Financing Receivables (Tables)
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6 Months Ended |
Jun. 30, 2020 |
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| Financing Receivables |
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| Summary of the components of financing receivables |
| | | | | | | | | | | | | | | Client Financing Receivables | | | | | | | | | Client Loan and | | Investment in | | | | | | | | | Installment Payment | | Sales-Type and | | Commercial | | | | (Dollars in millions) | | Receivables | | Direct Financing | | Financing | | | | At June 30, 2020: | | (Loans) | | Leases | | Receivables | | Total | Financing receivables, gross | | $ | 12,539 | | $ | 4,967 | | $ | 2,393 | | $ | 19,898 | Unearned income | | | (506) | | | (393) | | | (3) | | | (903) | Residual value* | | | — | | | 586 | | | — | | | 586 | Amortized cost | | $ | 12,033 | | $ | 5,160 | | $ | 2,389 | | $ | 19,582 | Allowance for credit losses | | | (164) | | | (89) | | | (11) | | | (264) | Total financing receivables, net | | $ | 11,869 | | $ | 5,070 | | $ | 2,379 | | $ | 19,318 | Current portion | | $ | 7,501 | | $ | 2,087 | | $ | 2,379 | | $ | 11,967 | Noncurrent portion | | $ | 4,368 | | $ | 2,983 | | $ | — | | $ | 7,351 | | | | | | | | | | | | | |
* Includes guaranteed and unguaranteed residual value. | | | | | | | | | | | | | | | Client Financing Receivables | | | | | | | | | Client Loan and | | Investment in | | | | | | | | | Installment Payment | | Sales-Type and | | Commercial | | | | (Dollars in millions) | | Receivables | | Direct Financing | | Financing | | | | At December 31, 2019: | | (Loans) | | Leases | | Receivables | | Total | Financing receivables, gross | | $ | 13,592 | | $ | 6,077 | | $ | 3,836 | | $ | 23,504 | Unearned income | | | (570) | | | (509) | | | (4) | | | (1,083) | Recorded investment | | $ | 13,022 | | $ | 5,567 | | $ | 3,831 | | $ | 22,421 | Allowance for credit losses | | | (138) | | | (72) | | | (11) | | | (221) | Unguaranteed residual value | | | — | | | 652 | | | — | | | 652 | Guaranteed residual value | | | — | | | 53 | | | — | | | 53 | Total financing receivables, net | | $ | 12,884 | | $ | 6,199 | | $ | 3,820 | | $ | 22,904 | Current portion | | $ | 8,037 | | $ | 2,334 | | $ | 3,820 | | $ | 14,192 | Noncurrent portion | | $ | 4,847 | | $ | 3,865 | | $ | — | | $ | 8,712 |
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| Schedule of financing receivables and allowance for credit losses by class |
| | | | | | | | | | | | | (Dollars in millions) | | | | | | | | | | | | | At June 30, 2020: | | Americas | | EMEA | | Asia Pacific | | Total | Amortized cost | | $ | 9,060 | | $ | 4,932 | | $ | 3,201 | | $ | 17,192 | | | | | | | | | | | | | | Allowance for credit losses | | | | | | | | | | | | | Beginning balance at December 31, 2019 | | $ | 120 | | $ | 54 | | $ | 36 | | $ | 210 | Adjustment for adoption of new standard | | | 21 | | | 15 | | | 5 | | | 41 | Beginning balance at January 1, 2020 | | $ | 142 | | $ | 69 | | $ | 41 | | $ | 252 | Write-offs | | $ | (17) | | $ | (1) | | $ | (2) | | $ | (21) | Recoveries | | | 0 | | | 0 | | | 2 | | | 2 | Additions/(releases) | | | 28 | | | 9 | | | (2) | | | 34 | Other* | | | (13) | | | 0 | | | (1) | | | (14) | Ending balance at June 30, 2020 | | $ | 140 | | $ | 76 | | $ | 37 | | $ | 253 |
* Primarily represents translation adjustments. | | | | | | | | | | | | | (Dollars in millions) | | | | | | | | | | | | | At December 31, 2019: | | Americas | | EMEA | | Asia Pacific | | Total | Recorded investment | | | | | | | | | | | | | Lease receivables | | $ | 3,419 | | $ | 1,186 | | $ | 963 | | $ | 5,567 | Loan receivables | | | 6,726 | | | 3,901 | | | 2,395 | | | 13,022 | Ending balance | | $ | 10,144 | | $ | 5,087 | | $ | 3,359 | | $ | 18,590 | Recorded investment collectively evaluated for impairment | | $ | 10,032 | | $ | 5,040 | | $ | 3,326 | | $ | 18,399 | Recorded investment individually evaluated for impairment | | $ | 112 | | $ | 47 | | $ | 32 | | $ | 191 | | | | | | | | | | | | | | Allowance for credit losses | | | | | | | | | | | | | Beginning balance at January 1, 2019 | | | | | | | | | | | | | Lease receivables | | $ | 53 | | $ | 22 | | $ | 24 | | $ | 99 | Loan receivables | | | 105 | | | 43 | | | 32 | | | 179 | Total | | $ | 158 | | $ | 65 | | $ | 56 | | $ | 279 | Write-offs | | $ | (42) | | $ | (3) | | $ | (18) | | $ | (63) | Recoveries | | | 1 | | | 0 | | | 1 | | | 2 | Additions/(releases) | | | 5 | | | (7) | | | (3) | | | (5) | Other* | | | (1) | | | 0 | | | (1) | | | (2) | Ending balance at December 31, 2019 | | $ | 120 | | $ | 54 | | $ | 36 | | $ | 210 | Lease receivables | | $ | 33 | | $ | 23 | | $ | 16 | | $ | 72 | Loan receivables | | $ | 88 | | $ | 31 | | $ | 20 | | $ | 138 | | | | | | | | | | | | | | Related allowance, collectively evaluated for impairment | | $ | 25 | | $ | 11 | | $ | 4 | | $ | 39 | Related allowance, individually evaluated for impairment | | $ | 96 | | $ | 43 | | $ | 32 | | $ | 171 |
* Primarily represents translation adjustments.
