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LEASES | 12 Months Ended
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Oct. 29, 2023
LEASES |
LEASES | 24. LEASES We are both a lessee and a lessor. We lease for our own use warehouse facilities, office space, production equipment, information technology equipment, and vehicles. The financial services operations lease equipment produced or sold by us and a limited amount of other equipment to retail customers. We determine if an arrangement is or contains a lease at the contract inception. Lessee The amounts of the lease liability and right of use asset are determined at lease commencement and are based on the present value of the lease payments over the lease term. The lease payments are discounted using our incremental borrowing rate since the rate implicit in the lease is not readily determinable. We determine the incremental borrowing rate for each lease based on the lease term and the economic environment of the country where the asset will be used, adjusted as if the borrowings were collateralized. Leases with contractual periods greater than one year and that do not meet the finance lease criteria are classified as operating leases. We have elected to combine lease and nonlease components, such as maintenance and utilities costs included in a lease contract, for all asset classes. Leases with an initial term of one year or less are expensed on a straight-line basis over the lease term and recorded in short-term lease expense. Variable lease expense includes warehouse facilities leases with payments based on utilization exceeding contractual minimum amounts and leases with payments indexed to inflation when the index changes after lease commencement. The lease expense by type consisted of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2023 | ​ | 2022 | ​ | 2021 | ​
Operating lease expense | ​ | $ | 129 | ​ | $ | 114 | ​ | $ | 116 | ​
Short-term lease expense | ​ | ​ | 49 | ​ | ​ | 55 | ​ | ​ | 29 | ​
Variable lease expense | ​ | ​ | 80 | ​ | ​ | 74 | ​ | ​ | 53 | ​
Finance lease: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Depreciation expense | ​ | ​ | 28 | ​ | ​ | 26 | ​ | ​ | 26 | ​
Interest on lease liabilities | ​ | ​ | 2 | ​ | ​ | 1 | ​ | ​ | 1 | ​
Total lease expense | ​ | $ | 288 | ​ | $ | 270 | ​ | $ | 225 | ​
​ Operating and finance lease right of use assets and lease liabilities follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​
Operating leases: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other assets | ​ | $ | 283 | ​ | $ | 299 | ​
Accounts payable and accrued expenses | ​ | ​ | 281 | ​ | ​ | 302 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Finance leases: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Property and equipment — net | ​ | $ | 66 | ​ | $ | 49 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Short-term borrowings | ​ | ​ | 25 | ​ | ​ | 21 | ​
Long-term borrowings | ​ | ​ | 49 | ​ | ​ | 30 | ​
Total finance lease liabilities | ​ | $ | 74 | ​ | $ | 51 | ​
​ The weighted-average remaining lease terms in years and discount rates follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​
Weighted-average remaining lease terms: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating leases | ​ | ​ | 7 | ​ | ​ | 7 | ​
Finance leases | ​ | ​ | 4 | ​ | ​ | 3 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted-average discount rates: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating leases | ​ | ​ | 3.1% | ​ | ​ | 2.4% | ​
Finance leases | ​ | ​ | 3.6% | ​ | ​ | 1.9% | ​
​ Lease payment amounts in each of the next five years at October 29, 2023 follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Operating | ​ | Finance | ​
Due in: | ​ | Leases | ​ | Leases | ​
2024 | ​ | $ | 103 | ​ | $ | 27 | ​
2025 | ​ | ​ | 71 | ​ | ​ | 22 | ​
2026 | ​ | ​ | 36 | ​ | ​ | 14 | ​
2027 | ​ | ​ | 24 | ​ | ​ | 8 | ​
2028 | ​ | ​ | 22 | ​ | ​ | 3 | ​
Later years | ​ | ​ | 45 | ​ | ​ | 6 | ​
Total lease payments | ​ | ​ | 301 | ​ | ​ | 80 | ​
Less: imputed interest | ​ | ​ | 20 | ​ | ​ | 6 | ​
Total lease liabilities | ​ | $ | 281 | ​ | $ | 74 | ​
​ Cash paid for amounts included in the measurement of lease liabilities follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​
Operating cash flows for operating leases | ​ | $ | 132 | ​ | $ | 127 | ​ | $ | 104 | ​
Operating cash flows for finance leases | ​ | ​ | 2 | ​ | ​ | 1 | ​ | ​ | 1 | ​
Financing cash flows for finance leases | ​ | ​ | 31 | ​ | ​ | 28 | ​ | ​ | 25 | ​
​ Right of use assets obtained in exchange for lease liabilities follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​
Operating leases | ​ | $ | 97 | ​ | $ | 135 | ​
Finance leases | ​ | ​ | 54 | ​ | ​ | 17 | ​
