Accounts Receivable Case Bombardier Vs. Rio Tinto

| March 29, 2017

Question
Accounts Receivable Case Bombardier Vs. Rio Tinto
Below you will find the note disclosure regarding Trade and other receivable from
Bombardier, in 2012 and in 2014. You are also provided with the note disclosure from
Rio Tinto for 2013.
Read the notes carefully and then focusing on the Trade Receivables, answer the
following questions.

1) Analyze the note disclosure from Bombardier:
a. How is the allowance for uncollectible done at Bombardier in comparison to the
aging receivables method described in the slide in the slides?
b. Looking on the information starting in 2011 and 2014, what trends are you able
to recognize?
2) Compare the methods and amounts to account for uncollectible at Rio Tinto relative to
that at Bombardier.
3) What expense amount did Bombardier record in 2013 related to its receivables? Ignore
the effect of foreign currency exchange rate changes

14.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents were as follows, as at:
December 31, 2014
$
997

Cash
Cash equivalents
Term deposits
Money market funds
Cash and cash equivalents

December 31, 2013
$
1,475

796
696
2,489

762
1,160
3,397

$

$

$

January 1, 2013
916

$

656
985
2,557

See Note 30 – Credit facilities for details on covenants related to cash and cash equivalents.

15.

TRADE AND OTHER RECEIVABLES

Trade and other receivables were as follows, as at:
Not past
due

Total
December 31, 2014(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
December 31, 2013(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
January 1, 2013(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
(1)

(2)

(3)

(4)

$

$

$

$

$

$

Past due but not impaired
less than
more than
90 days
90 days

1,453
(39)
1,414
124
1,538

$

1,430
(44)
1,386
106
1,492

$

1,256
(34)
1,222
89
1,311

$

$

$

$

717

717

$

796

796

$

813

813

$

$

$

$

238

238

$

194

194

$

204

204

$

$

$

$

(3)

Impaired

381

381

$

359

359

$

200

200

$

$

$

$

(4)

117
(39)
78

81
(44)
37

39
(34)
5

Of which $355 million and $475 million are denominated in euros and other foreign currencies, respectively, as at December 31, 2014
($465 million and $411 million, respectively, as at December 31, 2013 and $396 million and $356 million, respectively, as at
January 1, 2013).
Of which $419 million represents customer retentions relating to long-term contracts as at December 31, 2014 based on normal terms and
conditions ($392 million as at December 31, 2013 and $240 million as at January 1, 2013).
Of which $525 million of trade receivables relates to BT long-term contracts as at December 31, 2014, of which $376 million were more
than 90 days past due ($509 million as at December 31, 2013, of which $353 million were more than 90 days past due and $335 million as
at January 1, 2013, of which $190 million were more than 90 days past due). BT assesses whether these receivables are collectible as part
of its risk management practices applicable to long-term contracts as a whole.
Of which a gross amount of $71 million of trade receivables are individually impaired as at December 31, 2014 ($73 million as at December
31, 2013 and $34 million as at January 1, 2013).

The factors that the Corporation considers to classify trade receivables as impaired are as follows: the customer
is in bankruptcy or under administration, payments are in dispute, or payments are in arrears. Further information
on financial risk is provided in Note 32 – Financial risk management.
140 BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2014

Allowance for doubtful accounts – Changes in the allowance for doubtful accounts were as follows, for fiscal
years:
Balance at beginning of year
Provision for doubtful accounts
Amounts written-off
Recoveries
Effect of foreign currency exchange rate changes
Balance at end of year

2014
(44)
(5)
(1)
8
3
(39)

$

$

$

$

2013
(34)
(13)
3
3
(3)
(44)

Off-balance sheet factoring facilities
In the normal course of its business, BT has factoring facilities to which it can sell, without credit recourse,
qualifying trade receivables. Trade receivables of €974 million ($1,183 million) were outstanding under such
facilities as at December 31, 2014 (€1,084 million ($1,495 million) as at December 31, 2013 and €886 million
($1,169 million) as at January 1, 2013). Trade receivables of €1,287 million ($1,712 million) were sold to these
facilities during fiscal year 2014 (€1,213 million ($1,611 million) during fiscal year 2013).

16.

