Summary of significant accounting policies (Tables)

6 Months Ended

Apr. 30, 2012

Accrued product warranty and deferred warranty revenue activity is as follows:



	Six Months Ended April 30,
	2012			2011
(in millions)
Balance, at beginning of period	$	598		$	506
Costs accrued and revenues deferred	236			175
Adjustments to pre-existing warranties^(A)	227			36
Payments and revenues recognized	(217		)	(187		)
Balance, at end of period	844			530
Less: Current portion	365			240
Noncurrent accrued product warranty and deferred warranty revenue	$	479		$	290

_________________________

(A)

Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. In the first quarter of 2012, we recorded adjustments for changes in estimates of $123 million, $119 million net of tax, or $1.70 per diluted share. In the second quarter of 2012, we recorded adjustments for changes in estimates of $104 million, $100 million net of tax, or $1.46 per diluted share. In the second quarter of 2011, we recorded adjustments for changes in estimates of $27 million, $24 million net of tax, or $0.31 per diluted share.The impact of income taxes on the adjustments reflect the Company's respective periods estimated annual effective tax rate as of April 30, 2012 and 2012, respectively.

The amount of deferred revenue related to extended warranty programs was $308 million and $257 million at April 30, 2012 and October 31, 2011, respectively. Revenue recognized under our extended warranty programs was $16 million and $31 million for the three and six months ended April 30, 2012, respectively, and $13 million and $25 million for the three and six months ended April 30, 2011, respectively. In the second quarter of 2012, the Truck segment recognized a charge of $24 million, related to the extended warranty contracts on our 2010 emission standard MaxxForce Big-Bore engines. The majority of the change has been included in the adjustments to pre-existing warranties.