COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jul. 31, 2011

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

(14) Commitments and contingencies:

The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales.  The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period.  These unamortized warranty premiums (deferred revenue) included in the following table totaled $220 million and $203 million at July 31, 2011 and 2010, respectively.

A reconciliation of the changes in the warranty liability in millions of dollars follows:

	Three Months Ended July 31						Nine Months Ended July 31
	2011			2010			2011			2010
Balance, beginning of period	$	860		$	710		$	762		$	727
Payments	(140		)	(126		)	(413		)	(379		)
Amortization of premiums received	(23		)	(26		)	(69		)	(73		)
Accruals for warranties	153			146			502			396
Premiums received	30			20			86			65
Foreign exchange	(7		)	4			5			(8		)
Balance, end of period	$	873		$	728		$	873		$	728

At July 31, 2011, the Company had approximately $230 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment.  The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables.  At July 31, 2011, the Company had an accrued liability of approximately $7 million under these agreements.  The maximum remaining term of the receivables guaranteed at July 31, 2011 was approximately five years.

At July 31, 2011, the Company had commitments of approximately $423 million for the construction and acquisition of property and equipment.  Also, at July 31, 2011, the Company had pledged assets of $104 million, primarily as collateral for borrowings.  See Note 11 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately $60 million at July 31, 2011, for which it believes the probability for payment was substantially remote.  The accrued liability for these contingencies was not material at July 31, 2011.

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos related liability), retail credit, software licensing, patent and trademark matters.  Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material effect on its consolidated financial statements.