INVENTORIES

Inventories were as follows, as at:
Aerospace programs
Long-term contracts
Production contracts
Cost incurred and recorded margins
Less: advances and progress billings

December 31, 2014
$
4,600

December 31, 2013
$
4,847

7,369
(5,558)
1,811

7,064
(5,406)
1,658

5,387
(4,014)
1,373

310
(17)
293
1,266
7,970

420
(19)
401
1,328
8,234

408
(15)
393
1,429
7,540

Service contracts
Cost incurred and recorded margins
Less: advances and progress billings
Finished products(1)
$
(1)

$

$

$

January 1, 2013
4,345

Finished products include 1 new aircraft not associated with a firm order and 57 pre-owned aircraft, totalling $485 million as at
December 31, 2014 (11 new aircraft and 43 pre-owned aircraft, totalling $535 million as at December 31, 2013 and 3 new aircraft and 74
pre-owned aircraft, totalling $551 million as at January 1, 2013).

Finished products as at December 31, 2014 include $248 million of pre-owned aircraft legally sold to third parties
and leased back under sale and leaseback facilities ($134 million as at December 31, 2013 and $147 million as at
January 1, 2013). The related sales proceeds are accounted for as sale and leaseback obligations.
The amount of inventories recognized as cost of sales totalled $16,426 million for fiscal year 2014
($14,106 million for fiscal year 2013). These amounts include $172 of write-downs for fiscal year 2014 ($147
million for fiscal year 2013). An additional write-down of $21 million is recognized in special items for fiscal year
2014 ($24 million for fiscal year 2013). See Note 8 – Special items for more details.
Under certain contracts, title to inventories is vested to the customer as the work is performed, in accordance with
contractual arrangements and industry practice. In addition, in the normal course of business, the Corporation
provides performance bonds, bank guarantees and other forms of guarantees to customers, mainly in BT, as
security for advances received from customers pending performance under certain contracts. In accordance with
industry practice, the Corporation remains liable to the purchasers for the usual contractor’s obligations relating to
contract completion in accordance with predetermined specifications, timely delivery and product performance.

BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2014 – NOTES 141

PDF DE REFERENCE SEULEMENT
REFERENCE PDF ONLY

14

NE PAS UTILISER EN PREPRESSE
DO NOT USE FOR PREPRESS

CASH AND CASH EQUIVALENTS

Cash and cash equivalents were as follows, as at:
December 31
2012

$

Cash

1,255

December 31
2011

$

1,091

February 1
2011

$

1,529

Cash equivalents
Term deposits

656

750

832

Money market funds

985

1,531

1,834

Cash and cash equivalents

$

2,896

$

3,372

$

4,195

See Note 30 – Credit facilities for details on covenants related to cash and cash equivalents.

15

TRADE AND OTHER RECEIVABLES

Trade and other receivables were as follows, as at:
Past due but not impaired3
Not past
due as at

Total

less than
90 days

more than
90 days

Impaired4

December 31, 20121 2
,

Trade receivables, gross

$

1,443

$

(34)

Allowance for doubtful accounts

1,409

855

$

295

$

254

$

39
(34)

$

855

$

295

$

254

$

5

$

928

$

205

$

162

$

46

116

Other
Total

$

1,525

$

1,341

December 31, 20111 2
,

Trade receivables, gross

(42)

Allowance for doubtful accounts

1,299
Other

(42)

$

928

$

205

$

162

$

4

$

846

$

183

$

211

$

53

109

Total

$

1,408

$

1,293

February 1, 20111
Trade receivables, gross

(52)

Allowance for doubtful accounts

1,241
Other


$

846


$

183

(52)


$

211

$

1

136

Total

$

1,377

1 Of which $389 million and $551 million are denominated in euros and other foreign currencies, respectively, as at December 31, 2012 ($415 million and $349 million,
respectively, as at December 31, 2011 and $472 million and $393 million, respectively, as at February 1, 2011).
2 Of which $240 million represents customer retentions relating to long-term contracts as at December 31, 2012 based on normal terms and conditions ($172 million as at
December 31, 2011).
3 Of which $480 million of trade receivables relates to BT long-term contracts as at December 31, 2012, of which $244 million were more than 90 days past due ($272 million
as at December 31, 2011 of which $137 million was more than 90 days past due and $330 million as at February 1, 2011, of which $196 million was more than 90 days past
due). BT assesses whether these receivables are collectible as part of its risk management practices applicable to long-term contracts as a whole.
4 Of which a gross amount of $34 million in trade receivables are individually impaired as at December 31, 2012 ($39 million as at December 31, 2011 and $45 million as at
February 1, 2011).

