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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Oct. 31, 2021

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

21. 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 $774 million and $638 million at October 31, 2021 and November 1, 2020, respectively.

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


		Warranty Liability/
		Unearned Premiums
		2021			2020
Beginning of year balance		$	1,743		$	1,800
Payments			(864)			(942)
Amortization of premiums received			(227)			(222)
Accruals for warranties			1,071			851
Premiums received			358			276
Foreign exchange			5			(20)
End of year balance		$	2,086		$	1,743

At October 31, 2021, the company had approximately $409 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 equipment. The company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At October 31, 2021, the company had accrued losses of approximately $6 million under these agreements. The maximum remaining term of the receivables guaranteed at October 31, 2021 was about six years.

At October 31, 2021, the company had commitments of approximately $254 million for the construction and acquisition of property and equipment. Also at October 31, 2021, the company had restricted assets of $68 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 $75 million at October 31, 2021. The accrued liability for these contingencies was not material at October 31, 2021.

The company has commitments to extend credit to customers through lines of credit and other pre-approved credit arrangements. The amount of unused commitments to extend credit to John Deere dealers was approximately $14 billion at October 31, 2021. The amount of unused commitments to extend credit to retail customers was approximately $30 billion at October 31, 2021, primarily related to revolving charge accounts. A significant portion of these commitments is not expected to be

fully drawn upon; therefore, the total commitment amounts likely do not represent a future cash requirement. The company generally has the right to unconditionally cancel, alter, or amend the terms of these commitments at any time. The company recorded a provision for credit losses on unused commitments that are not unconditionally cancellable of $2 million in 2021.

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.