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NEW ACCOUNTING STANDARDS | 3 Months Ended
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Jan. 31, 2021
NEW ACCOUNTING STANDARDS |
NEW ACCOUNTING STANDARDS | (3) New Accounting Standards New Accounting Standards Adopted In the first quarter of 2021, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments - Credit Losses. This ASU was adopted using a modified-retrospective approach. The ASU, along with related amendments, revised the measurement of credit losses for financial assets measured at amortized cost from an incurred loss to an expected loss methodology. The ASU affects receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. The Company holds deposits from dealers (dealer deposits), which are recorded in “Accounts payable and accrued liabilities” to absorb certain credit losses. Prior to adopting this ASU, the allowance for credit losses was estimated on probable credit losses incurred after consideration of recoveries from dealer deposits. The ASU considers dealer deposits and certain credit insurance contracts as freestanding credit enhancements. As a result, after adoption, credit losses recovered from dealer deposits and certain credit insurance contracts are presented in “Other income” and no longer as part of the allowance for credit losses or the provision for credit losses. The ASU also modified the treatment of the estimated write-off of delinquent receivables by no longer including the estimated benefit of charges to the dealer deposits in the write-off amount. This change increases the estimated write-offs on delinquent financing receivables with the benefit of credit losses recovered from dealer deposits presented in “Other income.” This benefit, in both situations, is recorded when the dealer deposits are charged and no longer based on estimated recoveries. The effects of adopting the ASU on the consolidated balance sheet follows in millions of dollars:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | November 1 | ​ | Cumulative Effect | ​ | November 2 | ​
​ | ​ | 2020 | ​ | from Adoption | ​ | 2020 | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts and note receivable - net | ​ | $ | 4,171 | ​ | $ | 2 | ​ | $ | 4,173 | ​
Financing receivables - net | ​ | ​ | 29,750 | ​ | ​ | (27) | ​ | ​ | 29,723 | ​
Financing receivables securitized - net | ​ | ​ | 4,703 | ​ | ​ | (4) | ​ | ​ | 4,699 | ​
Deferred income taxes | ​ | ​ | 1,499 | ​ | ​ | 1 | ​ | ​ | 1,500 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accounts payable and accrued expenses | ​ | $ | 10,112 | ​ | $ | 14 | ​ | $ | 10,126 | ​
Deferred income taxes | ​ | ​ | 519 | ​ | ​ | (7) | ​ | ​ | 512 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stockholders’ equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Retained earnings | ​ | $ | 31,646 | ​ | $ | (35) | ​ | $ | 31,611 | ​
​ Note 11 contains additional disclosures as well as the Company’s updated allowance for credit losses accounting policy. The Company also adopted the following standards in 2021, none of which had a material effect on the Company’s consolidated financial statements: ​
​ | ​ | ​
No. 2018-15 | Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software | ​
No. 2019-04 | Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | ​
No. 2021-01 | Reference Rate Reform (Topic 848): Scope | ​
​ New Accounting Standards to be Adopted The Company will adopt the following standards in future periods, none of which are expected to have a material effect on the Company’s consolidated financial statements: ​
​ | ​ | ​
No. 2019-12 | Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes | ​
No. 2020-08 | Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs | ​
​

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