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REVENUE RECOGNITION
9 Months Ended
Aug. 02, 2020
REVENUE RECOGNITION  
REVENUE RECOGNITION

(4)  Revenue Recognition

The Company’s revenue by primary geographical market, major product line, and timing of revenue recognition in millions of dollars follow:

Three Months Ended August 2, 2020

    

Agriculture
and Turf

    

Construction
and Forestry

    

Financial
Services

    

Total

Primary geographical markets:

             

             

United States

$

2,845

$

1,048

$

632

$

4,525

Canada

295

194

 

146

 

635

Western Europe

1,103

376

 

22

 

1,501

Central Europe and CIS

319

178

 

9

 

506

Latin America

602

124

 

51

 

777

Asia, Africa, Australia, New Zealand, and Middle East

631

318

32

981

Total

$

5,795

$

2,238

$

892

$

8,925

Major product lines:

             

             

Large Agriculture

$

2,893

$

2,893

Small Agriculture

2,021

 

 

2,021

Turf

651

 

 

651

Construction

$

817

 

 

817

Compact Construction

303

303

Roadbuilding

818

 

 

818

Forestry

241

 

 

241

Financial Products

24

5

$

892

 

921

Other

206

54

 

 

260

Total

$

5,795

$

2,238

$

892

$

8,925

Timing of revenue recognition:

             

             

Revenue recognized at a point in time

$

5,739

$

2,210

$

28

$

7,977

Revenue recognized over time

56

28

864

948

Total

$

5,795

$

2,238

$

892

$

8,925

    

Nine Months Ended August 2, 2020

Agriculture
and Turf

Construction
and Forestry

Financial
Services

Total

Primary geographical markets:

United States

$

8,725

$

3,331

$

1,880

$

13,936

Canada

699

532

 

453

 

1,684

Western Europe

2,992

1,073

 

66

 

4,131

Central Europe and CIS

877

477

 

27

 

1,381

Latin America

1,515

418

 

177

 

2,110

Asia, Africa, Australia, New Zealand, and Middle East

1,646

825

96

2,567

Total

$

16,454

$

6,656

$

2,699

$

25,809

Major product lines:

             

             

Large Agriculture

$

8,106

$

8,106

Small Agriculture

5,762

 

 

5,762

Turf

1,925

 

 

1,925

Construction

$

2,535

 

 

2,535

Compact Construction

930

930

Roadbuilding

2,146

 

 

2,146

Forestry

769

 

769

Financial Products

72

18

$

2,699

 

2,789

Other

589

258

 

 

847

Total

$

16,454

$

6,656

$

2,699

$

25,809

Timing of revenue recognition:

             

             

Revenue recognized at a point in time

$

16,294

$

6,576

$

80

$

22,950

Revenue recognized over time

160

80

2,619

2,859

Total

$

16,454

$

6,656

$

2,699

$

25,809

Three Months Ended July 28, 2019

    

Agriculture
and Turf

    

Construction
and Forestry

    

Financial
Services

    

Total

Primary geographical markets:

             

             

United States

$

2,870

$

1,594

$

632

$

5,096

Canada

299

260

 

148

 

707

Western Europe

1,154

458

 

22

 

1,634

Central Europe and CIS

324

229

 

10

 

563

Latin America

708

171

 

66

 

945

Asia, Africa, Australia, New Zealand, and Middle East

684

375

32

1,091

Total

$

6,039

$

3,087

$

910

$

10,036

Major product lines:

             

             

Large Agriculture

$

2,985

$

2,985

Small Agriculture

2,172

 

 

2,172

Turf

704

 

 

704

Construction

$

1,319

 

 

1,319

Compact Construction

320

320

Roadbuilding

1,008

 

 

1,008

Forestry

333

 

 

333

Financial Products

25

7

$

910

 

942

Other

153

100

 

 

253

Total

$

6,039

$

3,087

$

910

$

10,036

Timing of revenue recognition:

             

             

Revenue recognized at a point in time

$

5,988

$

3,055

$

9,043

Revenue recognized over time

51

32

$

910

993

Total

$

6,039

$

3,087

$

910

$

10,036

Nine Months Ended July 28, 2019

    

Agriculture
and Turf

    

Construction
and Forestry

    

Financial
Services

    

Total

Primary geographical markets:

United States

$

9,411

$

4,495

$

1,810

$

15,716

Canada

784

773

 

458

 

2,015

Western Europe

3,362

1,174

 

63

 

4,599

Central Europe and CIS

865

555

 

28

 

1,448

Latin America

2,028

515

 

199

 

2,742

Asia, Africa, Australia, New Zealand, and Middle East

1,784

966

92

2,842

Total

$

18,234

$

8,478

$

2,650

$

29,362

Major product lines:

