ACCOUNTS AND NOTES RECEIVABLE

12 Months Ended

Jan. 01, 2022


(Millions of Dollars)	2021		2020
Trade accounts receivable	$	1,484.5	$	1,136.2
Trade notes receivable	75.3		73.5
Other accounts receivable	104.1		65.7
Gross accounts and notes receivable	1,663.9		1,275.4
Allowance for credit losses	(103.1)		(110.9)
Accounts and notes receivable, net	$	1,560.8	$	1,164.5

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. During the fourth quarter of 2021, as part of the acquisition of MTD, the Company acquired accounts receivable of $272.6 million. Refer to Note E, Acquisitions and Investments, for further discussion.

The changes in the allowance for credit losses for the years ended January 1, 2022 and January 2, 2021 are as follows:


(Millions of Dollars)	2021		2020
Beginning Balance	$	110.9	$	94.1
Cumulative Effect Adjustment (a)	—		1.1
Charged To Costs and Expenses	3.9		29.0
Charged To Other Accounts (b)	3.9		7.4
Deductions (c)	(15.6)		(20.7)
Balance end of period	$	103.1	$	110.9

(a) Represents the cumulative-effect adjustment to opening retained earnings due to the adoption of ASU 2016-13.

(b) Amounts represent the impacts of foreign currency translation, acquisitions and net transfers to/from other accounts.

The Company's payment terms are generally consistent with the industries in which their businesses operate and typically range from 30-90 days globally. The Company does not adjust the promised amount of consideration for the effects of a significant financing component when the period between transfer of the product and receipt of payment is less than one year. Any significant financing components for contracts greater than one year are included in revenue over time.

At January 1, 2022 and January 2, 2021, the Industrial segment operating lease receivable was $21.2 million and $36.7 million, respectively, from leasing equipment to customers. Net sales from operating lease revenue were $62.0 million and $113.7 million for the years ended January 1, 2022 and January 2, 2021, respectively.

The Company has an accounts receivable sale program. According to the terms, the Company sells certain of its trade accounts receivables at fair value to a wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS"). The BRS, in turn, can sell such receivables to a third-party financial institution (“Purchaser”) for cash. The Purchaser’s maximum cash investment in the receivables at any time is $110.0 million. The purpose of the program is to provide liquidity to the Company. These transfers qualify as sales under ASC 860, Transfers and Servicing, and 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. At January 1, 2022, 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 January 1, 2022 and January 2, 2021, net receivables of approximately $100.0 million and $86.8 million, respectively, were derecognized. Proceeds from transfers of receivables to the Purchaser totaled $447.7 million and $259.6 million for the years ended January 1, 2022 and January 2, 2021, respectively, and payments to the Purchaser totaled $434.5 million and $272.8 million, respectively. The program resulted in a pre-tax loss of $2.0 million and $1.7 million for the years ended January 1, 2022 and January 2, 2021, respectively, which included service fees of $0.9 million and $0.6 million, 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 received upon the initial sale of the receivable.

As of January 1, 2022 and January 2, 2021, the Company's deferred revenue totaled $126.7 million and $131.0 million, respectively, of which $42.2 million and $39.4 million, respectively, was classified as current. Revenue recognized for the years ended January 1, 2022 and January 2, 2021 that was previously deferred as of January 2, 2021 and December 28, 2019 totaled $24.0 million and $30.4 million, respectively.