​ Lessor We lease equipment manufactured by us through John Deere Financial. Sales-type and direct financing leases are reported in “Financing receivables ‒ net.” Operating leases are reported in “Equipment on operating leases ‒ net.” At the end of the majority of leases, the lessee has the option to purchase the underlying equipment for the contractual residual value or return it to the dealer. If the equipment is returned to the dealer, the dealer also has the option to purchase the equipment or return it to us for remarketing. We estimate the residual values for operating leases at lease inception based on several factors, including lease term, expected hours of usage, historical wholesale sale prices, return experience, intended use of the equipment, market dynamics and trends, and dealer residual guarantees. We review residual value estimates during the lease term and test the carrying value of our operating lease assets for impairment when events or circumstances necessitate. The depreciation is adjusted on a straight-line basis over the remaining lease term if residual value estimates change. Lease agreements include usage limits and specifications on machine condition, which allow us to assess lessees for excess use or damages to the underlying equipment. We have elected to combine lease and nonlease components. The nonlease components relate to preventative maintenance and extended warranty agreements financed by the retail customer. We have also elected to report consideration related to sales and value added taxes net of the related tax expense. Property taxes on leased assets are recorded on a gross basis in “Finance and interest income” and “Other operating expenses.” Variable lease revenues relate to property taxes on leased assets in certain markets and late fees. Lease revenues earned by us follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​
Sales-type and direct finance lease revenues | ​ | $ | 165 | ​ | $ | 154 | ​ | $ | 145 | ​
Operating lease revenues | ​ | ​ | 1,312 | ​ | ​ | 1,318 | ​ | ​ | 1,423 | ​
Variable lease revenues | ​ | ​ | 16 | ​ | ​ | 26 | ​ | ​ | 30 | ​
Total lease revenues | ​ | $ | 1,493 | ​ | $ | 1,498 | ​ | $ | 1,598 | ​
​ At the time of accepting a lease that qualifies as a sales-type or direct financing lease, we record the gross amount of lease payments receivable, estimated residual value of the leased equipment, and unearned finance income. The unearned finance income is recognized as revenue over the lease term using the interest method. Sales-type and direct financing lease receivables by market follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​
Agriculture and turf | ​ | $ | 1,078 | ​ | $ | 1,118 | ​
Construction and forestry | ​ | ​ | 1,048 | ​ | ​ | 1,167 | ​
Total | ​ | ​ | 2,126 | ​ | ​ | 2,285 | ​
Guaranteed residual values | ​ | ​ | 723 | ​ | ​ | 491 | ​
Unguaranteed residual values | ​ | ​ | 57 | ​ | ​ | 56 | ​
Less: unearned finance income | ​ | ​ | (350) | ​ | ​ | (285) | ​
Financing lease receivables | ​ | $ | 2,556 | ​ | $ | 2,547 | ​
​ Scheduled payments, including guaranteed residual values, on sales-type and direct financing lease receivables at October 29, 2023 follow: ​
​ | ​ | ​ | ​ | ​
Due in: | ​ | 2023 | ​
2024 | ​ | $ | 1,453 | ​
2025 | ​ | ​ | 642 | ​
2026 | ​ | ​ | 378 | ​
2027 | ​ | ​ | 214 | ​
2028 | ​ | ​ | 142 | ​
Later years | ​ | ​ | 20 | ​
Total | ​ | $ | 2,849 | ​
​ Lease payments from operating leases are recorded as income on a straight-line method over the lease terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value on a straight-line method over the terms of the leases. The cost of equipment on operating leases by market follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2023 | ​ | ​ | 2022 | ​
Agriculture and turf | ​ | $ | 7,168 | ​ | $ | 6,912 | ​
Construction and forestry | ​ | ​ | 1,212 | ​ | ​ | 1,342 | ​
Total | ​ | ​ | 8,380 | ​ | ​ | 8,254 | ​
Less: accumulated depreciation | ​ | ​ | (1,463) | ​ | ​ | (1,631) | ​
Equipment on operating leases - net | ​ | $ | 6,917 | ​ | $ | 6,623 | ​
Operating lease residual values | ​ | $ | 4,864 | ​ | $ | 4,640 | ​
First-loss residual value guarantees | ​ | ​ | 1,188 | ​ | ​ | 1,025 | ​
​ The equipment is depreciated on a straight-line basis over the term of the lease. The corresponding depreciation expense was $853 in 2023, $827 in 2022, and $983 in 2021. Lease payments for operating leases are scheduled as follows: ​
​ | ​ | ​ | ​ | ​
Due in: | ​ | 2023 | ​
2024 | ​ | $ | 1,044 | ​
2025 | ​ | ​ | 797 | ​
2026 | ​ | ​ | 490 | ​
2027 | ​ | ​ | 258 | ​
2028 | ​ | ​ | 65 | ​
Later years | ​ | ​ | 10 | ​
Total | ​ | $ | 2,664 | ​
​

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