FAIR VALUE MEASUREMENTS

9 Months Ended

Jul. 30, 2023

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

(17)  Fair Value Measurements

The fair values of financial instruments that do not approximate the carrying values were as follows in millions of dollars. Long-term borrowings exclude finance lease liabilities.

	July 30, 2023				October 30, 2022				July 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financing receivables – net	$	41,302	$	40,675	$	36,634	$	35,526	$	35,056	$	34,158
Financing receivables securitized – net		7,001		6,818		5,936		5,698		5,141		4,990
Short-term securitization borrowings		6,608		6,538		5,711		5,577		4,920		4,862
Long-term borrowings due within one year		7,765		7,568		7,466		7,322		7,693		7,608
Long-term borrowings		38,064		37,121		33,566		31,852		32,101		31,741

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

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.

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow. The Company’s cash equivalents, which consisted of money market funds and time deposits, are excluded as these assets were carried at cost that approximates fair value.

	July 30		October 30		July 31
	2023		2022		2022
Level 1:
Marketable securities
International equity securities	$	3	$	3	$	2
U.S. equity fund		101		70		75
U.S. fixed income fund		85
U.S. government debt securities		63		62		63
Total Level 1 marketable securities		252		135		140
Level 2:
Marketable securities
U.S. government debt securities		134		121		134
Municipal debt securities		69		63		70
Corporate debt securities		221		200		213
International debt securities		2		60		1
Mortgage-backed securities		163		155		161
Total Level 2 marketable securities		589		599		579
Other assets - Derivatives		324		373		280
Accounts payable and accrued expenses - Derivatives		948		1,231		667
Level 3:
Accounts payable and accrued expenses - Deferred consideration		202		236		252

The contractual maturities of debt securities at July 30, 2023 in millions of dollars are shown below. Actual maturities may differ from contractual maturities because some securities may be called or prepaid. Unrealized losses were not recognized in income due to the ability and intent to hold to maturity. 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	$	25	$	24
Due after one through five years		130		121
Due after five through 10 years		193		170
Due after 10 years		211		174
Mortgage-backed securities		194		163
Debt securities	$	753	$	652

Fair value, nonrecurring Level 3 measurements from impairments, excluding financing receivables with specific allowances which were not significant, were as follows in millions of dollars. Inventories and property and equipment – net fair values for October 30, 2022 represent the fair value assessment at July 31, 2022.

	Fair Value					Losses
						Three Months Ended			Nine Months Ended
	July 30	October 30		July 31		July 30	July 31		July 30	July 31
	2023	2022		2022		2023	2022		2023	2022
Inventories		$	19	$	13		$	4		$	12
Property and equipment – net			15								41
Other intangible assets – net											28

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

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 closing prices in the active market in which the investment trades.

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).

Inventories – The impairment was based on net realizable value.

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.

Other intangible assets - net – The Company considered external valuations based on the Company’s probability weighted cash flow analysis.