ACCOUNTS AND NOTES RECEIVABLE

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

ACCOUNTS AND NOTES RECEIVABLE

ACCOUNTS AND NOTES RECEIVABLE

(Millions of Dollars)	2016			2015
Trade accounts receivable	$	1,137.2		$	1,165.0
Trade notes receivable	140.1			130.6
Other accounts receivable	103.0			109.1
Gross accounts and notes receivable	1,380.3			1,404.7
Allowance for doubtful accounts	(77.5		)	(72.9		)
Accounts and notes receivable, net	$	1,302.8		$	1,331.8
Long-term trade notes receivable, net	$	180.9		$	182.1

Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. Adequate reserves have been established to cover anticipated credit losses. Long-term trade financing receivables of $180.9 million and $182.1 million at December 31, 2016 and January 2, 2016, respectively, are reported within Other Assets in the Consolidated Balance Sheets. Financing receivables and long-term financing receivables are predominantly related to certain security equipment leases with commercial businesses. Generally, the Company retains legal title to any equipment leases and bears the right to repossess such equipment in an event of default. All financing receivables are interest bearing and the Company has not classified any financing receivables as held-for-sale. Interest income earned from financing receivables that are not delinquent is recorded on the effective interest method. The Company considers any financing receivable that has not been collected within 90 days of original billing date as past-due or delinquent. Additionally, the Company considers the credit quality of all past-due or delinquent financing receivables as nonperforming.

The Company has an accounts receivable sale program that expires on January 5, 2018. According to the terms of that program the Company is required to sell certain of its trade accounts receivables at fair value to a wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS”). The BRS, in turn, must sell such receivables to a third-party financial institution (“Purchaser”) for cash and a deferred purchase price receivable. The Purchaser’s maximum cash investment in the receivables at any time is $100.0 million. The purpose of the program is to provide liquidity to the Company. The Company accounts for these transfers as sales under ASC 860 “Transfers and Servicing.” Receivables are derecognized from the Company’s Consolidated Balance Sheets when the BRS sells those receivables to the Purchaser. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred purchase price receivable. At December 31, 2016, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions and its cost of servicing the receivables sold.

At December 31, 2016 and January 2, 2016, $100.5 million and $100.4 million, respectively, of net receivables were derecognized. Gross receivables sold amounted to $1,832.9 million ($1,548.3 million, net) for the year ended December 31, 2016 and $1,580.4 million ($1,373.5 million, net) for the year ended January 2, 2016. These sales resulted in a pre-tax loss of $4.8 million and $3.9 million, respectively, for the years ended December 31, 2016 and January 2, 2016, respectively. These pre-tax losses include servicing fees of $0.9 million and $0.6 million, respectively, for the years ended December 31, 2016 and January 2, 2016. Proceeds from transfers of receivables to the Purchaser totaled $1,500.8 million and $1,350.4 million for the years ended December 31, 2016 and January 2, 2016, respectively. Collections of previously sold receivables, including deferred purchase price receivables, and all fees, which are settled one month in arrears, resulted in payments to the Purchaser of $1,500.8 million and $1,350.4 million for the years ended December 31, 2016 and January 2, 2016, respectively.

The Company’s risk of loss following the sale of the receivables is limited to the deferred purchase price receivable, which was $83.2 million at December 31, 2016 and $41.1 million at January 2, 2016. The deferred purchase price receivable will be repaid in cash as receivables are collected, generally within 30 days, and as such the carrying value of the receivable recorded approximates fair value. Delinquencies and credit losses on receivables sold were $0.1 million and $0.3 million for the years ended December 31, 2016 and January 2, 2016, respectively. Cash inflows related to the deferred purchase price receivable totaled $514.3 million and $416.9 million for the years ended December 31, 2016 and January 2, 2016, respectively. All cash flows under the program are reported as a component of changes in accounts receivable within operating activities in the Consolidated Statements of Cash Flows since all the cash from the Purchaser is either: 1) received upon the initial sale of the receivable; or 2) from the ultimate collection of the underlying receivables and the underlying receivables are not subject to significant risks, other than credit risk, given their short-term nature.