Accounts and Notes Receivable and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2012

Accounts and Notes Receivable and Allowance for Credit Losses

Accounts and notes receivable are recorded at cost. The portion of our notes receivable due in one year or less are included in accounts and notes receivable and the long-term portion is included in other assets, net on the consolidated balance sheets. Lease receivables arise from sales-type leases of products. We typically sell, without recourse, the contractual right to the lease payment stream and assets under lease to third parties. For certain customers, we retain the lease.

The contractual amounts due under the leases we retained as of December 31, 2012 were as follows (table in thousands):



Year	Contractual Amounts Due Under Leases
Due within one year	$	137,323
Due within two years	100,019
Due within three years	91,253
Thereafter	192
Total	328,787
Less amounts representing interest	(6,376		)
Present value	322,411
Current portion (included in accounts and notes receivable)	135,399
Long-term portion (included in other assets, net)	$	187,012

Subsequent to December 31, 2012, we sold $167.6 million of these notes to third parties without recourse.

We maintain an allowance for credit losses on our accounts and notes receivable. The allowance is based on the credit worthiness of our customers, including an assessment of the customer’s financial position, operating performance and their ability to meet their contractual obligation. We assess the credit scores for our customers each quarter. In addition, we consider our historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account.

In the event we determine that a lease may not be paid, we include in our allowance an amount for the outstanding balance related to the lease receivable. As of December 31, 2012, amounts from lease receivables past due for more than 90 days were not significant.

The following table presents the activity of our allowance for credit losses related to lease receivables for the years ended December 31, 2012 and 2011 (table in thousands):



	December 31, 2012			December 31, 2011
Balance, beginning of the period	$	24,247		$	44,661
Recoveries	(15,357		)	(31,531		)
Provisions	7,887			11,117
Balance, end of the period	$	16,777		$	24,247

Gross lease receivables totaled $328.8 million and $335.5 million in 2012 and 2011, respectively, before the allowance. The components of these balances were individually evaluated for impairment.

EMC CORPORATION AND SUBSIDIARIES

SCHEDULE II–VALUATION AND QUALIFYING ACCOUNTS

(in thousands)



Allowance for Bad Debts	Balance at Beginning of Period		Allowance for Bad Debts Charged to Selling, General and Administrative Expenses		Charged to Other Accounts		Bad Debts Write-Offs			Balance at End of Period
Description	Balance at Beginning of Period				Charged to Other Accounts		Bad Debts Write-Offs			Balance at End of Period
Year ended December 31, 2012 allowance for doubtful accounts	$	64,654	$	39,312	$	—	$	(31,651	)	$	72,315
Year ended December 31, 2011 allowance for doubtful accounts	60,535		20,255		—		(16,136		)	64,654
Year ended December 31, 2010 allowance for doubtful accounts	51,114		18,965		—		(9,544		)	60,535

Note: The allowance for doubtful accounts includes both current and non-current portions.



Allowance for Sales Returns	Balance at Beginning of Period		Allowance for Sales Returns Accounted for as a Reduction in Revenue		Charged to Other Accounts		Sales Returns			Balance at End of Period
Description	Balance at Beginning of Period				Charged to Other Accounts		Sales Returns			Balance at End of Period
Year ended December 31, 2012 allowance for sales returns	$	132,883	$	16,748	$	—	$	(63,832	)	$	85,799
Year ended December 31, 2011 allowance for sales returns	157,830		18,861		—		(43,808		)	132,883
Year ended December 31, 2010 allowance for sales returns	129,205		47,229		—		(18,604		)	157,830



Tax Valuation Allowance	Balance at Beginning of Period		Tax Valuation Allowance Charged to Income Tax Provision		Charged (credited) to Other Accounts*			Tax Valuation Allowance Credited to Income Tax Provision			Balance at End of Period
Description	Balance at Beginning of Period		Tax Valuation Allowance Charged to Income Tax Provision		Charged (credited) to Other Accounts*			Tax Valuation Allowance Credited to Income Tax Provision			Balance at End of Period
Year ended December 31, 2012 income tax valuation allowance	$	5,293	$	—	$	—		$	(943	)	$	4,350
Year ended December 31, 2011 income tax valuation allowance	4,350		943		—			—			5,293
Year ended December 31, 2010 income tax valuation allowance	21,815		—		(662		)	(16,803		)	4,350

* Amount represents valuation allowances recognized in connection with business combinations and equity.