SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CASH FLOW INFORMATION

6 Months Ended

May 03, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CASH FLOW INFORMATION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2)  Summary of Significant Accounting Policies and Cash Flow Information

The interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures. The identification and rapid spread of COVID-19 (COVID) has resulted in governments and other authorities implementing numerous measures designed to contain the virus. These and other actions have resulted in uncertainties in the Company’s business, which may result in actual results differing significantly from those estimates. Examples of estimates used in the financial statements affected by this uncertainty include sales incentive costs, incurred credit losses, the value of used equipment, equipment on operating lease return rates, forecasted annual effective income tax rate, and cash flows to determine long-lived assets, goodwill, and certain intangible asset recoverability, and fair value measurements.

CASH FLOW INFORMATION

Cash Flow Information

All cash flows from the changes in trade accounts and notes receivable are classified as operating activities in the statement of consolidated cash flows as these receivables arise from sales to the Company’s customers. Cash flows from financing receivables that are related to sales to the Company’s customers are also included in operating activities. The remaining financing receivables are related to the financing of equipment sold by independent dealers and are included in investing activities.

The Company had the following non-cash operating and investing activities that were not included in the statement of consolidated cash flows. The Company transferred inventory to equipment on operating leases of approximately $255 million and $308 million in the first six months of 2020 and 2019, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $46 million and $74 million at May 3, 2020 and April 28, 2019, respectively.

The Company’s restricted cash held at May 3, 2020, November 3, 2019, April 28, 2019, and October 28, 2018 was as follows in millions of dollars:

	May 3		November 3		April 28		October 28
	2020		2019		2019		2018
Equipment operations	$	11	$	21	$	10	$	7
Financial services		92		78		92		104
Total	$	103	$	99	$	102	$	111

The equipment operations’ restricted cash relates to miscellaneous operational activities. The financial services restricted cash primarily relates to securitization of financing receivables (see Note 12). The restricted cash is recorded in “Other assets” in the consolidated balance sheet.