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FINANCING RECEIVABLES AND OPERATING LEASES
 3 Months Ended
Jun. 30, 2022
FINANCING RECEIVABLES AND OPERATING LEASES [Abstract]  
FINANCING RECEIVABLES AND OPERATING LEASES
3.
FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist primarily of leases of IT and communication equipment and notes receivable from financing customer purchases of third-party software, maintenance, and services. Our leases often include elections for the lessee to purchase the underlying asset at the end of the lease term. Often, our leases provide the lessee a bargain purchase option.

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three months ended June 30, 2022, and 2021 (in thousands):

 
Three months ended June 30,
  
   
2022
    
2021
  
Net sales
  
$
4,983
    
$
3,817
  
Cost of sales
    
4,067
      
3,365
  
Gross profit
  
$
916
    
$
452
  

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three  months ended June 30, 2022, and 2021 (in thousands):

 
Three months ended June 30,
  
   
2022
    
2021
  
Interest income on sales-type leases
  
$
861
    
$
1,290
  
Lease income on operating leases
  
$
4,582
    
$
5,210
  

FINANCING RECEIVABLES—NET

The following tables provide a disaggregation of our financing receivables – net (in thousands):

June 30, 2022
  
Notes
Receivable
    
Lease
Receivables
    
Financing
Receivables
  
Gross receivables
  
$
88,178
    
$
51,103
    
$
139,281
  
Unguaranteed residual value (1)
    
-
      
9,233
      
9,233
  
Unearned income
    
(3,346
)
    
(4,996
)
    
(8,342
)
Allowance for credit losses (2)
    
(792
)
    
(913
)
    
(1,705
)
Total, net
  
$
84,040
    
$
54,427
    
$
138,467
  
Reported as:
                        
Current
  
$
52,547
    
$
22,623
    
$
75,170
  
Long-term
    
31,493
      
31,804
      
63,297
  
Total, net
  
$
84,040
    
$
54,427
    
$
138,467
  

  (1)
Includes unguaranteed residual values of $5,607 thousand that we retained after selling the related lease receivable.
(2)
Refer to Note 6, “Allowance for Credit Losses” for details.

March 31, 2022
  
Notes
Receivable
    
Lease
Receivables
    
Financing
Receivables
  
Gross receivables
  
$
80,517
    
$
38,788
    
$
119,305
  
Unguaranteed residual value (1)
    
-
      
9,141
      
9,141
  
Unearned income
    
(2,728
)
    
(3,604
)
    
(6,332
)
Allowance for credit losses (2)
    
(708
)
    
(681
)
    
(1,389
)
Total, net
  
$
77,081
    
$
43,644
    
$
120,725
  
Reported as:
                        
Current
  
$
45,415
    
$
16,077
    
$
61,492
  
Long-term
    
31,666
      
27,567
      
59,233
  
Total, net
  
$
77,081
    
$
43,644
    
$
120,725
  

(1)
Includes unguaranteed residual values of $6,424 thousand that we retained after selling the related lease receivable.
(2)
Refer to Note 6, “Allowance for Credit Losses” for details.

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as sales-type leases. The components of the operating leases—net are as follows (in thousands):

 
June 30,
2022
    
March 31,
2022
  
Cost of equipment under operating leases
  
$
14,322
    
$
13,044
  
Accumulated depreciation
    
(8,900
)
    
(7,985
)
Investment in operating lease equipment—net (1)
  
$
5,422
    
$
5,059
  

(1)
Amounts include estimated unguaranteed residual values of $1.8 million and $1.7 million as of June 30, 2022, and March 31, 2022, respectively.

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as sales or secured borrowings.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of June 30, 2022, and March 31, 2022, we had financing receivables of $29.0 million and $21.1 million, respectively, and operating leases of $1.8 million and $2.0 million, respectively, which were collateral for non-recourse notes payable. See Note 7, “Credit Facility and Notes Payable.”

For transfers accounted for as a sale, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended June 30, 2022, and 2021, we recognized net gains of $1.8 million and $3.2 million, respectively, and total proceeds from these sales were $52.5 million and $75.3 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of June 30, 2022, and March 31, 2022, we had deferred revenue of $0.4 million and $0.5 million, respectively, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects to early terminate the lease. As of June 30, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.