XML 41 R23.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENTS

6 Months Ended

May 01, 2022

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

(16) Fair Value Measurements

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 were as follows in millions of dollars. Long-term borrowings exclude finance lease liabilities.


		May 1, 2022						October 31, 2021						May 2, 2021
		Carrying Value			Fair Value			Carrying Value			Fair Value			Carrying Value			Fair Value
Financing receivables – net		$	34,085		$	33,540		$	33,799		$	33,718		$	30,994		$	31,165

Financing receivables securitized – net		$	4,073		$	4,016		$	4,659		$	4,704		$	4,107		$	4,188

Short-term securitization borrowings:
Equipment operations		$	5		$	6		$	10		$	10		$	14		$	15
Financial services			4,001			3,938			4,595			4,600			4,092			4,117
Total		$	4,006		$	3,944		$	4,605		$	4,610		$	4,106		$	4,132

Long-term borrowings due within one year:
Equipment operations		$	1,126		$	1,128		$	1,213		$	1,222		$	206		$	211
Financial services			7,308			7,270			7,117			7,142			7,211			7,293
Total		$	8,434		$	8,398		$	8,330		$	8,364		$	7,417		$	7,504

Long-term borrowings:
Equipment operations		$	8,519		$	8,546		$	8,877		$	10,244		$	10,079		$	11,391
Financial services			23,891			23,429			23,973			24,262			23,222			23,701
Total		$	32,410		$	31,975		$	32,850		$	34,506		$	33,301		$	35,092

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.

Fair values of the 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, excluding the Company’s cash equivalents, which were carried at cost that approximates fair value and consisted primarily of money market funds and time deposits.


		May 1			October 31			May 2
		2022			2021			2021
Level 1:
Marketable securities
International equity securities		$	2		$	2		$	2
U.S. equity fund			65			75			71
U.S. government debt securities			59			59			59
Total Level 1 marketable securities			126			136			132

Level 2:
Marketable securities
U.S. government debt securities			130			139			121
Municipal debt securities			67			73			69
Corporate debt securities			206			224			202
International debt securities			2			2			4
Mortgage-backed securities			151			154			140
Total Level 2 marketable securities			556			592			536
Other assets
Derivatives			407			275			402
Accounts payable and accrued expenses
Derivatives			780			228			223

Level 3:
Accounts payable and accrued expenses – Deferred consideration			262

The contractual maturities of debt securities at May 1, 2022 in millions of dollars are shown below. Actual maturities may differ from contractual maturities because some securities may be called or prepaid. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity. Mortgage-backed securities were primarily issued by U.S. government sponsored enterprises. Unrealized losses of debt securities at May 1, 2022 were not recognized in income due to the ability and intent to hold to maturity.


		Amortized			Fair
		Cost			Value
Due in one year or less		$	27		$	27
Due after one through five years			92			90
Due after five through 10 years			171			155
Due after 10 years			221			192
Mortgage-backed securities			167			151
Debt securities		$	678		$	615

Fair value, nonrecurring Level 3 measurements from impairments, excluding financing receivables with specific allowances which were not significant, were as follows in millions of dollars. Property and equipment – net and Other assets fair value for October 31, 2021 represents the fair value assessment at January 31, 2021.


		Fair Value									Losses
											Three Months Ended						Six Months Ended
		May 1			October 31			May 2			May 1			May 2			May 1			May 2
		2022			2021			2021			2022			2021			2022			2021
Inventories		$	19								$	8					$	8
Property and equipment – net		$	15		$	41					$	41					$	41		$	44
Other intangible assets – net											$	28					$	28
Other assets					$	1														$	6

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

Marketable securities – The portfolio of investments 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.

Derivatives – The Company’s derivative financial instruments consist of interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (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.

Inventories – The service parts inventory impairment was based on net realizable value, less reasonably predictable selling and disposal costs.

Property and equipment – net – The valuations were based on cost and market approaches. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence.

Other intangible assets – net – The Company considered external valuations based on the Company’s probability weighted cash flow analysis.

Other assets – The impairments were measured at the fair value of the right of use operating lease asset.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details