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FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended
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Jan. 27, 2019
FAIR VALUE MEASUREMENTS |
Fair Value of Financial Instruments | The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:
|  | January 27, 2019 |  | October 28, 2018 |  | January 28, 2018 |
|  | Carrying Value |  | Fair Value * |  | Carrying Value |  | Fair Value * |  | Carrying Value |  | Fair Value * |
Financing receivables – net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations |  | $ | 102 |  | $ | 99 |  | $ | 93 |  | $ | 91 |  | $ | 52 |  | $ | 51 |
Financial services |  |  | 25,048 |  |  | 24,900 |  |  | 26,961 |  |  | 26,722 |  |  | 23,803 |  |  | 23,597 |
Total |  | $ | 25,150 |  | $ | 24,999 |  | $ | 27,054 |  | $ | 26,813 |  | $ | 23,855 |  | $ | 23,648 |
Financing receivables securitized – net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations |  | $ | 67 |  | $ | 65 |  | $ | 76 |  | $ | 73 |  | $ | 125 |  | $ | 125 |
Financial services |  |  | 4,496 |  |  | 4,454 |  |  | 3,946 |  |  | 3,895 |  |  | 4,349 |  |  | 4,303 |
Total |  | $ | 4,563 |  | $ | 4,519 |  | $ | 4,022 |  | $ | 3,968 |  | $ | 4,474 |  | $ | 4,428 |
Short-term securitization borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations |  | $ | 67 |  | $ | 67 |  | $ | 75 |  | $ | 75 |  | $ | 126 |  | $ | 126 |
Financial services |  |  | 4,397 |  |  | 4,391 |  |  | 3,882 |  |  | 3,870 |  |  | 4,302 |  |  | 4,293 |
Total |  | $ | 4,464 |  | $ | 4,458 |  | $ | 3,957 |  | $ | 3,945 |  | $ | 4,428 |  | $ | 4,419 |
Long-term borrowings due within one year: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations |  | $ | 928 |  | $ | 937 |  | $ | 970 |  | $ | 979 |  | $ | 289 |  | $ | 289 |
Financial services |  |  | 5,198 |  |  | 5,186 |  |  | 5,427 |  |  | 5,411 |  |  | 6,124 |  |  | 6,127 |
Total |  | $ | 6,126 |  | $ | 6,123 |  | $ | 6,397 |  | $ | 6,390 |  | $ | 6,413 |  | $ | 6,416 |
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations |  | $ | 4,712 |  | $ | 4,989 |  | $ | 4,714 |  | $ | 4,948 |  | $ | 5,573 |  | $ | 6,076 |
Financial services |  |  | 23,143 |  |  | 23,217 |  |  | 22,523 |  |  | 22,590 |  |  | 20,849 |  |  | 21,023 |
Total |  | $ | 27,855 |  | $ | 28,206 |  | $ | 27,237 |  | $ | 27,538 |  | $ | 26,422 |  | $ | 27,099 |
* Fair value measurements above were Level 3 for all financing receivables, Level 3 for equipment operations short-term securitization borrowings, and Level 2 for all other borrowings.
Assets and Liabilities Measured at Fair Value on a Recurring Basis | Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow:
|  | January 27 |  | October 28 |  | January 28 |
|  | 2019* |  | 2018* |  | 2018* |
Marketable securities |  |  |  |  |  |  |  |  |  |
Equity fund **** |  | $ | 51 |  | $ | 46 |  | $ | 52 |
Fixed income fund |  |  |  |  |  |  |  |  | 14 |
U.S. government debt securities |  |  | 120 |  |  | 111 |  |  | 75 |
Municipal debt securities |  |  | 51 |  |  | 46 |  |  | 41 |
Corporate debt securities |  |  | 141 |  |  | 140 |  |  | 137 |
International debt securities |  |  | 15 |  |  | 10 |  |  | 18 |
Mortgage-backed securities ** |  |  | 146 |  |  | 137 |  |  | 125 |
Total marketable securities |  |  | 524 |  |  | 490 |  |  | 462 |
Other assets |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  | 76 |  |  | 80 |  |  | 94 |
Foreign exchange contracts |  |  | 59 |  |  | 83 |  |  | 31 |
Cross-currency interest rate contracts |  |  | 3 |  |  | 5 |  |  | 8 |
Total assets *** |  | $ | 662 |  | $ | 658 |  | $ | 595 |
Accounts payable and accrued expenses |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 232 |  | $ | 350 |  | $ | 248 |
Foreign exchange contracts |  |  | 64 |  |  | 49 |  |  | 124 |
Cross-currency interest rate contracts |  |  | 2 |  |  |  |  |  | 2 |
Total liabilities |  | $ | 298 |  | $ | 399 |  | $ | 374 |
* All measurements above were Level 2 measurements except for Level 1 measurements of the equity fund of $51 million, $46 million, and $52 million at January 27, 2019, October 28, 2018, and January 28, 2018, respectively; the fixed income fund of $14 million at January 28, 2018; and U.S. government debt securities of $44 million, $44 million, and $43 million at January 27, 2019, October 28, 2018, and January 28, 2018, respectively. In addition, $6 million, $8 million, and $15 million of the international debt securities were Level 3 measurements at January 27, 2019, October 28, 2018, and January 28, 2018, respectively. ** Primarily issued by U.S. government sponsored enterprises. *** Excluded from this table were the Company’s cash equivalents, which were carried at cost that approximates fair value. The cash equivalents consist primarily of money market funds and time deposits. ****Beginning in the first quarter of fiscal year 2019, unrealized fair value changes are recognized directly in net income (see Note 3).
Contractual Maturities of Debt Securities | The contractual maturities of debt securities at January 27, 2019 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 |  | $ | 32 |  | $ | 32 |
Due after one through five years |  |  | 112 |  |  | 111 |
Due after five through 10 years |  |  | 101 |  |  | 101 |
Due after 10 years |  |  | 84 |  |  | 83 |
Mortgage-backed securities |  |  | 150 |  |  | 146 |
Debt securities |  | $ | 479 |  | $ | 473 |
Fair Value, Recurring, Level 3 Measurements | Fair value, recurring Level 3 measurements from available-for-sale marketable securities in millions of dollars follow:
|  | Three Months Ended |
|  | January 27 |  | January 28 |
|  | 2019 |  | 2018 |
Beginning of period balance |  | $ | 8 |  | $ | 17 |
Principal payments |  |  | (3) |  |  | (2) |
Other |  |  | 1 |  |  |  |
End of period balance |  | $ | 6 |  | $ | 15 |

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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19279-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19207-110258 + Details
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