John Deere 2014 Annual Report Download - page 58

26. FAIR VALUE MEASUREMENTS
The fair values of financial instruments that do not approximate
the carrying values at October 31 in millions of dollars follow:
2014 2013
______________ ______________
Carrying Fair Carrying Fair
Value Value* Value Value*
Financing receivables – net .............. $ 27,42 2 $ 27,337 $ 25,633 $ 25,572
Financing receivables
securitized – net .......................... $ 4,602 $ 4,573 $ 4,153 $ 4,124
Short-term securitization
borrowings .................................. $ 4,559 $ 4,562 $ 4,109 $ 4,113
Long-term borrowings due
within one year:
Equipment operations .............. $ 243 $ 233 $ 821 $ 837
Financial services .................... 4,730 4,743 4,408 4,441
Total ....................................... $ 4,973 $ 4,976 $ 5,229 $ 5,278
Long-term borrowings:
Equipment operations .................. $ 4,643 $ 5,095 $ 4,871 $ 5,141
Financial services ........................ 19,738 19,886 16,707 16,887
Total ....................................... $ 24,381 $ 24,981 $ 21,578 $ 22,028
* 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.
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Assets and liabilities measured at October 31 at fair value
on a recurring basis in millions of dollars follow:
2014* 2013*
Marketable securities
Equity fund ............................................................ $ 45 $ 20
Fixed income fund .................................................. 10
U.S. government debt securities ............................. 808 1,312
Municipal debt securities ........................................ 34 36
Corporate debt securities ........................................ 172 138
Mortgage-backed securities** ................................ 146 119
Total marketable securities ......................................... 1,215 1,625
Other assets
Derivatives:
Interest rate contracts ............................................ 319 347
Foreign exchange contracts .................................... 18 32
Cross-currency interest rate contracts ..................... 16 15
Total assets*** ............................................................... $ 1,568 $ 2,019
Accounts payable and accrued expenses
Derivatives:
Interest rate contracts ............................................ $ 81 $ 120
Foreign exchange contracts .................................... 29 42
Cross-currency interest rate contracts ..................... 17
Total liabilities ................................................................. $ 110 $ 179
* All measurements above were Level 2 measurements except for Level 1 measure-
ments of U.S. government debt securities of $741 million and $1,247 million at
October 31, 2014 and 2013, respectively, and the equity fund of $45 million and
$20 million at October 31, 2014 and 2013, respectively, and the fixed income fund
of $10 million at October 31, 2014. There were no transfers between Level 1 and
Level 2 during 2014, 2013 and 2012.
** Primarily issued by U.S. government sponsored enterprises.
*** Excluded from this table were cash equivalents, which were carried at cost that
approximates fair value. The cash equivalents consist primarily of money market
funds that were Level 1 measurements.
Fair value, nonrecurring, Level 3 measurements from
impairments at October 31 in millions of dollars follow:
Fair Value* Losses*
_____________ ____________________
2014 2013 2014 2013 2012
Property and
equipment – net .......... $ 53 $ 36 $ 44 $ 48
Goodwill .......................... $ 33
Other intangible
assets – net ................ $ 9
Other assets .................... $ 15 $ 16
Assets held for sale –
Water operations ......... $ 36
* See financing receivables with specific allowances in Note 12 that were not
significant. See Note 5 for impairments.
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.