19. Current receivables and Other current assets

This item may be analyzed as follows:

(€ million)At December 31, 2013At December 31, 2012
Trade receivables9881,436
Receivables from financing activities15,94315,237
Current tax receivables252302
Other current assets:                                                                                                                                                                                      
Other current receivables1,214970
Accrued income and prepaid expenses163147
Total Other current assets1,3771,117
Total Current receivables and Other current assets18,56018,092

An analysis by due date is as follows:

 At December 31, 2013At December 31, 2012
(€ million) due
within
one year
due between
one and five
years
due beyond
five years
Totaldue
within
one year
due between
one and five
years
due
beyond
five
years
Total
Trade receivables9808-9881,42313-1,436
Receivables from financing activities9,6226,21810315,9439,4515,7068015,237
Current tax receivables15498-252279221302
Other current receivables1,09394271,2148618326970
Total Current receivables11,8496,41813018,39712,0145,82410717,945

Trade receivables

receivables are shown net of allowances for doubtful accounts of €180 million at December 31, 2013 (€169 million at December 31, 2012), determined on the basis of historical losses on receivables. Changes in the allowance accounts during 2013 are as follows: 

(€ million)At December 31, 2012ProvisionUse and other changesAt December 31, 2013
Allowances for doubtful accounts16937(26)180

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, 2013At December 31, 2012
Retail financing8,1237,628
Dealer financing6,6086,099
Finance leases1,1131,314
Other99196
Total Receivables from financing activities15,94315,237

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 financial 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 significant losses in 2013 and 2012 relating to the termination of dealer contracts.

Total Receivables from financing activities increased by €706 million over the period, mainly due to an increase in financing provided to Agricultural and Construction Equipment segment customers in the U.S., Trucks and Commercial Vehicles segment dealers in Europe and Agricultural and Construction Equipment segment dealers in the U.S. and Brazil. Changes in exchange rates, mainly between the Euro and the US dollar, the Brazilian real and the Canadian and Australian dollars, led to a decrease of €989 million.

Receivables from financing activities are shown net of an allowance for doubtful accounts determined on the basis of specific insolvency risks. At December 31, 2013 the allowance amounts to €526 million (€592 million at December 31, 2012). Changes in the allowance accounts during the year considered are as follows: 

(€ million)At
December
31, 2012
ProvisionUse and
other
changes
At December
31, 2013
Finance leases2561(27)230
Retail financing22134(75)180
Dealer financing11513(12)116
Total Allowance on Receivables from financing activities59248(114)526

Finance lease receivables mainly relate to vehicles of Trucks and Commercial Vehicles and Agricultural and Construction Equipment segments leased out under finance 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 finance lease receivables varies depending on prevailing market interest rates.

The item may be analyzed as follows stated gross of an allowance of €230 million at December 31, 2013 (€256 million at December 31, 2012): 

 At December 31, 2013At December 31, 2012
(€ million)due within
one year
due
between
one and
five years
due
beyond
five
years
Totaldue within
one year
due
between
one and
five
years
due
beyond
five
years
Total
Receivables for future minimum lease payments689937891,7158211,141472,009
Less: unrealized interest income(138)(219)(15)(372)(153)(274)(12)(439)
Present value of future minimum lease payments551718741,343668867351,570

No contingent rents were recognized as finance lease income during 2013 or 2012 and unguaranteed residual values at December 31, 2013 and 2012 are not significant.

Other current assets

At December 31, 2013, Other current assets mainly consist of Other tax receivables for VAT and other indirect taxes of €919 million (€680 million at December 31, 2012), Receivables from employees of €37 million (€38 million at December 31, 2012) and Accrued income and prepaid expenses of €163 million (€147 million at December 31, 2012).

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 financial 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 financial, 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 finances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the cash flow 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 asset-backed 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 first loss cover, meaning that the transferor takes priority participation in the losses, or require a significant exposure to the cash flows 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 financial 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, 2013 and 2012, the carrying amount of such transferred assets and the related liability and the respective fair values are as follows: 

 At December 31, 2013At December 31, 2012
(€ million)Trade
receivables
Receivables
from
financing
activities
Other
financial
assets
TotalTrade
receivables
Receivables
from
financing
activities
Other
financial
assets
Total
Carrying amount of assets42410,18693111,5415438,99874510,286
Carrying amount of the related liabilities(424)(9,324)(931)10,679)(543)(8,420)(745)(9,708)
Liabilities for which the counterparty has the right to obtain relief on the transferred assets:   
Fair value of the assets42410,20293111,5575439,20874510,496
Fair value of the liabilities(424)(9,338)(931)10,693)(543)(8,4809(745)(9,768)
Net position-864-864-728-728

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 and bills without recourse having due dates after December 31, 2013 amounting to €791 million (€763 million at December 31, 2012, with due date after that date), which refer to trade receivables and other receivables for €756 million (€708 million at December 31, 2012) and receivables from financing activities for €35 million (€55 million at December 31, 2012).