3. Investment in equipment and leases, net:

The Company’s investment in leases consists of the following (in thousands):


						Depreciation/
			Reclassifications		Amortization
	Balance		&			Expense or		Balance
	December 31,		Additions /			Amortization		March 31,
	2016		Dispositions			of Leases		2017
Net investment in operating leases	$	2,757	$	(28)		$	(62)	$	2,667
Assets held for sale or lease, net		697		6			-		703
Initial direct costs, net of accumulated amortization of $2 at March 31, 2017 and $1 at December 31, 2016		12		-			(1)		11
Total	$	3,466	$	(22)		$	(63)	$	3,381

Impairment of investments in leases and assets held for sale or lease:

Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the Company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract, if any. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances. As a result of these reviews, management determined that no impairment losses existed during the three months ended March 31, 2017 and 2016.

The Company utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $62 thousand and $77 thousand for the respective three months ended March 31, 2017 and 2016. Initial direct costs amortization expense related to the Company’s operating leases totaled $1 thousand and $0 for each of the respective three month periods ended March 31, 2017 and 2016.

All of the remaining property on lease, including capitalized improvements, were acquired during the years 1999 through 2015.

Operating leases:

Property on operating leases consists of the following (in thousands):


	Balance				Reclassifications		Balance
	December 31,				or		March 31,
	2016		Additions		Dispositions		2017
Transportation, rail	$	15,111	$	-	$	(40)	$	15,071
Containers		6,970		-		(275)		6,695
Aviation		11		-		(1)		10
		22,092		-		(316)		21,776
Less accumulated depreciation		(19,335)		(62)		288		(19,109)
Total	$	2,757	$	(62)	$	(28)	$	2,667

The average estimated residual value for assets on operating leases was 12% of the assets’ original cost at both March 31, 2017 and December 31, 2016. There were no operating leases in non-accrual status at March 31, 2017 and December 31, 2016.

The Company may earn revenues from its containers, rail transportation, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of operating lease revenues, and totaled $260 thousand and $309 thousand for the respective three months ended March 31, 2017 and 2016.

Direct financing leases:

There were no investments in direct financing leases as of March 31, 2017 or December 31, 2016.

At March 31, 2017, the aggregate amounts of future lease payments receivable are as follows (in thousands):


		Operating Leases
Nine months ending December 31, 2017	$	1,213
Year ending December 31, 2018		1,367
2019		1,102
2020		375
2021		48
	$	4,105

As indicated in Note 1, the Company is scheduled to terminate no later than December 31, 2019. In the event that any assets remain at such date, the Fund will venture to dispose of such assets in an orderly manner within a reasonable timeframe.

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2017, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):


Equipment category		Useful Life
Transportation, rail		35 - 40
Aviation equipment		15 - 20
Containers		15 - 20