ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

9 Months Ended

Jul. 31, 2011

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

(16)  Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow:

	July 31	October 31	July 31
	2011*	2010*	2010*
Marketable securities
U.S. government debt securities	$       270	$         63	$       69
Municipal debt securities	31	28	25
Corporate debt securities	79	63	60
Residential mortgage-backed securities **	79	72	76
Other debt securities		2	2
Total marketable securities	459	228	232
Other assets
Derivatives:
Interest rate contracts	388	493	533
Foreign exchange contracts	17	24	8
Cross-currency interest rate contracts	1	3	4
Total assets ***	$       865	$       748	$     777
Accounts payable and accrued expenses
Derivatives:
Interest rate contracts	$         12	$         38	$       51
Foreign exchange contracts	86	23	32
Cross-currency interest rate contracts	10	48	96
Total liabilities	$       108	$       109	$     179

*	All measurements above were Level 2 measurements except for Level 1 measurements of U.S. government debt securities of $238 million, $36 million and $42 million at July 31, 2011, October 31, 2010 and July 31, 2010, respectively.
**	Primarily issued by U.S. government sponsored enterprises.
***	Excluded from this table are the Company’s cash and cash equivalents, which are carried at par value or amortized cost approximating fair value. The cash and cash equivalents consist primarily of money market funds.
The contractual maturities of marketable securities at July 31, 2011 in millions of dollars are shown below. Actual maturities may differ from those scheduled as a result of prepayments by the issuers. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.

	Amortized	Fair
	Cost	Value
Due in one year or less	$    107	$   107
Due after one through five years	152	155
Due after five through 10 years	68	74
Due after 10 years	42	44
Residential mortgage-backed securities	74	79
Marketable securities	$    443	$   459

Fair value, nonrecurring, Level 3 measurements in millions of dollars follow:

	Fair Value *					Losses
						Nine Months Ended
	July 31	October 31		July 31		July 31
	2011	2010		2010		2011	2010
Retail notes	$         1	$	3	$	3		$	1
Operating loans	1			1
Financing leases	1	1		3			4
Wholesale notes		17		19			3
Financing receivables	$         3	$	21	$	26		$	8
Goodwill		$	34
Property and equipment held for sale **		$	918

*	Does not include cost to sell.
**	See Note 19.

Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities.  Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs.  Level 3 measurements include significant unobservable inputs.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market and income approaches.  The Company utilizes valuation models and techniques that maximize the use of observable inputs.  The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures.  These valuation techniques are consistently applied.

The following is a description of the valuation methodologies the Company uses to measure financial instruments at fair value:

Marketable Securities – The portfolio of investments is primarily valued based on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk and prepayment speeds.

Derivatives – The Company’s derivative financial instruments consist of interest rate swaps and caps, foreign currency forwards and swaps and cross-currency interest rate swaps.  The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

Financing Receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using an income approach (discounted cash flow) or a market approach (appraisal values or realizable values).  Inputs include interest rates and selection of realizable values.

Goodwill – The impairment of goodwill is based on the implied fair value measured as the difference between the fair value of the reporting unit and the fair value of the unit’s identifiable net assets.  An estimate of the fair value of the reporting unit is determined through a combination of an income approach (discounted cash flows) and market values for similar businesses, which includes inputs such as interest rates and selections of similar businesses.

Property and Equipment Held for Sale – The impairment of long-lived assets held for sale is measured at the lower of the carrying amount, or fair value less cost to sell.  Fair value is based on the probable sale price.  The inputs include estimates of final sale price adjustments.