12. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 31 consisted of the following in millions of dollars:


	2014		2013

Trade accounts and notes:
Agriculture and turf	$	2,633	$	3,127
Construction and forestry	645		631
Trade accounts and notes receivable–net	$	3,278	$	3,758

At October 31, 2014 and 2013, dealer notes included in the previous table were $61 million and $75 million, and the allowance for credit losses was $55 million and $67 million, respectively.

The equipment operations sell a significant portion of their trade receivables to financial services and provide compensation to these operations at approximate 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 primarily 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 significant 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.

Financing Receivables

Financing receivables at October 31 consisted of the following in millions of dollars:


	2014					2013
	Unrestricted/Securitized					Unrestricted/Securitized

Retail notes:
Equipment:
Agriculture and turf		$	16,970	$	3,975		$	16,209	$	3,602
Construction and forestry		1,951		697			1,449		607
Total		18,921		4,672			17,658		4,209
Wholesale notes		5,390					4,802
Revolving charge accounts		2,603					2,593
Financing leases (direct and sales-type)		1,558					1,513
Operating loans							32
Total financing receivables		28,472		4,672			26,598		4,209
Less:
Unearned finance income:
Equipment notes		753		56			665		42
Financing leases		136					141
Total		889		56			806		42
Allowance for credit losses		161		14			159		14
Financing receivables – net		$	27,422	$	4,602		$	25,633	$	4,153

The residual values for investments in financing leases at October 31, 2014 and 2013 totaled $112 million and $94 million, respectively.

Financing receivables have significant 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. The company generally retains as collateral a security interest in the equipment associated with retail notes, wholesale notes and financing leases.

Financing receivables at October 31 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:


	2014			2013
	Unrestricted			Unrestricted

Retail notes*:
Equipment:
Agriculture and turf		$	2,125		$	2,042
Construction and forestry		403			364
Total		2,528			2,406
Wholesale notes		5,390			4,802
Sales-type leases		844			826
Total		$	8,762		$	8,034

* These retail notes generally arise from sales of equipment by company-owned dealers or through direct sales.


	2014			2013
	Unrestricted			Unrestricted

Less:
Unearned finance income:
Equipment notes		$	212		$	191
Sales-type leases		57			58
Total		269			249
Financing receivablesrelated to the company’ssales of equipment		$	8,493		$	7,785

Financing receivable installments, including unearned finance income, at October 31 are scheduled as follows in millions of dollars:


	2014					2013
	Unrestricted/Securitized					Unrestricted/Securitized

Due in months:
0 – 12		$	14,357	$	1,878		$	13,343	$	1,663
13 – 24		5,254		1,331			4,879		1,177
25 – 36		4,053		880			3,750		808
37 – 48		2,819		457			2,620		422
49 – 60		1,575		120			1,610		130
Thereafter		414		6			396		9
Total		$	28,472	$	4,672		$	26,598	$	4,209

The maximum terms for retail notes are generally seven years for agriculture and turf equipment and five years for construction and forestry equipment. The maximum term for financing leases is generally five years, while the average term for wholesale notes is less than twelve months.

At October 31, 2014 and 2013, the unpaid balances of receivables administered but not owned were $54 million and $82 million, respectively. At October 31, 2014 and 2013, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $32,078 million and $29,868 million, respectively.

Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the company has ceased accruing finance income. These receivables are generally 120 days delinquent and the estimated uncollectible amount, after charging the dealer's withholding account, has been written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables at October 31, 2014 follows in millions of dollars:


	30-59			60-89			90 Days
	Days			Days			or Greater			Total
	Past Due			Past Due			Past Due			Past Due

Retail Notes:
Agriculture and turf		$	93		$	34		$	28		$	155
Construction and forestry		54			16			7			77
Other:
Agriculture and turf		23			12			2			37
Construction and forestry		12			3			4			19
Total		$	182		$	65		$	41		$	288

				Total						Total
	Total			Non-						Financing
	Past Due			Performing			Current			Receivables

Retail Notes:
Agriculture and turf		$	155		$	107		$	19,966		$	20,228
Construction and forestry		77			17			2,462			2,556
Other:
Agriculture and turf		37			15			8,208			8,260
Construction and forestry		19			2			1,134			1,155
Total		$	288		$	141		$	31,770		32,199
Less allowance for credit losses											175
Total financing receivables - net											$	32,024

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables at October 31, 2013 follows in millions of dollars:


	30-59			60-89			90 Days
	Days			Days			or Greater			Total
	Past Due			Past Due			Past Due			Past Due

