XML 51 R30.htm IDEA: XBRL DOCUMENT v3.6.0.2
Summary of Significant Accounting Policies (Tables)
 12 Months Ended
Oct. 31, 2016
Accounting Policies [Abstract]  
Schedule of Truck Reserve
The following table presents our used truck reserve:
 
For the Years Ended October 31,
(in millions)
2016
 
2015
 
2014
Balance at beginning of period
$
110

 
$
43

 
$
17

Additions charged to expense(A)
187

 
117

 
52

Deductions/Other adjustments(B)
(89
)
 
(50
)
 
(26
)
Balance at end of period
$
208

 
$
110

 
$
43

_________________________
(A)
Additions charged to expense reflects the increase of the reserve for inventory on hand.
(B)
Deductions/Other adjustments include reductions of the reserve related to the sale of units and our Mexican subsidiary currency translation adjustments.
Property, Plant And Equipment, Useful Life
The ranges of estimated useful lives are as follows:
 
Years
Buildings
20 - 50
Leasehold improvements
3 - 20
Machinery and equipment
3 - 12
Furniture, fixtures, and equipment
3 - 15
Equipment leased to others
1 - 10
Intangible Assets, Useful Life
The ranges for the amortization periods are generally as follows:
 
Years
Customer base and relationships
3 - 15
Trademarks
20
Other
3 - 18
Schedule of Product Warranty Liability [Table Text Block]
Product Warranty Liability
The following table presents accrued product warranty and deferred warranty revenue activity:
 
For the Years Ended October 31,
(in millions)
2016
 
2015
 
2014
Balance at beginning of period
$
994

 
$
1,197

 
$
1,349

Costs accrued and revenues deferred(B)
186

 
260

 
354

Currency translation adjustment
3

 
(9
)
 
(4
)
Adjustments to pre-existing warranties(A)
77

 
1

 
55

Payments and revenues recognized(B)
(442
)
 
(455
)
 
(557
)
Balance at end of period
818

 
994

 
1,197

Less: Current portion
396

 
429

 
535

Noncurrent accrued product warranty and deferred warranty revenue
$
422

 
$
565

 
$
662

_________________________
(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 second quarter of 2016, we recorded a charge for adjustments to pre-existing warranties of $46 million or a charge of $0.56 per diluted share. The charge primarily relates to increases in both claim frequency and cost of repair across both the Medium Duty and Big Bore engine families. The charge increased the reserve for our standard warranty obligations as well as the loss positions related to our Big Bore extended service contracts. Adjustments to pre-existing warranties in 2016 include a benefit of $1 million related to our Workhorse Custom Chassis operations, which are reported in Discontinued Operations in our Consolidated Statements of Operations.
In the first quarter of 2015, we recognized a benefit for adjustments to pre-existing warranties of $57 million or a benefit of $0.70 per diluted share. In the fourth quarter of 2015, we recognized a charge for adjustments to pre-existing warranties from continuing operations of $40 million or a charge of $0.49 per diluted share. Adjustments to pre-existing warranties in 2015 include a benefit of $3 million related to our Workhorse Custom Chassis operations, which are reported in Discontinued Operations in our Consolidated Statements of Operations.
In the first quarter of 2014, we recorded adjustments for changes in estimates of $52 million or charges of $0.64 per diluted share. In the second quarter of 2014, we recorded adjustments for changes in estimates of $42 million, or charges of $0.52 per diluted share. In the third quarter of 2014, we recognized a benefit for adjustments to pre-existing warranties of $29 million, or a benefit of $0.36 per diluted share. Included in the 2014 adjustments is a $36 million correction of prior-period errors, primarily related to pre-existing warranties. For more information on the errors identified, see 2014 Out-of-Period Adjustments.
The impact of income taxes on the 2016, 2015, and 2014 adjustments are not material due to our deferred tax valuation allowances on our U.S. deferred tax assets.
(B)
During 2016, we identified an error in amounts included in Costs accrued and revenues deferred and Payments and revenues recognized for the year ended October 31, 2015. As a result, the respective amounts were reclassified by $36 million. The reclassification did not impact our Consolidated Statements of Operations or our Consolidated Balance Sheets.
During the third quarter of 2016, we determined that the amortization of loss reserves for Big Bore extended service contracts, which were included within Costs accrued and revenues deferred, should now be applied to Payments and revenues recognized. As a result, for the years ended October 31, 2015 and 2014 we have reclassified $34 million and $52 million, respectively, of amortization of loss reserves in order to conform to our current presentation. The reclassification did not impact our Consolidated Statements of Operations or our Consolidated Balance Sheets.