31. Segment reporting

The operating segments through which CNH Industrial manages its operations are based on the internal reporting used by the CNH Industrial’s Chief Operating Decision Maker (“CODM”) to assess performance and make decisions about resource allocation. The segments are organized based on products and services provided by CNH Industrial.

As described in the Foreword, until December 31, 2013, CNH Industrial presented its Consolidated Financial Statements, prepared in accordance with IFRS, including three reportable segments: (i) Agricultural and Construction Equipment inclusive of its fi nancial services activities, (ii) Trucks and Commercial Vehicles inclusive of its fi nancial services activities, and (iii) Powertrain.

In order to enhance its reporting, CNH Industrial has realigned its reportable segments refl ecting the fi ve businesses now directly managed by CNH Industrial N.V., consisting of: (i) Agricultural Equipment, (ii) Construction Equipment, (iii) Commercial Vehicles, (iv) Powertrain, and (v) Financial Services. Segment information for comparative periods has been recast to conform to the current year’s presentation.

CNH Industrial has the following fi ve operating segments:

  • Agricultural Equipment, which designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, cotton pickers, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements and material handling equipment. Agricultural equipment is sold under the New Holland Agriculture and Case IH Agriculture brands, as well as the Steyr brand in Europe. Subsequent to the acquisition of Miller in November 2014, certain products are also sold under the Miller brand, primarily in North America.
  • Construction Equipment, which designs, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, telehandlers and trenchers. Construction equipment is sold under the New Holland Construction and Case Construction Equipment brands.
  • Commercial Vehicles, which designs, produces and sells a full range of light, medium and heavy vehicles for the transportation and distribution of goods through the Iveco brand, commuter buses and touring coaches through the Iveco Bus (previously Iveco Irisbus) and Heuliez Bus brands, quarry and mining equipment through the Iveco Astra brand, fi refi ghting vehicles through the Magirus brand and vehicles for civil defense and peace-keeping missions under the Iveco Defence Vehicles brand.
  • Powertrain, which designs, manufactures and offers a range of propulsion, transmission systems and axles for on and off-road applications, as well as engines for marine application and power generation through the FPT Industrial brand; and Financial Services, which offers a range of fi nancial services to dealers and customers. Financial Services provides and administers retail fi nancing to customers for the purchase or lease of new and used industrial equipment or vehicles and other equipment sold by CNH Industrial’s dealers. In addition, Financial Services provides wholesale fi nancing to CNH Industrial’s dealers, which primarily consists of fl oor plan fi nancing and allows the dealers to purchase and maintain a representative inventory of products.

The activities carried out by the four industrial segments Agricultural Equipment, Construction Equipment, Commercial Vehicles and Powertrain, as well as Corporate functions, are collectively referred to as “Industrial Activities”.

Revenues for each reported segment are those directly generated by or attributable to the segment as a result of its usual business activities and include revenues from transactions with third parties as well as those deriving from transactions with other segments, recognized at normal market prices. Segment expenses represent expenses deriving from each segment’s business activities both with third parties and other operating segments or which may otherwise be directly attributable to it. Expenses deriving from business activities with other segments are recognized at normal market prices.

Historically and through 2014, the CODM assessed the performance of the operating segments mainly on the basis of Trading profi t/(loss), earned by those segments, prepared in accordance with IFRS. Due to the CNH Industrial’s transition to reporting under U.S. GAAP during 2014, the CODM also reviewed the performance of operating segments using Operating profi t prepared in accordance with U.S.GAAP.

Operating profi t of Industrial Activities under U.S. GAAP is defi ned as net sales less cost of goods sold, selling, general and administrative expenses and research and development expenses. Operating Profi t of Financial Services under U.S. GAAP is defi ned as revenues, less selling, general and administrative expenses, interest expenses and certain other operating expenses. The CODM will utilize Operating profi t under US GAAP to assess segment performance in 2015 and, accordingly, CNH Industrial is presenting segment performance using both Trading profi t under IFRS and Operating profi t under U.S. GAAP. The CODM also reviews expenditures for long-lived assets under US GAAP by operating segment, therefore, this information is presented below as well.

