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 June 30, 2014 were as follows (table in millions):



Year	Contractual Amounts Due Under Leases
Due within one year	$	87
Due within two years	69
Due within three years	61
Thereafter	3
Total	220
Less: Amounts representing interest	5
Present value	215
Current portion (included in accounts and notes receivable)	86
Long-term portion (included in other assets, net)	$	129

Subsequent to June 30, 2014, we sold $39 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 June 30, 2014, 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 six months ended June 30, 2014 and 2013 (table in millions):



	For the Six Months Ended
	June 30, 2014			June 30, 2013
Balance, beginning of the period	$	9		$	17
Recoveries	(5		)	(9		)
Provisions	6			3
Balance, end of the period	$	10		$	11

Gross lease receivables totaled $220 million and $252 million as of June 30, 2014 and December 31, 2013, respectively, before the allowance. The components of these balances were individually evaluated for impairment and included in our allowance determination as necessary.