Assume that prices that Deere and CNH Global pay for inventory typically increase over time. CNH

uses the first-in, first-out (FIFO) cost flow assumption to measure its inventories. In general terms,

how do the balance sheet values for inventories of the two companies differ due to their cost flow

assumptions? What numbers on the two companies income statements would differ? What if prices

typically decrease over time?

Deere & Company

CONSOLIDATED BALANCE SHEET

As of October 31, 2012 and 2011

(In millions of dollars except per share amounts)

___2_0_1_2_ __ ____2_0_1_1__

ASSETS

Cash and cash equivalents..................................................................................................................................... $ 4,652.2 $ 3,647.2

Marketable securities ............................................................................................................................................ 1,470.4 787.3

Receivables from unconsolidated affiliates .............................................................................................................. 59.7 48.0

Trade accounts and notes receivable - net .............................................................................................................. 3,799.1 3,294.5

Financing receivables - net .................................................................................................................................... 22,159.1 19,923.5

Financing receivables securitized - net ................................................................................................................... 3,617.6 2,905.0

Other receivables .................................................................................................................................................. 1,790.9 1,330.6

Equipment on operating leases - net ...................................................................................................................... 2,527.8 2,150.0

Inventories ............................................................................................................................................................ 5,170.0 4,370.6

Property and equipment - net ................................................................................................................................ 5,011.9 4,352.3

Investments in unconsolidated affiliates .................................................................................................................. 215.0 201.7

Goodwill ................................................................................................................................................................ 921.2 999.8

Other intangible assets - net .................................................................................................................................. 105.0 127.4

Retirement benefits ............................................................................................................................................... 20.2 30.4

Deferred income taxes ........................................................................................................................................... 3,280.4 2,858.6

Other assets .......................................................................................................................................................... 1,465.3 1,180.5

Total Assets ........................................................................................................................................................ $ 56,265.8 $ 48,207.4

LIABILITIES AND STOCKHOLDERS EQUITY

LIABILITIES

Short-term borrowings ........................................................................................................................................... $ 6,392.5 $ 6,852.3

Short-term securitization borrowings ...................................................................................................................... 3,574.8 2,777.4

Payables to unconsolidated affiliates ...................................................................................................................... 135.2 117.7

Accounts payable and accrued expenses ................................................................................................................ 8,988.9 7,804.8

Deferred income taxes ........................................................................................................................................... 164.4 168.3

Long-term borrowings ........................................................................................................................................... 22,453.1 16,959.9

Retirement benefits and other liabilities .................................................................................................................. 7,694.9 6,712.1

Total liabilities ........................................................................................................................................... 49,403.8 41,392.5

Commitments and contingencies (Note 22)

STOCKHOLDERS EQUITY

Common stock, $1 par value (authorized 1,200,000,000 shares;

issued 536,431,204 shares in 2012 and 2011), at paid-in amount .................................................................. 3,352.2 3,251.7

Common stock in treasury, 148,625,875 shares in 2012 and 130,361,345 shares in 2011, at cost ......................... (8,813.8) (7,292.8)

Retained earnings .................................................................................................................................................. 16,875.2 14,519.4

Accumulated other comprehensive income (loss):

Retirement benefits adjustment.......................................................................................................................... (4,759.0) (4,135.4)

Cumulative translation adjustment ...................................................................................................................... 184.1 453.8

Unrealized loss on derivatives ............................................................................................................................ (13.4) (8.3)

Unrealized gain on investments. ......................................................................................................................... 16.8 11.9

Accumulated other comprehensive income (loss) ............................................................................................ (4,571.5) (3,678.0)

Total Deere & Company stockholders equity .......................................................................................................... 6,842.1 6,800.3

Noncontrolling interests ......................................................................................................................................... 19.9 14.6

Total stockholders equity .............................................................................................................................. 6,862.0 6,814.9

Total Liabilities and Stockholders Equity ....................................................................................................... $ 56,265.8 $ 48,207.4

CONSOLIDATED BALANCE SHEETS

As of December 31, 2012 and 2011

2012 2011

(in millions, except

share data)

ASSETS

Current Assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,008 $ 2,055

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 941

Deposits in Fiat Industrial subsidiaries cash management pools . . . . . . . . . . . . . . . . . . . 4,232 4,116

Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,514 8,811

Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,734 3,662

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 645

Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560 1,013

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,592 21,243

Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,654 5,680

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220 1,936

Investments in unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 506

Equipment on operating leases, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767 666

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,416 2,413

Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 671

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 779 978

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,426 $34,093

LIABILITIES AND EQUITY

Current Liabilities:

Current maturities of long-term debtFiat Industrial subsidiaries . . . . . . . . . . . . . . . . . $ 22 $ 221

Current maturities of long-term debtother . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,110 4,191

Short-term debtFiat Industrial subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313 325

Short-term debtother . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,484 3,747

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,821 2,952

Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,729 3,923

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,479 15,359

Long-term debtFiat Industrial subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 93

Long-term debtother . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,112 8,533

Pension, postretirement and other post employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,826 1,713

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 466

Redeemable Noncontrolling Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5

Equity:

Common shares, 2.25 par value; authorized 188,133,963 in 2012 and 400,000,000

shares in 2011, issued 30,624,076 shares in 2012 and 239,871,221 shares in 2011 . . . 77 603

Common shares B, 2.25 par value; authorized and issued 211,866,037 shares in 2012 . . 533

Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,420 6,299

Treasury stock, 154,813 shares in 2012 and 2011, at cost . . . . . . . . . . . . . . . . . . . . . . . . (8) (8)

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 1,597

Special reserve for common shares B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,119

Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (884) (630)

Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 63

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,634 7,924

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,426 $

15. INVENTORIES

Most inventories owned by Deere & Company and its

U.S. equipment subsidiaries are valued at cost, on the last-in,

first-out (LIFO) basis. Remaining inventories are generally

valued at the lower of cost, on the first-in, first-out (FIFO)

basis, or market. The value of gross inventories on the LIFO

basis represented 61 percent and 59 percent of worldwide gross

inventories at FIFO value at October 31, 2012 and 2011,

respectively. If all inventories had been valued on a FIFO basis,

estimated inventories by major classification at October 31 in

millions of dollars would have been as follows:

2012 2011

Raw materials and supplies ........................................... $ 1,874 $ 1,626

Work-in-process ........................................................... 652 647

Finished goods and parts .............................................. 4,065 3,584

Total FIFO value ........................................................ 6,591 5,857

Less adjustment to LIFO value ....................................... 1,421 1,486

Inventories ................................................................. $ 5,170 $ 4,371

CNH GLOBAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4: Inventories

Inventories as of December 31, 2012, and 2011 consist of the following:

2012 2011

(in millions)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,027 $1,129

Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 218

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,481 2,315

Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,734 $3,662