(15) Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, the Company uses various methods including market and income approaches. The Company utilizes valuation models and techniques that maximize the use of observable inputs. The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures. These valuation techniques are consistently applied.

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.

The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:


	April 30, 2017				October 30, 2016				May 1, 2016
	Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *
Financing receivables – net	$	23,301	$	23,141	$	23,702	$	23,564	$	23,415	$	23,300
Financing receivables securitized – net		4,282		4,253		5,127		5,114		4,735		4,723
Short-term securitization borrowings		4,225		4,225		4,998		5,005		4,637		4,642

Long-term borrowings due within one year:
Equipment operations	$	120	$	119	$	85	$	80	$	41	$	38
Financial services		5,339		5,345		5,258		5,259		5,308		5,321
Total	$	5,459	$	5,464	$	5,343	$	5,339	$	5,349	$	5,359

Long-term borrowings:
Equipment operations	$	4,520	$	5,020	$	4,565	$	5,184	$	4,562	$	5,148
Financial services		18,733		18,864		19,138		19,273		20,026		20,182
Total	$	23,253	$	23,884	$	23,703	$	24,457	$	24,588	$	25,330

* Fair value measurements above were Level 3 for all financing receivables and Level 2 for all borrowings.

Fair values of 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.

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow:


	April 30		October 30		May 1
	2017*		2016*		2016*
Marketable securities
U.S. equity securities and funds	$	135	$	45	$	44
Fixed income fund		15		15		3
U.S. government debt securities		79		88		79
Municipal debt securities		39		43		41
Corporate debt securities		132		118		113
International debt securities		28		34		71
Mortgage-backed securities **		118		111		124
Total marketable securities		546		454		475
Other assets
Derivatives:
Interest rate contracts		142		294		419
Foreign exchange contracts		60		60		38
Cross-currency interest rate contracts		14		21		22
Total assets ***	$	762	$	829	$	954
Accounts payable and accrued expenses
Derivatives:
Interest rate contracts	$	79	$	29	$	48
Foreign exchange contracts		50		43		96
Cross-currency interest rate contracts		2				1
Total liabilities	$	131	$	72	$	145

* Measurements above were Level 2 measurements except for Level 1 measurements of the U.S. equity securities and funds of $135 million, $45 million, and $44 million at April 30, 2017, October 30, 2016, and May 1, 2016, respectively; the fixed income fund of $15 million, $15 million, and $3 million at April 30, 2017; October 30, 2016, and May 1, 2016, respectively; and U.S. government debt securities of $46 million, $53 million, and $38 million at April 30, 2017, October 30, 2016, and May 1, 2016, respectively. In addition, $23 million, $28 million, and $40 million of the international debt securities were Level 3 measurements at April 30, 2017, October 30, 2016, and May 1, 2016. There were no transfers between Level 1 and Level 2 during the first six months of 2017 or 2016.

** Primarily issued by U.S. government sponsored enterprises.

*** Excluded from this table are the Company’s 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.

The contractual maturities of debt securities at April 30, 2017 in millions of dollars are shown below. Actual maturities may differ from those scheduled as a result of prepayments by the issuers. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.


	Amortized		Fair
	Cost		Value
Due in one year or less	$	24	$	23
Due after one through five years		106		105
Due after five through 10 years		94		96
Due after 10 years		53		54
Mortgage-backed securities		118		118
Debt securities	$	395	$	396

Fair value, recurring Level 3 measurements from available for sale marketable securities in millions of dollars follow:


	Three Months Ended				Six Months Ended
	April 30		May 1		April 30		May 1
	2017		2016		2017		2016
Beginning of period balance	$	23	$	44	$	28	$	29
Purchases								25
Principal payments		(1)		(6)		(6)		(8)
Change in unrealized gain (loss)		1		2		1		(6)
End of period balance	$	23	$	40	$	23	$	40

Fair value, nonrecurring Level 3 measurements from impairments in millions of dollars follow:


	Fair Value *					Losses
						Three Months Ended			Six Months Ended
	April 30	October 30		May 1		April 30	May 1		April 30	May 1
	2017	2016		2016		2017	2016		2017	2016
Equipment on operating leases – net		$	654	$	725		$	26		$	30
Property and equipment – net		$	31
Investments in unconsolidated affiliates		$	1
Other assets		$	184	$	166		$	11		$	20

* See financing receivables with specific allowances in Note 10. Losses were not significant.

The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet at fair value:

Marketable Securities – The portfolio of investments, except for the Level 3 measurement international debt securities, is primarily valued on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk, and prepayment speeds. Funds are primarily valued using the fund’s net asset value, based on the fair value of the underlying securities. The Level 3 measurement international debt securities are primarily valued using an income approach based on discounted cash flows using yield curves derived from limited, observable market data.

Derivatives – The Company’s derivative financial instruments consist of interest rate swaps and caps, foreign currency futures, forwards and swaps, and cross-currency interest rate swaps. The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

Financing Receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values). Inputs include a selection of realizable values.

Equipment on Operating Leases – Net – The impairments are based on an income approach (discounted cash flow), using the contractual payments, plus an estimate of equipment sale price at lease maturity. Inputs include realized sales values.

Property and Equipment – Net – The impairments are measured at the lower of the carrying amount, or fair value. The valuations are based on a cost approach. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence.

Investment in Unconsolidated Affiliates – Other than temporary impairments for investments are measured as the difference between the implied fair value and the carrying value of the investments. The estimated fair value is determined by an income approach (discounted cash flows), which includes inputs such as interest rates and margins.

Other Assets – The impairments are measured at the lower of the carrying amount or fair value. The valuations are based on a market approach. The inputs include sales of comparable assets.