CATERPILLAR INC.
Caterpillar Power Finance.. 8 50 50 4 56 55
Total................ 105 USD 76 USD 76 8 USD 56 USD 55
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Number Number
Pre-TDR Post-TDR Pre-TDR Post-TDR
of Amortized Amortized of Recorded Recorded
Cost Cost Investment Investment
Contracts Contracts
North America......... 13 USD 10 USD 10 12 USD 5 USD 4
EAME.............. - - - 19 17 17
Asia/Pacific(1) 183 12 12 - - -
Mining(2) 52 22 22 1 6 6
Latin America......... 9 18 18 4 2 2
Caterpillar Power Finance.. 14 87 87 19 154 152
Total................. 271 USD 149 USD 149 55 USD 184 USD 181 2. During the nine months ended September 30, 2020, 183 contracts with a pre-TDR and post-TDR amortized cost of USD12 million were related to seven customers. 3. During the nine months ended September 30, 2020, 52 contracts with a pre-TDR and post-TDR amortized
cost of USD22 million were related to three customers.
TDRs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, were as follows:
Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Post-TDR
Number of
(Dollars in millions) Contracts Post-TDR Amortized Cost Number of Recorded
Contracts Investment
North America............ 1 USD 6 - USD
Mining.................. 1 1 -
Caterpillar Power Finance..... 2 18 -
Total................... 4 USD 25 - USD
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Post-TDR
Number of
Contracts Post-TDR Amortized Cost Number of Recorded
Contracts Investment
North America............ 2 USD 6 - USD
EAME.................. 2 10 -
Mining.................. 1 1 -
Latin America............. 3 1 -
Caterpillar Power Finance..... 2 18 -
Total................... 10 USD 36 - USD 48
Table of Contents
18. Fair value disclosures
A. Fair value measurements
The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy: ? Level 1 - Quoted prices for identical instruments in active markets. ? Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs or
significant value-drivers are observable in active markets. ? Level 3 - Model-derived valuations in which one or more significant inputs or significant value-drivers are
unobservable.
When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.
We classify fair value measurements according to the lowest level input or value-driver that is significant to the valuation. We may therefore classify a measurement within Level 3 even though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled. For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.
Investments in debt and equity securities
We have investments in certain debt and equity securities, primarily at Insurance Services, that are recorded at fair value. Fair values for our U.S. treasury bonds and large capitalization value and smaller company growth equity securities are based upon valuations for identical instruments in active markets. Fair values for other government bonds, corporate bonds and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.
In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is recorded at fair value based on the net asset value (NAV) of the investment and is not classified within the fair value hierarchy.
See Note 8 for additional information on our investments in debt and equity securities.
Derivative financial instruments
The fair value of interest rate contracts is primarily based on models that utilize the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The fair value of foreign currency and commodity forward, option and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.
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Table of Contents
Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of September 30, 2020 and December 31, 2019 were as follows:
September 30, 2020
(Millions of dollars)
Total
Assets
Level 1 Measured Assets / Liabilities,
Debt securities
Level 2 Level 3 at NAV at Fair Value
Government debt
U.S. treasury bonds................ USD 16 USD - USD - USD - USD 16
Other U.S. and non-U.S. government bonds - 51 - - 51
Corporate bonds
Corporate bonds.................. - 1,001 - - 1,001
Asset-backed securities............. - 158 - - 158
Mortgage-backed debt securities
U.S. governmental agency........... - 364 - - 364
Residential..................... - 5 - - 5
Commercial..................... 65 - - 65
Total debt securities................... 16 1,644 - - 1,660
Equity securities
Large capitalization value............ 173 - - - 173
Smaller company growth............ 32 - - - 32
REIT......................... - - - 139 139
Total equity securities.................. 205 - - 139 344
Derivative financial instruments, net......... - 82 - - 82
Total assets......................... USD 221 USD 1,726 USD - USD 139 USD 2,086
December 31, 2019
(Millions of dollars)
Total
Assets
Level 1 Level 2 Level 3 Measured Assets / Liabilities,
Debt securities
at NAV at Fair Value
Government debt
U.S. treasury bonds............... USD 9 USD - USD - USD - USD 9 (MORE TO FOLLOW) Dow Jones Newswires
February 03, 2021 17:38 ET (22:38 GMT)
