Accounts and Notes Receivable and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2013

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, 2013 were as follows (table in millions):



Year	Contractual Amounts Due Under Leases
Due within one year	$	103
Due within two years	80
Due within three years	68
Thereafter	1
Total	252
Less amounts representing interest	(5		)
Present value	247
Current portion (included in accounts and notes receivable)	101
Long-term portion (included in other assets, net)	$	146

Subsequent to December 31, 2013, we sold $34 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, 2013, 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, 2013 and 2012 (table in millions):



	December 31, 2013			December 31, 2012
Balance, beginning of the period	$	17		$	24
Recoveries	(12		)	(15		)
Provisions	4			8
Balance, end of the period	$	9		$	17

Gross lease receivables totaled $252 million and $329 million in 2013 and 2012, respectively, before the allowance. The components of these balances were individually evaluated for impairment and included in our allowance determination as necessary.

EMC CORPORATION AND SUBSIDIARIES

SCHEDULE II–VALUATION AND QUALIFYING ACCOUNTS

(in millions)



Allowance for Bad Debts	Balance at Beginning of Period		Allowance for Bad Debts Charged to Selling, General and Administrative Expenses			Bad Debts Write-Offs			Balance at End of Period
Description	Balance at Beginning of Period					Bad Debts Write-Offs			Balance at End of Period
Year ended December 31, 2013 allowance for doubtful accounts	$	72	$	(1	)	$	(6	)	$	65
Year ended December 31, 2012 allowance for doubtful accounts	65		39			(32		)	72
Year ended December 31, 2011 allowance for doubtful accounts	61		20			(16		)	65

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		Sales Returns			Balance at End of Period
Description	Balance at Beginning of Period				Sales Returns			Balance at End of Period
Year ended December 31, 2013 allowance for sales returns	$	86	$	55	$	(65	)	$	76
Year ended December 31, 2012 allowance for sales returns	133		17		(64		)	86
Year ended December 31, 2011 allowance for sales returns	158		19		(44		)	133



Tax Valuation Allowance	Balance at Beginning of Period		Tax Valuation Allowance Charged to Income Tax Provision		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		Tax Valuation Allowance Credited to Income Tax Provision			Balance at End of Period
Year ended December 31, 2013 income tax valuation allowance	$	183	$	32	$	(4	)	$	211
Year ended December 31, 2012 income tax valuation allowance	151		33		(1		)	183
Year ended December 31, 2011 income tax valuation allowance	126		25		—			151