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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Nov. 03, 2019

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

23. COMMITMENTS AND CONTINGENCIES

The company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is

primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $582 million and $506 million at November 3, 2019 and October 28, 2018, respectively.

A reconciliation of the changes in the warranty liability and unearned premiums in millions of dollars follows:


		Warranty Liability/
		Unearned Premiums
		2019			2018
Beginning of year balance		$	1,652		$	1,468
Payments			(985)			(907)
Amortization of premiums received			(214)			(217)
Accruals for warranties			1,066			978
Premiums received			292			270
Acquisition*						80
Foreign exchange			(11)			(20)
End of year balance		$	1,800		$	1,652

* See Note 4.

At November 3, 2019, the company had approximately $343 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere and Wirtgen equipment. The company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At November 3, 2019, the company had accrued losses of approximately $14 million under these agreements. The maximum remaining term of the receivables guaranteed at November 3, 2019 was approximately seven years.

At November 3, 2019, the company had commitments of approximately $281 million for the construction and acquisition of property and equipment. Also at November 3, 2019, the company had restricted assets of $88 million, classified as “Other assets”. See Note 14 for additional restricted assets associated with borrowings related to securitizations.

The company also had other miscellaneous contingent liabilities totaling approximately $65 million at November 3, 2019. The accrued liability for these contingencies was not material at November 3, 2019.

The company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos related liability), retail credit, employment, patent, and trademark matters. The company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its financial statements.