The income statements under IFRS by reportable segment for the years 2014 and 2013 are as follows:

 2014
($ million)Agricultural EquipmentConstruction EquipmentCommercial
Vehicles
PowertrainUnallocated
items, eliminations and other
Total Industrial ActivitiesFinancial ServicesEliminations and otherCNH
Industrial Group
Segment revenues 15,204 3,346 11,087 4,475 (2,704) 31,408 2,086 (537) 32,957
Revenues from transactions with other operating segments (3) (1) (60) (2,640) 2,704 - (537) 537 -
Revenues from external customers 15,201 3,345 11,027 1,835 - 31,408 1,549 - 32,957
Trading profit/(loss) 1,689 66 2 220 (110) 1,867 532 - 2,399
Unusual  income/(expense) (48) (56) (124) - (4) (232) - - (232)
Operating profit/(loss) 1,641 10 (122) 220 (114) 1,635 532 - 2,167
Financial income/(expense)         (776) (776) - - (776)
Interest in profit/(loss) of joint ventures and associates accounted for using the equity method 75 - (3) - - 72 18 - 90
Other profit/(loss) from investments - - 1 - - 1 - - 1
Result from investments 75 - (2) - - 73 18 - 91
Profit/(loss) before taxes           932 550 - 1,482
Income taxes         378 378 188 - 566
Profit/(loss) from Continuing Operations           554 362 - 916
Result from intersegment investments           362 2 (364) -
Profit/(loss) from Continuing Operations           916 364 (364) 916
Amortization and depreciation (464) (128) (353) (201) 1 (1,145) (6) - (1,151)
Goodwill impairment - - - - - - - - -
Non-cash items other than depreciation and amortization (3,794) (497) (837) (65) - (5,193) 2 - (5,191)
Reversal of impairment losses on Intangible assets and Property, plant and equipment - - - - - - - - -

     2013
($ million)Agricultural EquipmentConstruction EquipmentCommercial
Vehicles
PowertrainUnallocated
items, eliminations and other
Total Industrial ActivitiesFinancial ServicesEliminations and otherCNH
Industrial Group
Segment revenues 16,763 3,258 11,447 4,423 (3,050) 32,841 1,950 (560) 34,231
Revenues from transactions with other operating segments - - (113) (2,937) 3,050 - (560) 560 -
Revenues from external customers 16,763 3,258 11,334 1,486 - 32,841 1,390 - 34,231
Trading profit/(loss) 1,949 (109) 145 210 (76) 2,119 518 - 2,637
Unusual  income/(expense) - (31) (72) (1) (11) (115) (41) - (156)
Operating profit/(loss) 1,949 (140) 73 209 (87) 2,004 477 - 2,481
Financial income/(expense)         (615) (615) - - (615)
Interest in profit/(loss) of joint ventures and associates accounted for using the equity method 91 - 29 - - 120 15 - 135
Other profit/(loss) from investments - - 1 - - 1 - - 1
Result from investments 91 - 30 - - 121 15 - 136
Profit/(loss) before taxes           1,510 492 - 2,002
Income taxes           632 152 - 784
Profit/(loss) from Continuing Operations           878 340 - 1,218
Result from intersegment investments           340 (1) (339) -
Profit/(loss) from Continuing Operations           1,218 339 (339) 1,218
Amortization and depreciation (392) (114) (283) (208) 3 (994) (3) - (997)
Goodwill impairment - - - - - - - - -
Non-cash items other than depreciation and amortization (3,960) (323) (895) (95) (39) (5,312) - - (5,312)
Reversal of impairment losses on Intangible assets and Property, plant and equipment - - - - - - - - -

Operating profi t under U.S. GAAP by reportable segment is summarized as follows:

($ million)20142013
Agricultural Equipment 1,770 2,008
Construction Equipment 79 (97)
Commercial Vehicles 29 74
Powertrain 223 187
Eliminations and other (113) (77)
Total Industrial Activities 1,988 2,095
Financial Services 554 514
Eliminations and other (343) (332)
Total Operating profit under U.S. GAAP 2,199 2,277

A reconciliation from consolidated Operating profi t under U.S. GAAP to Profi t/(loss) before taxes under IFRS for the years ended December 31, 2014 and 2013 is provided below:

($ million)20142013
Operating profit under U.S. GAAP 2,199 2,277
Adjustments/reclassifications to convert from Operating profit under U.S. GAAP to Profit/(loss) before taxes under IFRS:    
Gains/(losses) on the disposal of investments under IFRS - (25)
Other unusual income/(expenses) under IFRS (40) (77)
Financial income/(expenses) under IFRS (776) (615)
Result from investments under IFRS 91 136
Development costs, net 231 443
Restructuring provisions (192) (54)
Other adjustments (31) (83)
Total adjustments/reclassifications (717) (275)
Profit/(loss) before taxes under IFRS 1,482 2,002

Expenditures for long-lived assets by operating segment for the years ended December 31, 2014 and 2013 are summarized as follows:

($ million)20142013
Agricultural  Equipment 408 542
Construction Equipment 65 72
Commercial Vehicles 391 458
Powertrain 136 148
Other 5 1
Total Industrial Activities 1,005 1,221
Financial Services 17 6
Total Expenditures for long-lived assets (1)  under U.S. GAAP 1,022 1,227

(1) Excluding assets sold with buy-back commitments and equipment on operating lease. It should be noted that these amounts do not include expenditure for development costs, as not capitalized under U.S. GAAP (for additional information, refer to Note 38 “IFRS to U.S. GAAP reconciliation”).