7.	Financing Receivables and Guarantees

(a) Financing Receivables

Financing receivables primarily consist of lease receivables, loan receivables, and financed service contracts and other. Lease receivables represent sales-type and direct-financing leases resulting from the sale of the Company's and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average while loan receivables generally have terms of up to three years. The financed service contracts and other category includes financing receivables related to technical support and advanced services, as well as an insignificant amount of receivables related to financing of certain indirect costs associated with leases. Revenue related to the technical support services is typically deferred and included in deferred service revenue and is recognized ratably over the period during which the related services are to be performed, which typically ranges from one to three years.

A summary of the Company's financing receivables is presented as follows (in millions):


January 28, 2012	Lease Receivables			Loan Receivables			Financed Service Contracts & Other⁽¹⁾			Total Financing Receivables
Gross	$	3,293		$	1,673		$	2,666		$	7,632
Unearned income		(244	)		—			—			(244	)
Allowance for credit loss		(250	)		(110	)		(9	)		(369	)

Total, net	$	2,799		$	1,563		$	2,657		$	7,019

Reported as:
Current	$	1,155		$	932		$	1,460		$	3,547
Noncurrent		1,644			631			1,197			3,472

Total, net	$	2,799		$	1,563		$	2,657		$	7,019


July 30, 2011	Lease Receivables			Loan Receivables			Financed Service Contracts & Other⁽¹⁾			Total Financing Receivables
Gross	$	3,111		$	1,468		$	2,637		$	7,216
Unearned income		(250	)		—			—			(250	)
Allowance for credit loss		(237	)		(103	)		(27	)		(367	)

Total, net	$	2,624		$	1,365		$	2,610		$	6,599

Reported as:
Current	$	1,087		$	673		$	1,351		$	3,111
Noncurrent		1,537			692			1,259			3,488

Total, net	$	2,624		$	1,365		$	2,610		$	6,599

⁽¹⁾	As of January 28, 2012 and July 30, 2011, the deferred service revenue related to financed service contracts and other was $1,951 million and $2,044 million, respectively.

Contractual maturities of the gross lease receivables at January 28, 2012 are summarized as follows (in millions):


Fiscal Year	Amount
2012 (remaining six months)	$	766
2013		1,132
2014		803
2015		415
2016		156
Thereafter		21

Total	$	3,293

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

(b) Credit Quality of Financing Receivables

Financing receivables categorized by the Company's internal credit risk rating as of January 28, 2012 and July 30, 2011 are summarized as follows (in millions):


	INTERNAL CREDIT RISK RATING
January 28, 2012	1 to 4		5 to 6		7 and Higher		Total		Residual Value		Gross Receivables, Net of Unearned Income
Lease receivables	$	1,502	$	1,226	$	31	$	2,759	$	290	$	3,049
Loan receivables		744		899		30		1,673		—		1,673
Financed service contracts & other		1,660		938		68		2,666		—		2,666

Total	$	3,906	$	3,063	$	129	$	7,098	$	290	$	7,388

	INTERNAL CREDIT RISK RATING
July 30, 2011	1 to 4		5 to 6		7 and Higher		Total		Residual Value		Gross Receivables, Net of Unearned Income
Established Markets
Lease receivables	$	1,214	$	1,182	$	23	$	2,419	$	292	$	2,711
Loan receivables		204		187		4		395		—		395
Financed service contracts & other		1,622		939		52		2,613		—		2,613

Total Established Markets	$	3,040	$	2,308	$	79	$	5,427	$	292	$	5,719


Growth Markets
Lease receivables	$	35	$	93	$	18	$	146	$	4	$	150
Loan receivables		458		580		35		1,073		—		1,073
Financed service contracts & other		1		19		4		24		—		24

Total Growth Markets	$	494	$	692	$	57	$	1,243	$	4	$	1,247

Total	$	3,534	$	3,000	$	136	$	6,670	$	296	$	6,966

The Company determines the adequacy of its allowance for credit loss by assessing the risks and losses inherent in its financing receivables by portfolio segment. The portfolio segment is based on the types of financing offered by the Company to its customers: lease receivables, loan receivables, and financed service contracts and other. Effective in the second quarter of fiscal 2012, the Company combined its financing receivables into a single class as the two prior classes, Established Markets and Growth Markets, now exhibit similar risk characteristics as reflected by the Company's historical losses. In addition, effective in the second quarter of fiscal 2012, the Company also refined its methodology for calculating its allowance for financing receivables as discussed under (c) Allowance for Credit Loss Rollforward.

