John Deere 2010 Annual Report Download - page 31

31
New Accounting Standards to be Adopted
In December 2009, the FASB issued ASU No. 2009-16,
Accounting for Transfers of Financial Assets, which amends
ASC 860, Transfers and Servicing (FASB Statement No. 166,
Accounting for Transfers of Financial Assets an amendment of
FASB Statement No. 140). This ASU eliminates the qualifying
special purpose entities from the consolidation guidance and
clarifi es the requirements for isolation and limitations on
portions of fi nancial assets that are eligible for sale accounting.
It requires additional disclosures about the risks from continuing
involvement in transferred fi nancial assets accounted for as sales.
The effective date is the beginning of fi scal year 2011.
The adoption will not have a material effect on the company’s
consolidated fi nancial statements.
In December 2009, the FASB issued ASU No. 2009-17,
Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities, which amends ASC 810,
Consolidation (FASB Statement No. 167, Amendments to
FASB Interpretation No. 46(R)). This ASU requires a qualita-
tive analysis to determine the primary benefi ciary of a VIE.
The analysis identifi es the primary benefi ciary as the enterprise
that has both the power to direct the activities of a VIE that
most signifi cantly impact the VIE’s economic performance and
the obligation to absorb losses or the right to receive benefi ts
that could be signifi cant to the VIE. The ASU also requires
additional disclosures about an enterprise’s involvement in a
VIE. The effective date is the beginning of fi scal year 2011.
The adoption will not have a material effect on the company’s
consolidated fi nancial statements.
In July 2010, the FASB issued ASU No. 2010-20,
Disclosures about the Credit Quality of Financing Receivables
and the Allowance for Credit Losses, which amends ASC 310,
Receivables. This ASU requires disclosures related to fi nancing
receivables and the allowance for credit losses by portfolio
segment. The ASU also requires disclosures of information
regarding the credit quality, aging, nonaccrual status and
impairments by class of receivable. A portfolio segment is the
level at which a creditor develops a systematic methodology for
determining its credit allowance. A receivable class is a subdivi-
sion of a portfolio segment with similar measurement attributes,
risk characteristics and common methods to monitor and assess
credit risk. Trade accounts receivable with maturities of one
year or less are excluded from the disclosure requirements.
The effective date for disclosures as of the end of the reporting
period is the fi rst quarter of fi scal year 2011. The effective date
for disclosures for activity during the reporting period is the
second quarter of fi scal year 2011. The adoption will not have
a material effect on the company’s consolidated fi nancial
statements.
4. ASSETS HELD FOR SALE
In August 2010, the company announced it had signed an
agreement to sell John Deere Renewables, LLC, its wind
energy business. The company concluded that its resources
are best invested in growing its core businesses. These assets
were reclassifi ed as held for sale and written down to fair value
less cost to sell at October 31, 2010 (see Note 26). The asset
write-down in the fourth quarter of 2010 was $35 million
pretax and included in “Other operating expenses.” The assets
classifi ed as held for sale after the write-down consisted of
$908 million of wind energy investments previously included in
property and equipment and $23 million of other miscellaneous
assets. At October 31, 2010, the related liabilities to be sold
recorded in accounts payable and accrued expenses totaled
$35 million and the noncontrolling interest was $2 million.
The company closed the sale for approximately $900 million
after year end (see Note 30).
5. SPECIAL ITEMS
Restructuring
In September 2008, the company announced it would close its
manufacturing facility in Welland, Ontario, Canada, and transfer
production to company operations in Horicon, Wisconsin, U.S.,
and Monterrey and Saltillo, Mexico. The Welland factory
manufactured utility vehicles and attachments for the agriculture
and turf business. The factory discontinued manufacturing in
the fourth quarter of 2009. The move supported ongoing
efforts aimed at improved effi ciency and profi tability.
The closure resulted in total expenses recognized in cost
of sales in millions of dollars as follows:
2008 2009 2010 Total
Pension and other
postretirement benefi ts ..................$ 10 $ 27 $ 6 $ 43
Property and equipment
impairments .................................. 21 3 1 25
Employee termination benefi ts ........... 18 7 25
Other expenses .................................. 11 8 19
Total .........................................$ 49 $ 48 $ 15 $ 112
All expenses are included in the agriculture and turf
operating segment. The pretax cash expenditures associated
with this closure through 2010 were approximately $60 million.
The annual pretax increase in earnings and cash fl ows due to
this restructuring was approximately $40 million in 2010.
Property and equipment impairment values were based
primarily on market appraisals.
The remaining liability for employee termination benefi ts
at October 31, 2010 was $4 million, which included accrued
benefi t expenses to date of $25 million and an increase due to
foreign currency translation of $3 million, which were partially
offset by $24 million of benefi ts paid to date.
Voluntary Employee Separations
The company combined the agricultural equipment segment
and the commercial and consumer equipment segment into the
agriculture and turf segment effective at the beginning of the
third quarter of 2009. Voluntary employee separations related
to the new organizational structure resulted in pretax expenses
of $91 million in 2009. The expenses were approximately
60 percent cost of sales and 40 percent selling, administrative
and general expenses.