10. Long-term Customer Financing and Sales of Receivables

Long-term Customer Financing

Long-term receivables consist of trade receivables with payment terms greater than twelve months, long-term loans and lease receivables under sales-type leases. Long-term receivables consist of the following:


December 31	*2011*			2010
Long-term receivables	$	177		$	265
Less allowance for losses		(10	)		(1	)

		167			264
Less current portion		130			(13	)

Non-current long-term receivables, net	$	37		$	251

The current portion of long-term receivables is included in Accounts receivable and the non-current portion of long-term receivables is included in Other assets in the Company's consolidated balance sheets. Interest income recognized on long-term receivables for the years ended December 31, 2011, 2010 and 2009 was $15 million, $14 million and $2 million, respectively.

Certain purchasers of the Company's products and services may request that the Company provide long-term financing (defined as financing with a term of greater than one year) in connection with the sale of products and services. These requests may include all or a portion of the purchase price of the products and services. The Company's obligation to provide long-term financing may be conditioned on the issuance of a letter of credit in favor of the Company by a reputable bank to support the purchaser's credit or a pre-existing commitment from a reputable bank to purchase the long-term receivables from the Company. The Company had outstanding commitments to provide long-term financing to third parties totaling $138 million at December 31, 2011, compared to $333 million at December 31, 2010 (including $168 million at December 31, 2010, relating to discontinued operations). Of the $333 million at December 31, 2010, $27 million was supported by letters of credit or by bank commitments to purchase long-term receivables at December 31, 2010, (including $25 million at December 31, 2010, related to discontinued operations). The majority of the outstanding commitments at December 31, 2011 are related to a variety of U.S. state and local government customers.

The Company retained the funded portion of the financing arrangements related to the Networks business following the sale to NSN, which totaled a net amount of $127 million at December 31, 2011. These receivables have an allowance for uncollectable accounts of $10 million. As of December 31, 2011, $37 million of net receivables are classified as long-term. The remainder of the retained receivables are current and included in Accounts receivable, net.

Sales of Receivables

From time to time, the Company sells accounts receivable and long-term receivables on a non-recourse basis to third parties under one-time arrangements while others are sold to third parties under committed facilities that involve contractual commitments from these parties to purchase qualifying receivables up to an outstanding monetary limit. Committed facilities may be revolving in nature and, typically, must be renewed annually. The Company may or may not retain the obligation to service the sold accounts receivable and long-term receivables.

The Company had no revolving sales facilities as of December 31, 2011. At December 31, 2010, the Company had a $200 million committed revolving credit facility for the sale of accounts receivable, which was fully available. The $200 million facility matured in December 2011 and was not renewed by the Company. The Company had no significant committed facilities for the sale of long-term receivables at December 31, 2011 and 2010, respectively.

The following table summarizes the proceeds received from non-recourse sales of accounts receivable and long-term receivables for the years ended December 31, 2011, 2010 and 2009.


Years Ended December 31	*2011*		2010		2009
Cumulative annual proceeds received from one-time sales:
Accounts receivable sales proceeds	$	8	$	30	$	46
Long-term receivables sales proceeds		224		67		72

Total proceeds from one-time sales		232		97		118
Cumulative annual proceeds received from sales under committed facilities		—		70		234

Total proceeds from receivables sales	$	232	$	167	$	352

At December 31, 2011, the Company had retained servicing obligations for $263 million of long-term receivables, compared to $329 million of sold accounts receivables and $277 million of long-term receivables at December 31, 2010. Servicing obligations are limited to collection activities related to the non-recourse sales of accounts receivables and long-term receivables.

At December 31, 2011, the Company was subject to a recourse obligation related to $125 million of accounts receivables sold during 2011 generated by the Networks business and retained after the sale to NSN. This obligation is only triggered upon the insufficiency of a third party legally binding support letter backing the sold receivables. The conditions which must occur in order for the Company to be required to make a payment under this obligation are deemed remote and the fair value of this obligation at the outset of the arrangement and as of December 31, 2011, is zero.

Under certain arrangements, the value of accounts receivable sold is supported by credit insurance purchased from third-party insurance companies, less deductibles or self-insurance requirements under the insurance policies. Under these arrangements, the Company's total credit exposure, less insurance coverage, to outstanding accounts receivable that have been sold was de minimus at December 31, 2011 and 2010, respectively.

Credit Quality of Customer Financing Receivables and Allowance for Credit Losses

An aging analysis of financing receivables at December 31, 2011 and December 31, 2010 is as follows:


December 31, 2011	Total Long-term Receivable		Current Billed Due		Past Due Under 90 Days		Past Due Over 90 Days
Municipal leases secured tax exempt	$	14	$	—	$	—	$	—
Commercial loans and leases secured	$	61	$	1	$	2	$	—
Commercial loans unsecured	$	102	$	—	$	—	$	—

Total gross long-term receivables, including current portion	$	177	$	1	$	2	$	—


December 31, 2010	Total Long-term Receivable		Current Billed Due		Past Due Under 90 Days		Past Due Over 90 Days
Municipal leases secured tax exempt	$	16	$	—	$	—	$	—
Commercial loans and leases secured	$	67	$	1	$	—	$	—
Commercial loans unsecured	$	182	$	—	$	—	$	—

Total gross long-term receivables	$	265	$	1	$	—	$	—

The Company uses an internally developed credit risk rating system for establishing customer credit limits. This system is aligned and comparable to the rating systems utilized by independent rating agencies.

The Company's policy for valuing the allowance for credit losses is to review for collectability on an individual receivable basis. All customer financing receivables are reviewed for collectability. For those receivables where collection risk is probable, the Company calculates the value of impairment based on the net present value of expected future cash flows from the customer less the fair value of any collateral.

The Company did not have any financing receivables past due over 90 days as of December 31, 2011 or December 31, 2010. However, a $10 million reserve was established at December 31, 2011 in relation to collectability issues on a loan related to the funded portion of the financing arrangements from the Networks business following the sale to NSN. This loan was placed on nonaccrual status as of December 31, 2011.