The Company's internal credit risk ratings of 1 through 4 correspond to investment-grade ratings, while credit risk ratings of 5 and 6 correspond to non-investment-grade ratings. Credit risk ratings of 7 and higher correspond to substandard ratings and constitute a relatively small portion of the Company's financing receivables.

In circumstances when collectability is not deemed reasonably assured, the associated revenue is deferred in accordance with the Company's revenue recognition policies, and the related allowance for credit loss, if any, is included in deferred revenue. The Company also records deferred revenue associated with financing receivables when there are remaining performance obligations, as it does for financed service contracts. Total allowances for credit loss and deferred revenue as of January 28, 2012 and July 30, 2011 were $2,599 million and $2,793 million, respectively, and they were associated with financing receivables (net of unearned income) of $7,388 million and $6,966 million as of their respective period ends. The losses that the Company has incurred historically as well as in the periods presented with respect to its financing receivables have been immaterial and consistent with the performance of an investment-grade portfolio. The Company did not modify any financing receivables during the periods presented.

The following tables present the aging analysis of financing receivables as of January 28, 2012 and July 30, 2011 (in millions):


	DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
January 28, 2012	31-60		61-90		91+		Total Past Due		Current		Gross Receivables, Net of Unearned Income		Non- Accrual Financing Receivables		Impaired Financing Receivables
Lease receivables	$	180	$	55	$	188	$	423	$	2,626	$	3,049	$	24	$	14
Loan receivables		16		26		6		48		1,625		1,673		5		4
Financed service contracts & other		129		63		211		403		2,263		2,666		11		7

Total	$	325	$	144	$	405	$	874	$	6,514	$	7,388	$	40	$	25


	DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
July 30, 2011	31-60		61-90		91+		Total Past Due		Current		Gross Receivables, Net of Unearned Income		Non- Accrual Financing Receivables		Impaired Financing Receivables
Established Markets
Lease receivables	$	85	$	33	$	139	$	257	$	2,454	$	2,711	$	16	$	6
Loan receivables		6		1		9		16		379		395		1		1
Financed service contracts & other		68		33		265		366		2,247		2,613		17		6

Total Established Markets	$	159	$	67	$	413	$	639	$	5,080	$	5,719	$	34	$	13


Growth Markets
Lease receivables	$	4	$	2	$	13	$	19	$	131	$	150	$	18	$	18
Loan receivables		2		6		12		20		1,053		1,073		3		3
Financed service contracts & other		—		—		—		—		24		24		—		—

Total Growth Markets	$	6	$	8	$	25	$	39	$	1,208	$	1,247	$	21	$	21

Total	$	165	$	75	$	438	$	678	$	6,288	$	6,966	$	55	$	34

Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables are presented by contract and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract. The preceding aging tables exclude pending adjustments on billed tax assessment in certain international markets. The balances of either unbilled or current financing receivables included in the greater-than-90 days past due category for lease receivables, loan receivables, and financed service contracts and other were, respectively, $148 million, $3 million, and $169 million as of January 28, 2012; and were, respectively, $116 million, $15 million, and $230 million as of July 30, 2011.

As of January 28, 2012, the Company had financing receivables of $80 million, net of unbilled or current receivables from the same contract, that were in the greater-than-90 days past due category but remained on accrual status. Such balance was $50 million as of July 30, 2011. A financing receivable may be placed on non-accrual status earlier if, in management's opinion, a timely collection of the full principal and interest becomes uncertain.