Retail Notes:
Agriculture and turf		$	75		$	26		$	20		$	121
Construction and forestry		39			14			9			62
Other:
Agriculture and turf		28			9			5			42
Construction and forestry		12			4			3			19
Total		$	154		$	53		$	37		$	244


				Total					Total
	Total			Non-					Financing
	Past Due			Performing			Current		Receivables

Retail Notes:
Agriculture and turf		$	121		$	102	$	18,942		$	19,165
Construction and forestry		62			12		1,921			1,995
Other:
Agriculture and turf		42			13		7,613			7,668
Construction and forestry		19			3		1,109			1,131
Total		$	244		$	130	$	29,585		29,959
Less allowance for credit losses										173
Total financing receivables - net										$	29,786

An analysis of the allowance for credit losses and investment in financing receivables follows in millions of dollars:


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total

2014
Allowance:
Beginning of year balance	$	101	$	41	$	31	$	173
Provision	18		11		2		31
Write-offs	(16)		(26)		(7)		(49)
Recoveries	11		15				26
Translation adjustments	(5)				(1)		(6)
End of year balance*	$	109	$	41	$	25	$	175
Financing receivables:
End of year balance	$	22,784	$	2,603	$	6,812	$	32,199
Balance individually evaluated	$	26			$	1	$	27

* Individual allowances were not significant.

2013
Allowance:
Beginning of year balance	$	110	$	40	$	27	$	177
Provision (credit)	(2)		5		7		10
Write-offs	(11)		(21)		(3)		(35)
Recoveries	9		17		1		27
Translation adjustments	(5)				(1)		(6)
End of year balance*	$	101	$	41	$	31	$	173
Financing receivables:
End of year balance	$	21,160	$	2,593	$	6,206	$	29,959
Balance individually evaluated	$	21			$	33	$	54

* Individual allowances were not significant.


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total

2012
Allowance:
Beginning of year balance	$	130	$	40	$	27	$	197
Provision (credit)	(12)		8		3		(1)
Write-offs	(8)		(30)		(4)		(42)
Recoveries	10		22		1		33
Translation adjustments	(10)						(10)
End of year balance*	$	110	$	40	$	27	$	177
Financing receivables:
End of year balance	$	18,251	$	2,488	$	5,215	$	25,954
Balance individually evaluated	$	11	$	1	$	1	$	13

* Individual allowances were not significant.

Past-due amounts over 30 days represented .90 percent and .82 percent of the receivables financed at October 31, 2014 and 2013, respectively. The allowance for credit losses represented .54 percent and .58 percent of financing receivables outstanding at October 31, 2014 and 2013, respectively. In addition, at October 31, 2014 and 2013, the company’s financial services operations had $196 million and $197 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses.

Financing receivables are considered impaired when it is probable the company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables, which are impaired, are generally classified as non-performing.

An analysis of the impaired financing receivables at October 31 follows in millions of dollars:

				Unpaid						Average
	Recorded			Principal			Specific			Recorded
	Investment			Balance			Allowance			Investment
2014*
Receivables with specific allowance***		$	9		$	9		$	2		$	10
Receivables without a specific allowance***		6			6						7
Total		$	15		$	15		$	2		$	17
Agriculture and turf		$	12		$	12		$	2		$	13
Construction and forestry		$	3		$	3					$	4

				Unpaid						Average
	Recorded			Principal			Specific			Recorded
	Investment			Balance			Allowance			Investment
2013*
Receivables with specific allowance**		$	18		$	18		$	4		$	19
Receivables without a specific allowance***		8			8						8
Total		$	26		$	26		$	4		$	27
Agriculture and turf		$	23		$	23		$	4		$	24
Construction and forestry		$	3		$	3					$	3

* Finance income recognized was not material.

** Primarily operating loans and retail notes.

*** Primarily retail notes.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During 2014, 2013 and 2012, the company identified 66, 92 and 138 financing receivable contracts, primarily operating loans and retail notes, as troubled debt restructurings with aggregate balances of $3 million, $16 million and $5 million pre-modification and $2 million, $15 million and $4 million post-modification, respectively. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 31, 2014, the company had no commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 31 consisted of the following in millions of dollars:

	2014		2013
Taxes receivable	$	697	$	868
Reinsurance receivables	502		351
Insurance premium receivables	23		24
Other	278		221
Other receivables	$	1,500	$	1,464

Reinsurance and insurance premium receivables are associated with the financial services’ crop insurance subsidiary (see Note 9).