John Deere 2010 Annual Report Download - page 38

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12. RECEIVABLES
Trade Accounts and Notes Receivable
Trade accounts and notes receivable at October 31 consisted of
the following in millions of dollars:
2010 2009
Trade accounts and notes:
Agriculture and turf ................................................. $ 2,929 $ 2,363
Construction and forestry......................................... 535 254
Trade accounts and notes receivable–net ............. $ 3,46 4 $ 2,617
At October 31, 2010 and 2009, dealer notes included in
the previous table were $852 million and $538 million, and the
allowance for doubtful trade receivables was $71 million and
$77 million, respectively.
The Equipment Operations sell a signifi cant portion of
their trade receivables to Financial Services and provide
compensation to these operations at market rates of interest.
Trade accounts and notes receivable primarily arise from
sales of goods to independent dealers. Under the terms of the
sales to dealers, interest is charged to dealers on outstanding
balances, from the earlier of the date when goods are sold to
retail customers by the dealer or the expiration of certain
interest-free periods granted at the time of the sale to the dealer,
until payment is received by the company. Dealers cannot cancel
purchases after the equipment is shipped and are responsible for
payment even if the equipment is not sold to retail customers.
The interest-free periods are determined based on the type of
equipment sold and the time of year of the sale. These periods
range from one to twelve months for most equipment.
Interest-free periods may not be extended. Interest charged may
not be forgiven and the past due interest rates exceed market
rates. The company evaluates and assesses dealers on an ongoing
basis as to their creditworthiness and generally retains a security
interest in the goods associated with the trade receivables.
The company is obligated to repurchase goods sold to a dealer
upon cancellation or termination of the dealer’s contract for
such causes as change in ownership and closeout of the business.
Trade accounts and notes receivable have signifi cant
concentrations of credit risk in the agriculture and turf sector
and construction and forestry sector as shown in the previous
table. On a geographic basis, there is not a disproportionate
concentration of credit risk in any area.
11. MARKETABLE SECURITIES
All marketable securities are classifi ed as available-for-sale,
with unrealized gains and losses shown as a component of
stockholders’ equity. Realized gains or losses from the sales of
marketable securities are based on the specifi c identifi cation
method.
The amortized cost and fair value of marketable
securities at October 31 in millions of dollars follow:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
2010
U.S. government debt securities .... $ 57 $ 6 $ 63
Municipal debt securities .............. 26 2 28
Corporate debt securities .............. 58 5 63
Residential mortgage-
backed securities* .................... 69 4 $ 1 72
Other debt securities .................... 2 2
Marketable securities ............... $ 212 $ 17 $ 1 $ 228
2009
U.S. government debt securities .... $ 49 $ 3 $ 52
Municipal debt securities .............. 23 1 24
Corporate debt securities .............. 41 2 43
Residential mortgage-
backed securities* .................... 70 3 73
Marketable securities ............... $ 183 $ 9 $ 192
* Primarily issued by U.S. government sponsored enterprises.
The contractual maturities of debt securities at October 31,
2010 in millions of dollars follow:
Amortized Fair
Cost Value
Due in one year or less ................................................. $ 9 $ 9
Due after one through fi ve years .................................... 45 49
Due after fi ve through 10 years ..................................... 54 60
Due after 10 years ........................................................ 35 38
Residential mortgage-backed securities ........................ 69 72
Debt securities .......................................................... $ 212 $ 228
Actual maturities may differ from contractual maturities
because some securities may be called or prepaid. Proceeds from
the sales of available-for-sale securities were none in 2010,
$759 million in 2009 and $1,137 million in 2008. Realized gains
were none, $4 million and $12 million and realized losses were
none, $8 million and $15 million in 2010, 2009 and 2008,
respectively. The increase (decrease) in net unrealized gains
or losses and unrealized losses that have been continuous for
over twelve months were not material in any years presented.
Unrealized losses at October 31, 2010 were primarily the
result of an increase in interest rates and were not recognized
in income due to the ability and intent to hold to maturity.
Losses related to impairment write-downs were none in 2010,
$2 million in 2009 and $27 million in 2008.