		$	273,262		$	1,361,315
Unguaranteed residual values	75,242			14,301			89,543			90,190			13,655			103,845
Unearned income	(213,852		)	(62,343		)	(276,195		)	(223,908		)	(60,458		)	(284,366		)
Allowance for credit losses	(7,103		)	(2,768		)	(9,871		)	(8,247		)	(2,647		)	(10,894		)
Net investment in sales-type lease receivables	877,493			233,289			1,110,782			946,088			223,812			1,169,900
Loan receivables
Loan receivables	339,726			34,456			374,182			374,147			32,716			406,863
Allowance for credit losses	(6,960		)	(1,089		)	(8,049		)	(8,517		)	(1,089		)	(9,606		)
Net investment in loan receivables	332,766			33,367			366,133			365,630			31,627			397,257
Net investment in finance receivables	$	1,210,259		$	266,656		$	1,476,915		$	1,311,718		$	255,439		$	1,567,157

Allowance for Credit Losses

We provide an allowance for probable 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. We continually evaluate the adequacy of the allowance for credit losses and make adjustments as necessary. The assumptions used in determining an estimate of credit losses are 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 loan receivables that are more than 90 days past due. We resume revenue recognition when the client's payments reduce the account aging to less than 60 days 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 low because of the geographic and industry diversification of our clients and small account balances for most of our clients.

Activity in the allowance for credit losses for the nine months ended September 30, 2017 and 2016 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2017	$	8,247		$	2,647		$	8,517		$	1,089		$	20,500
Amounts charged to expense	7,807			895			3,892			438			13,032
Write-offs and other	(8,951		)	(774		)	(5,449		)	(438		)	(15,612		)
Balance at September 30, 2017	$	7,103		$	2,768		$	6,960		$	1,089		$	17,920

	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2016	$	6,606		$	3,542		$	10,024		$	1,518		$	21,690
Amounts charged to expense	2,881			464			4,217			688			8,250
Write-offs and other	(3,433		)	(1,419		)	(5,953		)	(1,010		)	(11,815		)
Balance at September 30, 2016	$	6,054		$	2,587		$	8,288		$	1,196		$	18,125

Aging of Receivables

The aging of gross finance receivables at September 30, 2017 and December 31, 2016 was as follows:



	September 30, 2017
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	970,891	$	279,517	$	331,233	$	34,224	$	1,615,865
> 90 days	52,315		4,582		8,493		232		65,622
Total	$	1,023,206	$	284,099	$	339,726	$	34,456	$	1,681,487
Past due amounts > 90 days
Still accruing interest	$	6,726	$	1,781	$	—	$	—	$	8,507
Not accruing interest	45,589		2,801		8,493		232		57,115
Total	$	52,315	$	4,582	$	8,493	$	232	$	65,622

As of September 30, 2017, we had North America sales-type lease receivables aged greater than 90 days with a contract value of $52 million. As of October 31, 2017, we received payments with a contract value of approximately $23 million related to these receivables.



	December 31, 2016
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	1,025,313	$	269,247	$	366,726	$	32,420	$	1,693,706
> 90 days	62,740		4,015		7,421		296		74,472
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		7,421		296		64,669
Total	$	62,740	$	4,015	$	7,421	$	296	$	74,472

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, 2017 and December 31, 2016 by relative risk class 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 (low, medium, high), 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, 2017		December 31, 2016
Sales-type lease receivables
Low	$	817,332	$	879,823
Medium	136,995		135,953
High	21,528		22,600
Not Scored	47,351		49,677
Total	$	1,023,206	$	1,088,053
Loan receivables
Low	$	263,537	$	296,598
Medium	52,630		53,647
High	6,897		7,216
Not Scored	16,662		16,686
Total	$	339,726	$	374,147