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Note6
Leasing Arrangements
As Lessor
We are the lessor in leveraged and direct financing lease agree-
ments for commercial aircraft and power generating facilities, which
comprise the majority of our leasing portfolio along with telecom-
munications equipment, commercial real estate property and other
equipment. These leases have remaining terms of up to 23 years as of
December31, 2015. In addition, we lease space on certain of our cell
towers to other wireless carriers. Minimum lease payments receivable
represent unpaid rentals, less principal and interest on third-party non-
recourse debt relating to leveraged lease transactions. Since we have
no general liability for this debt, which is secured by a senior security
interest in the leased equipment and rentals, the related principal and
interest have been offset against the minimum lease payments. All
recourse debt is reflected in our consolidated balance sheets.
At each reporting period, we monitor the credit quality of the various
lessees in our portfolios. Regarding the leveraged lease portfolio,
external credit reports are used where available and where not
available we use internally developed indicators. These indicators or
internal credit risk grades factor historic loss experience, the value of
the underlying collateral, delinquency trends, and industry and general
economic conditions. The credit quality of our lessees varies from A
to CCC+. For each reporting period, the leveraged leases within the
portfolio are reviewed for indicators of impairment where it is probable
the rent due according to the contractual terms of the lease will not be
collected. All significant accounts, individually or in the aggregate, are
current and none are classified as impaired.
Finance lease receivables, which are included in Prepaid expenses and other and Other assets in our consolidated balance sheets, are
comprised of the following:
(dollars in millions)
At December31, 2015 2014
Leveraged
Leases
Direct
Finance
Leases Total
Leveraged
Leases
Direct
Finance
Leases Total
Minimum lease payments receivable $ 778 $ 7 $ 785 $ 1,095 $ 8 $ 1,103
Estimated residual value 496 2 498 600 2 602
Unearned income (309) (2) (311) (535) (2) (537)
Total $ 965 $ 7 $ 972 $ 1,160 $ 8 $ 1,168
Allowance for doubtful accounts (78) (78)
Finance lease receivables, net $ 894 $ 1,090
Prepaid expenses and other $ 3 $ 4
Other assets 891 1,086
$ 894 $ 1,090
Accumulated deferred taxes arising from leveraged leases, which are included in Deferred income taxes, amounted to $0.8billion at
December31, 2015 and $0.9billion at December31, 2014.
54 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued