Financing Receivable

6 Months Ended

Jun. 30, 2019

(7) Financing Receivable

In April 2019, the Company entered into an agreement with a customer to purchase rental equipment and to lease the equipment back to the customer on a finance lease. As control of the equipment has been retained by the customer, the Company concluded that sale-leaseback accounting was not applicable and has treated the arrangement as a financing transaction. The amount paid by the Company has been recorded as a financing receivable. Payments made by the customer are recorded as a reduction to the financing receivable and as interest income, calculated using the effective interest method.

The following table summarizes the components of the Company’s financing receivable (in thousands):


		June 30,
	Financial statement caption	2019
Current	Prepaid expenses and other current assets	$	3,458
Non-current	Financing receivable		31,948
Total financing receivable		$	35,406

In order to estimate an allowance for losses from financing receivables, the Company reviews the credit worthiness of its customers on an ongoing basis. As of June 30, 2019, the Company’s financing receivable of $35.4 million would be categorized as Tier 1 based on the internal customer credit ratings as described in Note 6.