Verizon Wireless 2012 Annual Report Download - page 65

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Accumulated deferred taxes arising from leveraged leases, which are
included in Deferred income taxes, amounted to $1.2 billion at December
31, 2012 and $1.6 billion at December 31, 2011.
The following table is a summary of the components of income from
leveraged leases:
(dollars in millions)
Years Ended December 31, 2012 2011 2010
Pretax income $ 30 $ 61 $ 74
Income tax expense 12 24 32
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 expected receipts relating to operating leases for
the periods shown at December 31, 2012, are as follows:
(dollars in millions)
Years
Capital
Leases
Operating
Leases
2013 $ 123 $ 184
2014 45 162
2015 52 139
2016 122 114
2017 38 89
Thereafter 931 90
Total $ 1,311 $ 778
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 2012, 2011 and 2010, respectively.
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, 2012 2011
Capital leases $ 358 $ 362
Less accumulated amortization 158 132
Total $ 200 $ 230
The aggregate minimum rental commitments under noncancelable
leases for the periods shown at December 31, 2012, are as follows:
(dollars in millions)
Years
Capital
Leases
Operating
Leases
2013 $ 86 $ 2,038
2014 67 1,840
2015 57 1,572
2016 54 1,280
2017 44 992
Thereafter 99 4,119
Total minimum rental commitments 407 $ 11,841
Less interest and executory costs 109
Present value of minimum lease payments 298
Less current installments 64
Long-term obligation at December 31, 2012 $ 234
NOTE 7
LEASING ARRANGEMENTS
As Lessor
We are the lessor in leveraged and direct financing lease agreements for commercial aircraft and power generating facilities, which comprise the
majority of our leasing portfolio along with telecommunications equipment, commercial real estate property and other equipment. These leases
have remaining terms of up to 38 years as of December 31, 2012. 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 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 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, and industry and general economic conditions. The credit quality
of our lessees primarily varies from AAA 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, 2012 2011
Leveraged
Leases
Direct Finance
Leases Total
Leveraged
Leases
Direct Finance
Leases Total
Minimum lease payments receivable $ 1,253 $ 58 $ 1,311 $ 1,610 $ 119 $ 1,729
Estimated residual value 923 6 929 1,202 9 1,211
Unearned income (654) (10) (664) (874) (19) (893)
Total $ 1,522 $ 54 $ 1,576 $ 1,938 $ 109 $ 2,047
Allowance for doubtful accounts (99) (137)
Finance lease receivables, net $ 1,477 $ 1,910
Prepaid expenses and other $ 22 $ 46
Other assets 1,455 1,864
$ 1,477 $ 1,910
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued