12. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 31 consisted of the following in millions of dollars:


	2015		2014

Trade accounts and notes:
Agriculture and turf	$	2,278	$	2,633
Construction and forestry		773		645
Trade accounts and notes receivable–net	$	3,051	$	3,278

At October 31, 2015 and 2014, dealer notes included in the previous table were $90 million and $61 million, and the allowance for credit losses was $41 million and $55 million, respectively.

The equipment operations sell a significant portion of their trade receivables to financial services and provide compensation to these operations at approximate market rates of interest.

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Under the terms of the sales to dealers, interest is primarily charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted at the time of the sale to the dealer, until payment is received by the company. Dealers cannot cancel purchases after the equipment is shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest charged may not be forgiven and the past due interest rates exceed market rates. The company evaluates and assesses dealers on an ongoing basis as to their creditworthiness and generally retains a security interest in the goods associated with the trade receivables. The company is obligated to repurchase goods sold to a dealer upon cancellation or termination of the dealer’s contract for such causes as change in ownership and closeout of the business.

Trade accounts and notes receivable have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area.

Financing Receivables

Financing receivables at October 31 consisted of the following in millions of dollars:


	2015				2014
	Unrestricted/Securitized				Unrestricted/Securitized

Retail notes:
Equipment:
Agriculture and turf	$	15,359	$	4,236	$	16,970	$	3,975
Construction and forestry		2,086		686		1,951		697
Total		17,445		4,922		18,921		4,672
Wholesale notes		4,269				5,390
Revolving charge accounts		2,740				2,603
Financing leases (direct and sales-type)		1,333				1,558
Total financing receivables		25,787		4,922		28,472		4,672
Less:
Unearned finance income:
Equipment notes		726		74		753		56
Financing leases		108				136
Total		834		74		889		56
Allowance for credit losses		144		13		161		14
Financing receivables – net	$	24,809	$	4,835	$	27,422	$	4,602

The residual values for investments in financing leases at October 31, 2015 and 2014 totaled $115 million and $112 million, respectively.

Financing receivables have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area. The company generally retains as collateral a security interest in the equipment associated with retail notes, wholesale notes and financing leases.

Financing receivables at October 31 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:


	2015		2014
	Unrestricted		Unrestricted

Retail notes*:
Equipment:
Agriculture and turf	$	1,792	$	2,125
Construction and forestry		356		403
Total		2,148		2,528
Wholesale notes		4,269		5,390
Sales-type leases		690		844
Total		7,107		8,762
Less:
Unearned finance income:
Equipment notes		178		212
Sales-type leases		45		57
Total		223		269
Financing receivables related to the company’s sales of equipment	$	6,884	$	8,493

*These retail notes generally arise from sales of equipment by company-owned dealers or through direct sales.

Financing receivable installments, including unearned finance income, at October 31 are scheduled as follows in millions of dollars:


	2015				2014
	Unrestricted/Securitized				Unrestricted/Securitized

Due in months:
0 – 12	$	13,006	$	2,057	$	14,357	$	1,878
13 – 24		4,987		1,418		5,254		1,331
25 – 36		3,719		921		4,053		880
37 – 48		2,444		426		2,819		457
49 – 60		1,283		95		1,575		120
Thereafter		348		5		414		6
Total	$	25,787	$	4,922	$	28,472	$	4,672

The maximum terms for retail notes are generally seven years for agriculture and turf equipment and five years for construction and forestry equipment. The maximum term for financing leases is generally five years, while the average term for wholesale notes is less than twelve months.

At October 31, 2015 and 2014, the unpaid balances of receivables administered but not owned were $22 million and $54 million, respectively. At October 31, 2015 and 2014, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $29,666 million and $32,078 million, respectively.

Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the company has ceased accruing finance income. These receivables are generally 120 days delinquent and the estimated uncollectible amount, after charging the dealer’s withholding account, has been written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables at October 31 follows in millions of dollars:


	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due

2015
Retail Notes:
Agriculture and turf	$	112	$	54	$	47	$	213
Construction and forestry		64		29		12		105
Other:
Agriculture and turf		26		12		4		42
Construction and forestry		13		5		3		21
Total	$	215	$	100	$	66	$	381


			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables

Retail Notes:
Agriculture and turf	$	213	$	98	$	18,574	$	18,885
Construction and forestry		105		21		2,556		2,682
Other:
Agriculture and turf		42		13		7,175		7,230
Construction and forestry		21		10		973		1,004
Total	$	381	$	142	$	29,278		29,801
Less allowance for credit losses								157
Total financing receivables - net							$	29,644


	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due

2014
Retail Notes:
Agriculture and turf	$	93	$	34	$	28	$	155
Construction and forestry		54		16		7		77
Other:
Agriculture and turf		23		12		2		37
Construction and forestry		12		3		4		19
Total	$	182	$	65	$	41	$	288


			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables

Retail Notes:
Agriculture and turf	$	155	$	107	$	19,966	$	20,228
Construction and forestry		77		17		2,462		2,556
Other:
Agriculture and turf		37		15		8,208		8,260
Construction and forestry		19		2		1,134		1,155
Total	$	288	$	141	$	31,770		32,199
Less allowance for credit losses								175
Total financing receivables - net							$	32,024

An analysis of the allowance for credit losses and investment in financing receivables follows in millions of dollars:


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total

2015
Allowance:
Beginning of year balance	$	109	$	41	$	25	$	175
Provision		22		21		3		46
Write-offs		(26)		(37)		(4)		(67)
Recoveries		10		15		1		26
Translation adjustments		(20)				(3)		(23)
End of year balance*	$	95	$	40	$	22	$	157

Financing receivables:
End of year balance	$	21,567	$	2,740	$	5,494	$	29,801

Balance individually evaluated	$	40			$	6	$	46

*Individual allowances were not significant.


2014
Allowance:
Beginning of year balance	$	101	$	41	$	31	$	173
Provision		18		11		2		31
Write-offs		(16)		(26)		(7)		(49)
Recoveries		11		15				26
Translation adjustments		(5)				(1)		(6)
End of year balance*	$	109	$	41	$	25	$	175

Financing receivables:
End of year balance	$	22,784	$	2,603	$	6,812	$	32,199

Balance individually evaluated	$	26			$	1	$	27

*Individual allowances were not significant.


2013
Allowance:
Beginning of year balance	$	110	$	40	$	27	$	177
Provision (credit)		(2)		5		7		10
Write-offs		(11)		(21)		(3)		(35)
Recoveries		9		17		1		27
Translation adjustments		(5)				(1)		(6)
End of year balance*	$	101	$	41	$	31	$	173

Financing receivables:
End of year balance	$	21,160	$	2,593	$	6,206	$	29,959

Balance individually evaluated	$	21			$	33	$	54

*Individual allowances were not significant.

Past-due amounts over 30 days represented 1.28 percent and .90 percent of the receivables financed at October 31, 2015 and 2014, respectively. The allowance for credit losses represented .53 percent and .54 percent of financing receivables outstanding at October 31, 2015 and 2014, respectively. In addition, at October 31, 2015 and 2014, the company’s financial services operations had $179 million and $196 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses.

Financing receivables are considered impaired when it is probable the company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables, which are impaired, are generally classified as non-performing.

An analysis of the impaired financing receivables at October 31 follows in millions of dollars:


			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment

2015*
Receivables with specific allowance**	$	14	$	13	$	2	$	13
Receivables without a specific allowance***		14		14				20
Total	$	28	$	27	$	2	$	33
Agriculture and turf	$	19	$	18	$	2	$	20
Construction and forestry	$	9	$	9			$	13


2014*
Receivables with specific allowance**	$	9	$	9	$	2	$	10
Receivables without a specific allowance**		6		6				7
Total	$	15	$	15	$	2	$	17
Agriculture and turf	$	12	$	12	$	2	$	13
Construction and forestry	$	3	$	3			$	4

*Finance income recognized was not material.

**Primarily retail notes.

***Primarily retail notes and wholesale receivables.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During 2015, 2014 and 2013, the company identified 107, 66 and 92 financing receivable contracts, primarily operating loans and retail notes, as troubled debt restructurings with aggregate balances of $8 million, $3 million and $16 million pre-modification and $7 million, $2 million and $15 million post-modification, respectively. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 31, 2015, the company had no significant commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 31 consisted of the following in millions of dollars:


	2015		2014

Taxes receivable	$	720	$	697
Reinsurance receivables				502
Insurance premium receivables				23
Other		271		278
Other receivables	$	991	$	1,500

Reinsurance and insurance premium receivables were associated with the financial services’ crop insurance subsidiary (see Note 9), which was sold in 2015 (see Note 4).