13. Receivables from financial services
Receivables from financial services are comprised of the following:
Show table:
Types of receivables. Retail receivables include loans and finance leases to end users of the Group’s products who purchased their vehicle either from a dealer or directly from Daimler.
Wholesale receivables represent loans for floor financing programs for vehicles sold by the Group’s automotive businesses to dealers or loans for assets purchased by dealers from third parties, primarily used vehicles traded in by dealers’ customer or real estate such as dealer showrooms.
Other receivables mainly represent non-automotive assets from contracts of the financial services business with third parties.
In 2009, a risk sharing agreement between Daimler and its independent dealers in connection with residual values was modified, which also affected existing lease contracts accounted for as finance leases and shown under retail receivables. Due to these contractual changes, the affected lease contracts were reclassified as operating leases. In consequence, these lease contracts with a carrying amount of €1.2 billion are reported under equipment on operating leases.
All cash flow effects attributable to receivables from financial services are presented within cash provided by (used for) operating activities in the consolidated statement of cash flows.
Allowances. Changes in the allowance account for receivables from financial services were as follows:
|
| in millions of € |
|
|
|
|
|
|
|
| Balance at January 1 |
934 |
594 |
924 |
| Charged to costs and expenses |
850 |
712 |
457 |
| Amounts written off |
(446) |
(237) |
(321) |
| Reversals |
(165) |
(131) |
(153) |
| Disposal of Chrysler activities |
- |
- |
(310) |
| Currency translation and other changes |
(5) |
(4) |
(3) |
| Balance at December 31 |
1,168 |
934 |
594 |
The total expense relating to impairment losses on receivables from financial services amounted to €853 million (2008: €730 million; 2007: €487 million).
Credit risks. The following chart gives an overview of credit risks included in receivables from financial services:
|
| in millions of € |
|
|
|
|
|
| Receivables, neither past due nor impaired individually |
35,270 |
39,027 |
| Receivables past due, not impaired individually |
|
|
less than 30 days
|
1,219 |
1,458 |
30 to 59 days
|
442 |
443 |
60 to 89 days
|
121 |
127 |
90 to 119 days
|
78 |
59 |
120 days or more
|
184 |
127 |
| Total |
2,044 |
2,214 |
| Receivables impaired individually |
1,164 |
1,146 |
| Carrying amount, net |
38,478 |
42,387 |
Receivables not subject to an individual impairment assessment are grouped and subject to collective impairment allowances to cover credit losses.
The carrying amount of receivables from financial services of which the terms have been renegotiated and that would otherwise be past due or impaired as of December 31, 2009 was €135 million (2008: €222 million).
Further information on financial risks and nature of risks is
provided in Note 30.
Finance leases. Finance leases consist of sales-types leases of vehicles to the Group’s direct retail customers and of direct-financing leases of vehicles to customers of the Group’s independent dealers including leveraged leases of non-automotive assets to third parties.
Maturities of the finance lease contracts are comprised as follows:
Show table:
Leveraged leases. Leveraged leases which are included in the above table also involve those leveraged lease arrangements which are recorded net of non-recourse debt. Revenue is recognized based on the effective interest method using the implicit rate of return that considers the net cash flows underlying the transactions.
In 2009, a number of assets under these leverage lease contracts were sold. The sales were combined with a before maturity termination of the lease contracts(see Note 2). In addition, investments under selected leveraged lease contracts with a fair value less costs to sell of €310 million were recorded under assets held for sale (see Note 18).
The remaining investments in leveraged leases shown in the receivables of financial services consist of a sewage treatment plant and railroad rolling stock; the contractual maturities range from 30 to 32 years. The carrying amount of leveraged leases as of December 31, 2009 and December 31, 2008 was €169 million and €1,304 million, respectively. Daimler recognized income of €5 million (2008: €36 million; 2007: €38 million) relating to these transactions, which is included in revenue.
Sale of receivables. Based on market conditions and liquidity needs, Daimler may sell portfolios of retail and wholesale receivables to third parties (i.e. special purpose entities). At the time of the sale, Daimler determines whether the legally transferred receivables meet the criteria for derecognition in conformity with the appropriate provisions. If the criteria are not met, the receivables continue to be recognized in the Group’s consolidated statement of financial position.
As of December 31, 2009, the carrying amount of receivables from financial services sold but not derecognized for accounting purposes amounted to €1,006 million (2008: €697 million). The associated risks and rewards are similar to those with respect to receivables from financial services that have not been transferred. For information on the related total liabilities associated with these receivables sold but not derecognized, see Note 23.
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