(c) Allowance for Credit Loss Rollforward

The allowances for credit loss and the related financing receivables are summarized as follows (in millions):


Allowance for Credit Loss	Lease Receivables			Loan Receivables			Financed Service Contracts & Other			Total
BALANCE AT JULY 30, 2011	$	237		$	103		$	27		$	367
Provisions		2			5			2			9
Foreign exchange and other		(6	)		(5	)		—			(11	)

BALANCE AT OCTOBER 29, 2011		233			103			29			365
Provisions		18			4			(18	)		4
Foreign exchange and other		(1	)		3			(2	)		—

BALANCE AT JANUARY 28, 2012	$	250		$	110		$	9		$	369

Gross receivables, net of unearned income, as of January 28, 2012	$	3,049		$	1,673		$	2,666		$	7,388


Allowance for Credit Loss	Lease Receivables			Loan Receivables			Financed Service Contracts & Other			Total
BALANCE AT JULY 31, 2010	$	207		$	73		$	21		$	301
Provisions		6			(15	)		3			(6	)
Write offs, net of recoveries		(1	)		—			(1	)		(2	)
Foreign exchange and other		20			22			—			42

BALANCE AT OCTOBER 30, 2010		232			80			23			335
Provisions		15			24			4			43
Foreign exchange and other		(14	)		(20	)		—			(34	)

BALANCE AT JANUARY 29, 2011	$	233		$	84		$	27		$	344

Gross receivables, net of unearned income, as of January 29, 2011	$	2,513		$	1,294		$	2,285		$	6,092

When determining the allowances for credit loss, financing receivables are evaluated on an individual or a collective basis. When evaluating lease and loan receivables and the earned portion of financed service contracts for possible impairment on an individual basis, the Company considers historical experience, credit quality, age of the receivable balances, and economic conditions that may affect a customer's ability to pay. When the evaluation indicates that it is probable that all amounts due pursuant to the contractual terms of the financing agreement, including scheduled interest payments, are unable to be collected, the financing receivable is considered impaired. All such outstanding amounts, including any accrued interest, are assessed at the customer level and will be fully reserved. Typically, the Company considers receivables with a risk rating of 8 or higher to be impaired. Financing receivables that were individually evaluated for impairment during the periods presented were not material and therefore are not presented separately in the preceding tables.

The Company evaluates the remainder of its financing receivables portfolio for impairment on a collective basis and records an allowance for credit loss at the portfolio segment level. Effective at the beginning of the second quarter of fiscal 2012, the Company refined its methodology for determining the portion of its allowance for credit loss that is evaluated on a collective basis. The refinement consists of more systematically giving effect to economic conditions, concentration of risk and correlation. The Company also began to use expected default frequency rates published by a major third-party credit-rating agency as well as its own historical loss rate in the event of default. Previously the Company used only historical loss rates published by the same third-party credit-rating agency. These refinements are intended to better identify changes in macroeconomic conditions and credit risk. There was not a material change to the Company's total allowance for credit loss related to financing receivables as a result of these methodology refinements. See the Company's Annual Report on Form 10-K for the fiscal year ended July 30, 2011 for a discussion of the methodology applied in previous periods.

(d) Financing Guarantees

In the ordinary course of business, the Company provides financing guarantees for various third-party financing arrangements extended to channel partners and end-user customers. Payments under these financing guarantee arrangements were not material for the periods presented.

Channel Partner Financing Guarantees The Company facilitates arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners and, in some cases, the Company guarantees a portion of these arrangements. The volume of channel partner financing was $5.4 billion and $4.5 billion for the three months ended January 28, 2012 and January 29, 2011, respectively. The volume of channel partner financing was $10.7 billion and $9.0 billion for the six months ended January 28, 2012 and January 29, 2011, respectively. The balance of the channel partner financing subject to guarantees was $1.6 billion as of January 28, 2012 and $1.4 billion as of July 30, 2011.

End-User Financing Guarantees The Company also provides financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans that typically have terms of up to three years. The volume of financing provided by third parties for leases and loans on which the Company had provided guarantees was $60 million and $74 million for the three months ended January 28, 2012 and January 29, 2011, respectively, and was $95 million and $109 million for the six months ended January 28, 2012 and January 29, 2011, respectively.

Financing Guarantee Summary The aggregate amount of financing guarantees outstanding at January 28, 2012 and July 30, 2011, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue are summarized in the following table (in millions):


	January 28, 2012			July 30, 2011
Maximum potential future payments relating to financing guarantees:
Channel partner	$	353		$	336
End user		247			277

Total	$	600		$	613

Deferred revenue associated with financing guarantees:
Channel partner	$	(240	)	$	(248	)
End user		(224	)		(248	)

Total	$	(464	)	$	(496	)

Maximum potential future payments relating to financing guarantees, net of associated deferred revenue	$	136		$	117