Note 7: Sales-type Leases
We have certain customer leases providing bargain purchase options, which are accounted for as sales-type leases. Interest income is recognized over the life of the lease using the effective interest method.
The initial acceptance of customer finance arrangements is based on an in-depth review of each customer’s credit profile, including review of third party credit reports, customer financial statements and bank verifications. We monitor the credit quality of our sales-type lease portfolio based on payment activity and the related finance lease receivable aging. This credit quality is assessed on a monthly basis. Our historical losses on finance lease receivables are insignificant, and therefore we do not have a specific allowance for credit losses.
The minimum lease payments receivable and the net investment included in other assets were as follows at May 31:
| 2013 | 2012 | |||||||
|
Gross minimum lease payments receivable |
$ | 9,862 | $ | 12,284 | ||||
|
Less—unearned interest |
(425 | ) | (603 | ) | ||||
|
|
|
|
|
|||||
|
Net investment in sales-type lease receivables |
$ | 9,437 | $ | 11,681 | ||||
|
|
|
|
|
|||||
The following table provides estimated future minimum lease payments by year related to sales-type leases:
|
Year ending May 31, |
Future Amortization |
|||
|
2014 |
$ | 6,561 | ||
|
2015 |
2,726 | |||
|
2016 |
458 | |||
|
2017 |
117 | |||
|
|
|
|||
| $ | 9,862 | |||
|
|
|
|||