             

             

Large Agriculture

$

8,647

$

8,647

Small Agriculture

6,613

 

 

6,613

Turf

2,199

 

 

2,199

Construction

$

3,806

 

 

3,806

Compact Construction

904

904

Roadbuilding

2,420

 

 

2,420

Forestry

1,023

 

1,023

Financial Products

69

20

$

2,650

 

2,739

Other

706

305

 

 

1,011

Total

$

18,234

$

8,478

$

2,650

$

29,362

Timing of revenue recognition:

             

             

Revenue recognized at a point in time

$

18,088

$

8,402

$

26,490

Revenue recognized over time

146

76

$

2,650

2,872

Total

$

18,234

$

8,478

$

2,650

$

29,362

Following is a description of the Company’s major product lines:

Large Agriculture – Includes net sales of tractors with more than approximately 200 horsepower and associated attachments, combines, cotton pickers, cotton strippers, self-propelled forage harvesters and related attachments, and sugarcane harvesters, harvesting front-end equipment, sugarcane loaders and pull behind scrapers, tillage, seeding, and application equipment, including sprayers, nutrient management and soil preparation machinery, and related attachments and service parts.

Small Agriculture – Includes net sales of medium and utility tractors with less than approximately 200 horsepower, hay and forage equipment, balers, mowers, and related attachments and service parts.

Turf – Includes net sales of turf and utility equipment, including riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements, other outdoor power products, and related attachments and service parts.

Construction – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, and related attachments and service parts.

Compact Construction – Includes net sales of smaller construction equipment, including compact excavators, compact track loaders, compact wheel loaders, skid steers, landscape loaders, and related attachments and service parts.

Roadbuilding – Includes net sales of equipment used in roadbuilding and renovation, including milling machines, recyclers, slipform pavers, surface miners, asphalt pavers, compactors, tandem and static rollers, mobile crushers and screens, mobile and stationary asphalt plants, and related attachments and service parts.

Forestry – Includes net sales of equipment used in timber harvesting, including log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments and service parts.

Financial Products – Includes finance and interest income primarily from retail notes related to sales of John Deere equipment to end customers, wholesale financing to dealers of John Deere equipment, and revolving charge accounts; lease income from retail leases of John Deere equipment; and revenue from extended warranties.

Other – Includes sales of certain components to other equipment manufacturers, revenue earned over time from precision guidance, telematics, and other information enabled solutions, revenue from service performed at company owned dealerships and service centers, gains on disposition of property and businesses, trademark licensing revenue, and other miscellaneous revenue items.

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services. These items are primarily for premiums for extended warranties, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses” in the consolidated balance sheet. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $1,115 million, $1,010 million and $1,022 million at August 2, 2020, November 3, 2019, and July 28, 2019, respectively. The contract liability is reduced as the revenue is recognized. During the three months ended August 2, 2020 and July 28, 2019, $97 million and $101 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year. During the nine months ended August 2, 2020 and July 28, 2019, $375 million and $360 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.

The Company entered into contracts with customers to deliver equipment and services that have not been recognized at August 2, 2020 because the equipment or services have not been provided. These contracts primarily relate to extended warranty and certain precision guidance and telematic services. The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $920 million at August 2, 2020. The estimated revenue to be recognized by fiscal year follows in millions of dollars: remainder of 2020 - $88, 2021 - $385, 2022 - $240, 2023 - $132, 2024 - $56, 2025 - $16 and later years - $3. The Company discloses unsatisfied performance obligations with an original contract duration greater than one year. The contracts with an expected duration of one year or less are generally for sales to dealers and end customers for equipment, service parts, repair services, and certain telematics services.

As explained in the 2019 Form 10-K, the Company’s policy on trade accounts and notes receivables is to not extend interest-free periods nor to forgive interest charged. During the second and third quarters of 2020, the Company provided short-term payment relief on trade accounts and notes receivables to independent dealers and certain other customers (customers) that are negatively affected by the economic effects of COVID. The relief was provided both in regional programs and case-by-case situations with creditworthy customers. This relief generally included payment deferrals not exceeding three months, extending interest-free periods for up to an additional three months with the total interest-free period not to exceed one year, or reducing interest rates for a maximum of three months. The trade receivable balance granted relief in the second or third quarter that remained outstanding at August 2, 2020 was $234 million or approximately 4 percent of the trade receivable portfolio. These actions were taken in response to the economic effects of COVID on customers. Outside of these actions, the Company is not modifying its normal sales terms with customers that are outlined in the 2019 Form 10-K.

For customers who obtained payment relief, subsequent sales transactions are evaluated to confirm the revenue recognition criteria are met, including the sales price is determinable and collectability of the payments is probable based on the terms outlined in the contract.