Note 7 Receivables, net

“Receivables, net” consisted of the following:

(XLS:)

December 31, ($ in millions)

2011

2010

Trade receivables

7,750

7,155

Other receivables

764

776

Allowance

(227)

(215)

 

8,287

7,716

Unbilled receivables, net:

 

 

Costs and estimated profits in excess of billings

3,503

3,151

Advance payments consumed

(1,017)

(897)

 

2,486

2,254

Total

10,773

9,970

“Trade receivables” in the table above includes contractual retention amounts billed to customers of $381 million and $411 million at December 31, 2011 and 2010, respectively. Management expects that the substantial majority of related contracts will be completed and the substantial majority of the billed amounts retained by the customer will be collected. Of the retention amounts outstanding at December 31, 2011, 73 percent and 23 percent are expected to be collected in 2012 and 2013, respectively. “Other receivables” in the table above consists of value added tax, claims, rental deposits and other non-trade receivables.

“Costs and estimated profits in excess of billings” in the table above represents revenues earned and recognized for contracts under the percentage-of-completion or completed-contract method of accounting. Management expects that the majority of the amounts will be collected within one year of the respective balance sheet date.

The reconciliation of changes in the allowance for doubtful accounts is as follows:

(XLS:)

($ in millions)

2011

2010

2009

Balance at January 1,

215

312

232

Additions

157

119

195

Deductions

(131)

(216)

(119)

Exchange rate differences

(14)

4

Balance at December 31,

227

215

312

At December 31, 2011, the gross amounts of, and doubtful debt allowance for, trade receivables (excluding those with a contractual maturity of one year or less) and other receivables (excluding tax and other receivables which are not considered to be of a financing nature) were as follows:

(XLS:)

 

December 31, 2011

December 31, 2010

($ in millions)

Trade receivables (excluding those with a contractual maturity of one year or less)

Other
receivables

Total

Trade receivables (excluding those with a contractual maturity of one year or less)

Other
receivables

Total

Recorded gross amount:

 

 

 

 

 

 

Individually evaluated for impairment

252

108

360

154

82

236

Collectively evaluated for impairment

282

129

411

391

71

462

Total

534

237

771

545

153

698

Doubtful debt allowance:

 

 

 

 

 

 

From individual impairment evaluation

(41)

(5)

(46)

(27)

(27)

From collective impairment evaluation

(9)

(9)

(10)

(10)

Total

(50)

(5)

(55)

(37)

(37)

Recorded net amount

484

232

716

508

153

661

Changes in the doubtful debt allowance for trade receivables (excluding those with a contractual maturity of one year or less) in 2011 were as follows:

(XLS:)

Trade receivables (excluding those with a contractual maturity of one year or less)

($ in millions)

2011

Balance at January 1,

37

Reversal of allowance

(13)

Additions to allowance

36

Amounts written off

(3)

Exchange rate differences

(7)

Balance at December 31,

50

Changes in the doubtful debt allowance for “Other receivables” in 2011 were not significant.

The Company has a group-wide policy on the management of credit risk. The policy includes a credit assessment methodology to assess the creditworthiness of customers and assign to those customers a risk category on a scale from “A” (lowest likelihood of loss) to “E” (highest likelihood of loss), as shown in the following table:

(XLS:)

Risk category

Equivalent Standard & Poor’s rating

A

AAA to AA–

B

A+ to BBB–

C

BB+ to BB–

D

B+ to CCC–

E

CC+ to D

Third-party agencies’ ratings are considered, if available. For customers where agency ratings are not available, the customer’s most recent financial statements, payment history and other relevant information are considered in the assignment to a risk category. Customers are assessed at least annually or more frequently when information on significant changes in the customers’ financial position becomes known. In addition to the assignment to a risk category, a credit limit per customer is set.

The following table shows the credit risk profile, on a gross basis, of trade receivables (excluding those with a contractual maturity of one year or less) and other receivables (excluding tax and other receivables which are not considered to be of a financing nature) based on the internal credit risk categories which are used as a credit quality indicator:

(XLS:)

Risk category

December 31, 2011

December 31, 2010

($ in millions)

Trade receivables (excluding those with a contractual maturity of one year or less)

Other
receivables

Total

Trade receivables (excluding those with a contractual maturity of one year or less)

Other
receivables

Total

A

251

196

447

219

125

344

B

134

18

152

199

5

204

C

122

20

142

87

12

99

D

22

1

23

37

2

39

E

5

2

7

3

9

12

Total gross amount

534

237

771

545

153

698

The following table shows an aging analysis, on a gross basis, of trade receivables (excluding those with a contractual maturity of one year or less) and other receivables (excluding tax and other receivables which are not considered to be of a financing nature):

(XLS:)

 

Past due

 

 

December 31, 2011
($ in millions)

0–30
days

30–60
days

60–90
days

> 90 days
and not
accruing
interest

> 90 days
and accruing
interest

Not due at
December
31, 2011(1)

Total

(1)

Trade receivables (excluding those with a contractual maturity of one year or less) principally represent contractual retention amounts that will become due subsequent to the completion of the long-term contract.

Trade receivables (excluding those with a contractual maturity of one year or less)

73

6

5

49

6

395

534

Other receivables

4

1

1

15

3

213

237

Total gross amount

77

7

6

64

9

608

771

(XLS:)

 

Past due

 

 

December 31, 2010
($ in millions)

0–30
days

30–60
days

60–90
days

> 90 days
and not
accruing
interest

> 90 days
and accruing
interest

Not due at
December
31, 2010(1)

Total

(1)

Trade receivables (excluding those with a contractual maturity of one year or less) principally represent contractual retention amounts that will become due subsequent to the completion of the long-term contract.

Trade receivables (excluding those with a contractual maturity of one year or less)

49

7

6

40

9

434

545

Other receivables

1

18

134

153

Total gross amount

50

7

6

58

9

568

698

Financial review

© Copyright 2012 ABB.