Financing Receivables (Tables)

3 Months Ended

Mar. 31, 2020

Financing Receivables

Summary of the components of financing receivables

	Investment in				Client Loan and
	Sales-Type and		Commercial		Installment Payment
(Dollars in millions)	Direct Financing		Financing		Receivables
At March 31, 2020:	Leases		Receivables		(Loans)		Total
Financing receivables, gross	$	5,479	$	2,334	$	12,605	$	20,418
Unearned income		(471)		(3)		(517)		(991)
Residual value*		646		—		—		646
Amortized cost	$	5,654	$	2,331	$	12,087	$	20,072
Allowance for credit losses		(79)		(12)		(147)		(238)
Total financing receivables, net	$	5,575	$	2,319	$	11,940	$	19,834
Current portion	$	2,112	$	2,319	$	7,695	$	12,126
Noncurrent portion	$	3,463	$	—	$	4,245	$	7,708

* Includes guaranteed and unguaranteed residual value.

	Investment in				Client Loan and
	Sales-Type and		Commercial		Installment Payment
(Dollars in millions)	Direct Financing		Financing		Receivables
At December 31, 2019:	Leases		Receivables		(Loans)		Total
Financing receivables, gross	$	6,077	$	3,836	$	13,592	$	23,504
Unearned income		(509)		(4)		(570)		(1,083)
Recorded investment	$	5,567	$	3,831	$	13,022	$	22,421
Allowance for credit losses		(72)		(11)		(138)		(221)
Unguaranteed residual value		652		—		—		652
Guaranteed residual value		53		—		—		53
Total financing receivables, net	$	6,199	$	3,820	$	12,884	$	22,904
Current portion	$	2,334	$	3,820	$	8,037	$	14,192
Noncurrent portion	$	3,865	$	—	$	4,847	$	8,712

Schedule of financing receivables and allowance for credit losses by portfolio segment

(Dollars in millions)
At March 31, 2020:	Americas		EMEA		Asia Pacific		Total
Amortized cost
Lease receivables	$	3,609	$	1,122	$	923	$	5,654
Loan receivables		6,151		3,663		2,273		12,087
Ending balance	$	9,760	$	4,785	$	3,196	$	17,741
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
Lease receivables	$	44	$	27	$	18	$	89
Loan receivables		98		42		22		163
Total	$	142	$	69	$	41	$	252
Write-offs	$	(16)	$	(1)	$	(2)	$	(19)
Recoveries		0		—		1		1
Provision		3		7		(1)		9
Other*		(13)		(2)		(1)		(16)
Ending balance at March 31, 2020	$	117	$	73	$	36	$	226
Lease receivables	$	41	$	23	$	15	$	79
Loan receivables	$	75	$	50	$	22	$	147

*  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
Provision		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.

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 March 31, 2020:	Cost		> 90 Days (1)		Accruing (1)		Accruing		Accruing (2)
Americas	$	3,609	$	144	$	110	$	8	$	40
EMEA		1,122		20		6		0		16
Asia Pacific		923		24		13		1		10
Total lease receivables	$	5,654	$	188	$	129	$	9	$	65
Americas	$	6,151	$	115	$	62	$	11	$	54
EMEA		3,663		74		7		3		69
Asia Pacific		2,273		27		10		1		17
Total loan receivables	$	12,087	$	215	$	80	$	16	$	140
Total	$	17,741	$	403	$	209	$	26	$	206

(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 was a related allowance of $148 million. Financing income recognized on these receivables was immaterial for the three months ended March 31, 2020.

					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 was individually evaluated for impairment with a related allowance of $171 million.

Schedule of net recorded investment by credit quality indicator

(Dollars in millions)	Americas				EMEA				Asia Pacific
At March 31, 2020:	Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D
Vintage year:
2020	$	1,422	$	883	$	633	$	806	$	251	$	163
2019		2,213		1,601		966		1,043		1,607		678
2018		1,148		736		400		359		208		82
2017		722		386		141		191		79		37
2016		292		309		94		68		36		20
2015 and prior		18		30		45		40		20		16
Total	$	5,815	$	3,945	$	2,278	$	2,506	$	2,200	$	996

(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