John Deere 2012 Annual Report Download - page 30

denominated in a currency other than the functional currency
of the subsidiary involved and foreign exchange forward
contracts are included in net income. The pretax net losses for
foreign exchange in 2012, 2011 and 2010 were $96 million,
$121 million and $75 million, respectively.
3. NEW ACCOUNTING STANDARDS
New Accounting Standards Adopted
In the first quarter of 2012, the company adopted the remaining
provisions of Financial Accounting Standards Board (FASB)
Accounting Standards Update (ASU) No. 2010-06, Improving
Disclosures about Fair Value Measurements, which amends
Accounting Standards Codification (ASC) 820, Fair Value
Measurements and Disclosures. This ASU requires disclosures
of transfers into and out of Levels 1 and 2, more detailed roll
forward reconciliations of Level 3 recurring fair value measure-
ments on a gross basis, fair value information by class of assets
and liabilities, and descriptions of valuation techniques and
inputs for Level 2 and 3 measurements. The effective date was
the second quarter of fiscal year 2010 except for the roll
forward reconciliations, which were required in the first quarter
of fiscal year 2012. The adoption in 2010 and the adoption in
the first quarter of 2012 did not have a material effect on the
company’s consolidated financial statements.
In the second quarter of 2012, the company adopted
FASB ASU No. 2011-04, Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in
U.S. GAAP and IFRSs, which amends ASC 820, Fair Value
Measurement. This ASU requires the categorization by level
for items that are required to be disclosed at fair value and
information about transfers between Level 1 and Level 2 and
additional disclosure for Level 3 measurements. In addition,
the ASU provides guidance on measuring the fair value of
financial instruments managed within a portfolio and the
application of premiums and discounts on fair value measure-
ments. The adoption did not have a material effect on the
company’s consolidated financial statements.
New Accounting Standards to be Adopted
In June 2011, the FASB issued ASU No. 2011-05, Presentation
of Comprehensive Income, which amends ASC 220,
Comprehensive Income. This ASU requires the presentation of
total comprehensive income, total net income and the compo-
nents of net income and comprehensive income either in a
single continuous statement or in two separate but consecutive
statements. The requirements do not change how earnings per
share is calculated or presented. The effective date will be the
first quarter of fiscal year 2013 and must be applied retrospec-
tively. The adoption will not have a material effect on the
company’s consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08,
Testing Goodwill for Impairment, which amends ASC 350,
Intangibles - Goodwill and Other. This ASU gives an entity the
option to first assess qualitative factors to determine if goodwill
is impaired. The entity may first determine based on qualitative
factors if it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, including
goodwill. If that assessment indicates no impairment, the first
and second steps of the quantitative goodwill impairment test
are not required. The effective date will be the first quarter of
fiscal year 2013. The adoption will not have a material effect on
the company’s consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-11,
Disclosures about Offsetting Assets and Liabilities, which
amends ASC 210, Balance Sheet. This ASU requires entities to
disclose gross and net information about both instruments and
transactions eligible for offset in the statement of financial
position and those subject to an agreement similar to a master
netting arrangement. This would include derivatives and other
financial securities arrangements. The effective date will be the
first quarter of fiscal year 2014 and must be applied retrospec-
tively. The adoption will not have a material effect on the
company’s consolidated financial statements.
In July 2012, the FASB issued ASU No. 2012-02,
Testing Indefinite-Lived Intangible Assets for Impairment,
which amends ASC 350, Intangibles – Goodwill and Other.
This ASU gives an entity the option to first assess qualitative
factors to determine if indefinite-lived intangible assets are
impaired. The entity may first determine based on qualitative
factors if it is more likely than not that the fair value of indefi-
nite-lived intangible assets are less than their carrying amount.
If that assessment indicates no impairment, the quantitative
impairment test is not required. The effective date will be the
first quarter of fiscal year 2013. The adoption will not have a
material effect on the company’s consolidated financial
statements.
4. DISPOSITION
In December 2010, the company sold John Deere Renewables,
LLC, its wind energy business for approximately $900 million.
The company had concluded that its resources were best
invested in growing its core businesses. These assets were
reclassified 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.”
5. SPECIAL ITEM
Goodwill Impairment
In the fourth quarters of 2012 and 2010, the company recorded
non-cash charges in cost of sales for the impairment of goodwill
of $33 million pretax, or $31 million after-tax, and $27 million
pretax, or $25 million after-tax, respectively. The charges were
associated with the company’s John Deere Water reporting
unit, which is included in the agriculture and turf operating
segment. The goodwill impairments in 2012 and 2010 were
due to declines in the forecasted financial performance as a
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