Verizon Wireless 2010 Annual Report Download - page 58

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Accumulated deferred taxes arising from leveraged leases, which are
included in Deferred income taxes, amounted to $2.0 billion at December
31, 2010 and $2.1 billion at December 31, 2009.
The following table is a summary of the components of income from
leveraged leases:
(dollars in millions)
Years Ended December 31, 2010 2009 2008
Pretax income $ 74 $ 83 $ 74
Income tax expense 32 34 30
The future minimum lease payments to be received from noncancelable
capital leases (direct financing and leveraged leases), net of nonrecourse
loan payments related to leveraged leases and allowances for doubtful
accounts, along with payments relating to operating leases for the
periods shown at December 31, 2010, are as follows:
(dollars in millions)
Years
Capital
Leases
Operating
Leases
2011 $ 194 $ 109
2012 156 89
2013 151 71
2014 129 51
2015 85 26
Thereafter 1,800 40
Total $ 2,515 $ 386
As Lessee
We lease certain facilities and equipment for use in our operations under
both capital and operating leases. Total rent expense under operating
leases amounted to $2.5 billion in 2010 and 2009, and $2.2 billion in 2008.
Amortization of capital leases is included in Depreciation and amortiza-
tion expense in the consolidated statements of income. Capital lease
amounts included in Plant, property and equipment are as follows:
(dollars in millions)
At December 31, 2010 2009
Capital leases $ 321 $ 357
Less accumulated amortization 79 126
Total $ 242 $ 231
The aggregate minimum rental commitments under noncancelable
leases for the periods shown at December 31, 2010, are as follows:
(dollars in millions)
Years
Capital
Leases
Operating
Leases
2011 $ 97 $ 1,898
2012 74 1,720
2013 70 1,471
2014 54 1,255
2015 42 1,012
Thereafter 81 5,277
Total minimum rental commitments 418 $ 12,633
Less interest and executory costs 86
Present value of minimum lease payments 332
Less current installments 75
Long-term obligation at December 31, 2010 $ 257
As of December 31, 2010, the total minimum sublease rentals to be
received in the future under noncancelable operating subleases was not
significant.
NOTE 8
LEASING ARRANGEMENTS
As Lessor
We are the lessor in leveraged and direct financing lease agreements for commercial aircraft, power generating facilities, telecommunications equip-
ment, real estate property and other equipment. These leases have remaining terms of up to 40 years as of December 31, 2010. 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 nonrecourse debt relating to leveraged lease transactions. Since we have no general liability for this debt, which holds a senior security
interest in the leased equipment and rentals, the related principal and interest have been offset against the minimum lease payments receivable in
accordance with GAAP. 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, industry and general economic conditions. The credit quality of
our lessees vary from AAA to B-. All accounts are current as of the end of this reporting period. 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. Currently there are no impaired leases.
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, 2010 2009
Leveraged
Leases
Direct Finance
Leases Total
Leveraged
Leases
Direct Finance
Leases Total
Minimum lease payments receivable $ 2,360 $ 155 $ 2,515 $ 2,504 $ 166 $ 2,670
Estimated residual value 1,305 7 1,312 1,410 12 1,422
Unearned income (1,140) (20) (1,160) (1,251) (19) (1,270)
Total $ 2,525 $ 142 $ 2,667 $ 2,663 $ 159 $ 2,822
Allowance for doubtful accounts (152) (158)
Finance lease receivables, net $ 2,515 $ 2,664
Prepaid expenses and other $ 59 $ 72
Other assets 2,456 2,592
$ 2,515 $ 2,664
Notes to Consolidated Financial Statements continued