XML 52 R32.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENTS

12 Months Ended

Oct. 30, 2022

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

25. FAIR VALUE MEASUREMENTS

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. To determine 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.

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 values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the company for similar financing receivables. The fair values of the remaining financing receivables approximated the carrying amounts.

Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings have been swapped to current variable interest rates. The carrying values of these long-term borrowings included adjustments related to fair value hedges.

The fair values of financial instruments that do not approximate the carrying values at October 30, 2022 and October 31, 2021 in millions of dollars follow:


		2022						2021
		Carrying			Fair			Carrying			Fair
		Value			Value*			Value			Value*
Financing receivables – net		$	36,634		$	35,526		$	33,799		$	33,718
Financing receivables securitized – net			5,936			5,698			4,659			4,704
Short-term securitization borrowings			5,711			5,577			4,605			4,610
Long-term borrowings due within one year**			7,466			7,322			8,330			8,364
Long-term borrowings**			33,566			31,852			32,850			34,506

* Fair value measurements above were Level 3 for all financing receivables and Level 2 for all borrowings.

**	Values exclude finance lease liabilities that are presented as borrowings (see Note 24).

Assets and liabilities measured at October 30, 2022 and October 31, 2021 at fair value on a recurring basis in millions of dollars follow, excluding the company’s cash equivalents, which were carried at a cost that approximates fair value and consisted of money market funds and time deposits:


		2022			2021
Level 1:
Marketable securities
U.S. equity fund		$	70		$	75
International equity securities			3			2
U.S. government debt securities			62			59
Total Level 1 marketable securities			135			136

Level 2:
Marketable securities
U.S. government debt securities			121			139
Municipal debt securities			63			73
Corporate debt securities			200			224
International debt securities			60			2
Mortgage-backed securities*			155			154
Total Level 2 marketable securities			599			592
Other assets
Derivatives			373			275
Accounts payable and accrued expenses
Derivatives			1,231			228

Level 3:
Accounts payable and accrued expenses – Deferred consideration			236

* Primarily issued by U.S. government sponsored enterprises.

Fair value, nonrecurring measurements from impairments at October 30, 2022 and October 31, 2021 in millions of dollars follow:


		Fair Value						Losses
		2022¹			2021			2022			2021			2020
Other receivables														$	2
Equipment on operating leases – net															22
Inventories		$	19					$	19
Property and equipment – net ²			15		$	41			41		$	44			102
Investments in unconsolidated affiliates															50
Other intangible assets – net									28						2
Other assets ³						1						6			16

¹ Related to assessments on the Russian operations, performed at May 1, 2022 and updated on July 31, 2022 and October 30, 2022.

² 2021 fair value of $41 million at January 31, 2021.

³ 2021 fair value as of January 31, 2021.

The following is a description of the valuation methodologies the company uses to measure certain financial instruments on the balance sheets at fair value. For more information on asset impairments, see Note 4.

Marketable securities – The portfolio of investments is valued 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. Funds are valued

using the fund’s net asset value, based on the fair value of the underlying securities.

Derivatives – The company’s derivative financial instruments consist of interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards and swaps), and cross-currency interest rate contracts (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 a market approach (appraisal values or realizable values). Inputs include a selection of realizable values (see Note 11).

Other receivables – The impairment was based on the expected realization of value-added tax receivables related to a closed factory operation.

Equipment on operating leases – net – The impairments are based on an income approach (discounted cash flow), using the contractual payments, plus an estimate of return rates and equipment sale price at lease maturity. Inputs include historical return rates and realized sales values.

Inventories – The impairment was based on net realizable value, less reasonably predictable selling and disposal costs.

Property and equipment – net – The valuations were based on cost and market approaches. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence, or quoted prices when available.

Investment in unconsolidated affiliates – Other than temporary impairments for investments are measured as the difference between the implied fair value or the estimated realization amount, and the carrying value. The fair value for publicly traded entities is the share price multiplied by the shares owned, or the estimated realization amount.

Other intangible assets – net – In 2022, the company considered external valuations based on the company’s probability weighted cash flow analysis. In 2020, the impairment was measured at the remaining net book value of customer relationships related to a closed factory operation.

Other assets – In 2021, the impairments were measured at the fair value of the right of use operating lease asset. In 2020, the impairments of the matured operating lease inventory were measured at the fair value of that equipment. The valuations were based on a market approach. The inputs include sales of comparable assets. Also in 2020, the impairment of the German lawn mower business was measured at the estimated realizable value. Fair value was based on estimates of the final sale price.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details