19. Current receivables and Other current assets

This item may be analyzed as follows:

($ million)At December 31, 2014At December 31, 2013
Trade receivables 1,054 1,362
Receivables from financing activities 21,472 21,986
Current tax receivables 324 348
Other current assets:    
Other current receivables 1,264 1,674
Accrued income and prepaid expenses 170 226
Total Other current assets 1,434 1,900
Total Current receivables and Other current assets 24,284 25,596

An analysis by due date is as follows:

 At December 31, 2014At December 31, 2013
($ million)due within one yeardue between one and five yearsdue beyond five yearsTotaldue within one yeardue between one and five yearsdue beyond five yearsTotal
Trade receivables 1,043 10 1 1,054 1,351 11 - 1,362
Receivables from financing activities 12,659 8,500 313 21,472 13,270 8,574 142 21,986
Current tax receivables 291 33 - 324 212 136 - 348
Other current receivables 1,077 146 41 1,264 1,507 130 37 1,674
Total Current receivables 15,070 8,689 355 24,114 16,340 8,851 179 25,370

Trade receivables

Trade receivables are shown net of allowances for doubtful accounts of $207 million at December 31, 2014 ($248 million at December 31, 2013), determined on the basis of historical losses on receivables. Changes in the allowance accounts during 2014 were as follows:

($ million)At December 31, 2013ProvisionUse and other changesAt December 31, 2014
Allowances for doubtful accounts 248 53 (94) 207

The carrying amount of Trade receivables is considered in line with their fair value at the date.

Receivables from financing activities

Receivables from financing activities include the following:

($ million)At December 31, 2014At December 31, 2013
Retail financing 11,023 11,202
Dealer financing 9,400 9,113
Finance leases 955 1,535
Other 94 136
Total Receivables from financing activities 21,472 21,986

CNH Industrial provides and administers financing for stock and retail purchases of new and used equipment sold through its dealer network.

The terms of retail financing generally range from two to six years and interest rates vary depending on prevailing market interest rates and certain incentive programs offered by Industrial Activities.

Wholesale receivables arise primarily from the sale of goods to dealers and distributors and, to a lesser extent, the financing of dealer operations. Under the standard terms of the wholesale receivable agreements, these receivables typically have “interest-free” periods of up to twelve months and stated original maturities of up to twenty-four months, with repayment accelerated upon the sale of the underlying equipment by the dealer. During the “interest free” period, Financial Services is compensated by Industrial Activities for the difference between market interest rates and the amount paid by the dealer. After the expiration of any “interest-free” period, interest is charged to dealers on outstanding balances until CNH Industrial receives payment in full. The “interest-free” periods are determined based on the type of equipment sold and the time of year of the sale. Interest rates are set based on market factors and based on Euribor or the equivalent fi nancial market rate (e.g. FHBR, Finance House Base Rate for UK). CNH Industrial evaluates and assesses dealers on an ongoing basis as to their credit worthiness. CNH Industrial may be obligated to repurchase the dealer’s equipment upon cancellation or termination of the dealer’s contract for such causes as change in ownership, closeout of the business, or default. There were no signifi cant losses in 2014 and 2013 relating to the termination of dealer contracts.

Total Receivables from financing activities increased by $799 million over the period excluding currency translation differences which decreased the portfolio by $1,321 million. The increase, on a constant currency basis, was mainly due to increases in retail and wholesale receivables in NAFTA, as well as in wholesale receivables in LATAM. The negative impact of currency translation was mainly due to the changes between the U.S. dollar and the euro, the Brazilian real, the Canadian dollar and the British pound.

Receivables from financing activities are shown net of an allowance for doubtful accounts determined on the basis of specifi c insolvency risks.

At December 31, 2014 the allowance amounts to $650 million ($726 million at December 31, 2013). Changes in the allowance accounts during 2014 were as follows:

($ million)At December 31, 2013ProvisionUse and other changesAt December 31, 2014
Allowance for receivables regarding:        
Retail financing 249 46 (51) 244
Dealer financing 160 71 (49) 182
Finance leases 317 40 (133) 224
Total Allowance on Receivables from financing activities 726 157 (233) 650

Finance lease receivables mainly relate to vehicles of Commercial Vehicles, Agricultural Equipment and Construction Equipment leased out under fi nance lease arrangements. The interest rate implicit in the lease is determined at the commencement of the lease for the whole lease term. The average interest rate implicit in total fi nance lease receivables varies depending on prevailing market interest rates.