164 BOMBARDIER INC. Annual Report • FISCAL Year ended December 31, 2012

21_75023_EN_7_Notes.indd

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PAGE 25

STRATEGIC REPORT
STRATEGIC REPORT

18

Trade and other receivables
Total
2013
US$m

Restated
Non-current
2012
US$m

Restated
Current
2012
US$m

Restated
Total
2012
US$m

5
1,150
479
290

216
2,140

(a)

Trade receivables
(b)
Other receivables
(c)
Prepayment of tolling charges to jointly controlled entities
Pension surpluses (note 45)
Amounts due from equity accounted units
Other prepayments

Current
2013
US$m

2,987
1,212


136
332
4,667

2,992
2,362
479
290
136
548
6,807


1,301
484
154

326
2,265

3,292
1,475


238
336
5,341

3,292
2,776
484
154
238
662
7,606

(a)

At 31 December 2013, trade and other receivables are stated net of provisions for doubtful debts of US$12 million (2012: US$23 million). Amounts of US$10 million
(2012: US$21 million) were impaired; the majority of these receivable more than 90 days overdue.

(b)

Non-current receivables at 31 December 2013 included a US$700 million (2012: US$700 million) prepayment for an intangible asset, as a result of signing the agreement
for the Simandou iron ore project in 2012.

(c)

DIRECTORS’ REPORT
DIRECTORS’ REPORT

Non-current
2013
US$m

Rio Tinto Aluminium has made certain prepayments to equity accounted units for toll processing of alumina. These prepayments will be charged to Group operating
costs as processing takes place.

There is no material element of trade and other receivables that is interest bearing.
The fair value of current trade and other receivables, including the majority of amounts classified as non-current assets, approximates their carrying value.

2013
US$m

57
71
47
3
178

less than 30 days overdue
between 30 and 60 days overdue
between 60 and 90 days overdue
more than 90 days overdue

2012
US$m

117
22
19
32
190

FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

As of 31 December 2013, trade and other receivables of US$178 million (2012: US$190 million) were past due but not impaired. The ageing of these receivables
is as follows:

These relate to a number of customers for whom there is no recent history of default or other indicators of impairment.
With respect to trade and other receivables that are neither impaired nor past due, there are no indications as of the reporting date that the debtors will not meet
their payment obligations.

19

Assets and liabilities held for sale

In relation to Clermont and Blair Athol, assets held for sale include: property, plant and equipment of US$807 million and other assets of US$81 million; liabilities
held for sale include: provisions of US$95 million and other liabilities of US$44 million.
At 31 December 2012 assets and liabilities held for sale comprised Palabora Mining Company Limited and ZAC. The sale of Palabora to a consortium comprising
South African and Chinese entities led by the Industrial Development Corporation of South Africa Limited and Hebei Iron & Steel Group completed on 31 July 2013.
At 31 December 2011 assets and liabilities held for sale comprised ZAC.

PRODUCTION, RESERVES AND OPERATIONS
PRODUCTION, RESERVES AND OPERATIONS

At 31 December 2013 assets and liabilities held for sale comprise the Group’s 50.1 per cent interest in the Clermont Joint Venture (Clermont), its 71.2 per cent
interest in the Blair Athol Coal project (Blair Athol), and Zululand Anthracite Colliery (ZAC), which was acquired with Rio Tinto Coal Mozambique in 2011.
On 25 October 2013, Rio Tinto announced that it had reached a binding agreement to sell its interest in Clermont to GS Coal Pty Ltd, a company jointly owned
by Glencore Xstrata and Sumitomo Corporation, for US$1.015 billion. The sale is conditional upon certain conditions precedent, including customary regulatory
approval. On 3 October, the Rio Tinto Coal Australia managed Blair Athol Coal Joint Venture signed a conditional Sale and Purchase Agreement to transfer its
interests in Blair Athol to New Emerald Coal Ltd (NEC), a subsidiary of Linc Energy Ltd. The transaction is expected to complete during the first half of 2014.
Rio Tinto ceased mining at Blair Athol in November 2012.

ADDITIONAL INFORMATION
ADDITIONAL INFORMATION

149
149

riotinto.com/reportingcentre2013
riotinto.com/reportingcentre2013

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