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| Schedule of past due financing receivables |
| | | | | | | | | | | | | | | | | | | | | | | | Amortized | | Billed | | | | | Total | | Amortized | | Cost | | Invoices | | Amortized | (Dollars in millions) | | Amortized | | Cost | | > 90 Days and | | > 90 Days and | | Cost Not | At June 30, 2020: | | Cost | | > 90 Days (1) | | Accruing (1) | | Accruing | | Accruing (2) | Americas | | $ | 9,060 | | $ | 323 | | $ | 231 | | $ | 30 | | $ | 111 | EMEA | | | 4,932 | | | 115 | | | 31 | | | 5 | | | 89 | Asia Pacific | | | 3,201 | | | 48 | | | 20 | | | 4 | | | 29 | Total client financing receivables | | $ | 17,192 | | $ | 486 | | $ | 283 | | $ | 38 | | $ | 229 |
| (1) | At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. |
| (2) | Of the amortized cost not accruing, there is a related allowance of $171 million. Financing income recognized on these receivables was immaterial for the three and six months ended June 30, 2020, respectively. |
| | | | | | | | | | | | | | | | | | | | | | | | Recorded | | Billed | | Recorded | | | Total | | Recorded | | Investment | | Invoices | | Investment | (Dollars in millions) | | Recorded | | Investment | | > 90 Days and | | > 90 Days and | | Not | At December 31, 2019: | | Investment | | > 90 Days (1) | | Accruing (1) | | Accruing | | Accruing (2) | Americas | | $ | 3,419 | | $ | 187 | | $ | 147 | | $ | 11 | | $ | 41 | EMEA | | | 1,186 | | | 28 | | | 13 | | | 2 | | | 17 | Asia Pacific | | | 963 | | | 19 | | | 7 | | | 1 | | | 11 | Total lease receivables | | $ | 5,567 | | $ | 234 | | $ | 168 | | $ | 14 | | $ | 69 | | | | | | | | | | | | | | | | | Americas | | $ | 6,726 | | $ | 127 | | $ | 71 | | $ | 11 | | $ | 72 | EMEA | | | 3,901 | | | 77 | | | 8 | | | 3 | | | 72 | Asia Pacific | | | 2,395 | | | 26 | | | 6 | | | 2 | | | 21 | Total loan receivables | | $ | 13,022 | | $ | 231 | | $ | 85 | | $ | 15 | | $ | 166 | | | | | | | | | | | | | | | | | Total | | $ | 18,590 | | $ | 465 | | $ | 253 | | $ | 29 | | $ | 235 |
| (1) | At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. |
| (2) | Of the recorded investment not accruing, $191 million is individually evaluated for impairment with a related allowance of $171 million. Financing income recognized on these receivables was immaterial for the three and six months ended June 30, 2019, respectively. |
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| Schedule of net recorded investment by credit quality indicator |
| | | | | | | | | | | | | | | | | | | (Dollars in millions) | | Americas | | EMEA | | Asia Pacific | At June 30, 2020: | | Aaa – Baa3 | | Ba1 – D | | Aaa – Baa3 | | Ba1 – D | | Aaa – Baa3 | | Ba1 – D | Vintage year: | | | | | | | | | | | | | | | | | | | 2020 | | $ | 1,556 | | $ | 1,185 | | $ | 925 | | $ | 1,062 | | $ | 548 | | $ | 273 | 2019 | | | 2,076 | | | 1,187 | | | 922 | | | 836 | | | 719 | | | 271 | 2018 | | | 1,173 | | | 608 | | | 403 | | | 328 | | | 498 | | | 221 | 2017 | | | 582 | | | 257 | | | 107 | | | 170 | | | 266 | | | 77 | 2016 | | | 144 | | | 95 | | | 52 | | | 65 | | | 176 | | | 48 | 2015 and prior | | | 57 | | | 140 | | | 37 | | | 27 | | | 80 | | | 24 | Total | | $ | 5,588 | | $ | 3,472 | | $ | 2,444 | | $ | 2,487 | | $ | 2,287 | | $ | 914 |
| | | | | | | | | | | | | | | | | | | (Dollars in millions) | | Lease Receivables | | Loan Receivables | At December 31, 2019: | | Americas | | EMEA | | Asia Pacific | | Americas | | EMEA | | Asia Pacific | Credit rating: | | | | | | | | | | | | | | | | | | | Aaa – Aa3 | | $ | 465 | | $ | 54 | | $ | 43 | | $ | 1,028 | | $ | 193 | | $ | 189 | A1 – A3 | | | 750 | | | 181 | | | 454 | | | 1,186 | | | 395 | | | 892 | Baa1 – Baa3 | | | 955 | | | 409 | | | 147 | | | 1,882 | | | 1,527 | | | 619 | Ba1 – Ba2 | | | 746 | | | 326 | | | 154 | | | 1,513 | | | 921 | | | 388 | Ba3 – B1 | | | 215 | | | 140 | | | 101 | | | 471 | | | 564 | | | 205 | B2 – B3 | | | 242 | | | 50 | | | 47 | | | 522 | | | 253 | | | 72 | Caa – D | | | 13 | | | 2 | | | 2 | | | 36 | | | 18 | | | 10 | Total | | $ | 3,385 | | $ | 1,162 | | $ | 947 | | $ | 6,638 | | $ | 3,871 | | $ | 2,376 |
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