The item may be analyzed as follows stated gross of an allowance of $224 million at December 31, 2014 ($317 million at December 31, 2013):

 At December 31, 2014At December 31, 2013
($ million)due within one yeardue between one and five yearsdue beyond five yearsTotaldue within one yeardue between one and five yearsdue beyond five yearsTotal
Receivables for future minimum lease payments 671 760 77 1,508 949 1,292 123 2,364
Less: unrealized interest income (125) (191) (13) (329) (190) (302) (20) (512)
Present value of future minimum lease payments 546 569 64 1,179 759 990 103 1,852

No contingent rents were recognized as fi nance lease income during 2014 or 2013 and unguaranteed residual values at December 31, 2014 and 2013 are not significant.

Other current assets

At December 31, 2014, Other current assets mainly consist of other tax receivables for VAT and other indirect taxes of $954 million ($1,267 million at December 31, 2013), Receivables from employees of $57 million ($51 million at December 31, 2013) and Accrued income and prepaid expenses of $170 million ($226 million at December 31, 2013).

At the balance sheet date the carrying amount of Other current assets is considered to be in line with their fair value.

Refer to section “Risk Management” and Note 33 “Information on fi nancial risks” for additional information on the credit risk to which CNH Industrial is exposed and the way it is managed by the Group.

Transfers of financial assets

The Group transfers a number of its fi nancial, trade and tax receivables under securitization programs or factoring transactions.

A securitization transaction entails the sale of a portfolio of receivables to a securitization vehicle. This structured entity fi nances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest fl ow depend upon the cash fl ow generated by the portfolio). Asset-backed securities are divided into classes according to their degree of seniority and rating: the most senior classes are placed with investors on the market; the junior class, whose repayment is subordinated to the senior classes, is normally subscribed for by the seller. The residual interest in the receivables retained by the seller is therefore limited to the junior securities it has subscribed for.

In accordance with IFRS 10, all securitization vehicles are included in the scope of consolidation because the subscription of the junior assetbacked securities by the seller implies its control in substance over the structured entity. Furthermore, factoring transactions may be either with recourse or without recourse; certain without recourse transfers include deferred payment clauses (for example, when the payment by the factor of a minor part of the purchase price is dependent on the total amount collected from the receivables), requiring fi rst loss cover, meaning that the transferor takes priority participation in the losses, or require a signifi cant exposure to the cash fl ows arising from the transferred receivables to be retained. These types of transactions do not comply with the requirements of IAS 39 for the derecognition of the assets since the risks and rewards connected with collection are not substantially transferred, and accordingly the Group continues to recognize the receivables transferred by this means in its balance sheet and recognizes a fi nancial liability of the same amount under Asset-backed financing (Note 27). The gains and losses arising from the transfer of these assets are only recognized when the assets are derecognized.

At December 31, 2014 and 2013, the carrying amount of such transferred fi nancial assets and the related liability and the respective fair values were as follows:

 At December 31, 2014At December 31, 2013
($ million)Trade
receivables
Receivables
from
fi nancing
activities
Other
fi nancial
assets
TotalTrade
receivables
Receivables
from
fi nancing
activities
Other
fi nancial
assets
Total
Carrying amount of assets 429 13,631 1,241 15,301 584 14,048 1,284 15,916
Carrying amount of the related liabilities (429) (11,917) (1,241) (13,587) (584) (12,859) (1,284) (14,727)
Liabilities for which the counterparty has the right to obtain relief on the transferred assets:                
Fair value of the assets 429 13,694 1,241 15,364 584 14,070 1,284 15,938
Fair value of the liabilities (429) (11,916) (1,241) (13,586) (584) (12,879) (1,284) (14,747)
Net position - 1,778 - 1,778 - 1,191 - 1,191

Other financial assets also include the cash with a pre-determined use restricted to the repayment of the securitization debt.

For completeness of information, it is recalled that the Group has discounted receivables without recourse having due dates after December 31, 2014 amounting to $654 million ($1,091 million at December 31, 2013, with due date after that date), which refer to trade receivables and other receivables for $585 million ($1,043 million at December 31, 2013) and receivables from financing activities for $69 million ($48 million at December 31, 2013).