ELECTRO RENT CORP | 2013 | FY | 3


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   
  

 

 

 

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