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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

The Company franchises and operates McDonald’s restaurants in the global restaurant industry. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees and foreign affiliates under license agreements.

The following table presents restaurant information by ownership type:



Restaurants at December 31,	2018	2017	2016
Conventional franchised	21,685	21,366	21,559
Developmental licensed	7,225	6,945	6,300
Foreign affiliated	6,175	5,797	3,371
Franchised	35,085	34,108	31,230
Company-operated	2,770	3,133	5,669
Systemwide restaurants	37,855	37,241	36,899

The results of operations of restaurant businesses purchased and sold in transactions with franchisees were not material either individually or in the aggregate to the consolidated financial statements for periods prior to purchase and sale.

CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates owned 50% or less (primarily McDonald’s China and Japan) are accounted for by the equity method.

On an ongoing basis, the Company evaluates its business relationships such as those with franchisees, joint venture partners, developmental licensees, suppliers and advertising cooperatives to identify potential variable interest entities. Generally, these businesses qualify for a scope exception under the variable interest entity consolidation guidance. The Company has concluded that consolidation of any such entity is not appropriate for the periods presented.

ESTIMATES IN FINANCIAL STATEMENTS

ESTIMATES IN FINANCIAL STATEMENTSThe preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

RECENTLY ISSUED ACCOUNTING STANDARDS

Income Taxes

In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("AOCI")." The guidance permits entities to reclassify the stranded tax effects resulting from the Tax Act from AOCI to retained earnings. ASU 2018-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those annual reporting periods. ASU 2018-02 may be applied in the period of adoption or retrospectively to each period in which the effect of the change related to the Tax Act was recognized. The Company has adopted the provisions of ASU 2018-02 as of January 1, 2019, and plans to not make an election to reclassify the income tax effects of the Tax Act from AOCI to retained earnings.

Lease Accounting

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

As discussed further in the “Franchise Arrangements” and “Leasing Arrangements” footnotes, the Company is engaged in a significant amount of leasing activity, both from a lessee and a lessor perspective. As required by the standard, the Company has adopted the provisions of the new standard effective January 1, 2019, using the required modified retrospective approach.

The Company has elected the package of practical expedients, which allows the Company to retain the classification of existing leases; therefore, there will be minimal initial impact on the Consolidated Statement of Income. Moving forward, as the Company enters into new leases or as leases are modified, the expectation is that many of the Company's ground leases may be reclassified from operating classification to financing classification, which will change the timing and classification of a portion of lease expense between operating income and interest expense. It is not possible to quantify the impact at this time, due to the unknown timing of new leases and lease modifications, however the Company does not expect the impact to be material to any given year.

ASU 2016-02 will have a material impact on the Consolidated Balance Sheet due to the significance of the Company’s operating lease portfolio. The Company estimates adoption of the new standard will result in a Right of Use Asset and Lease Liability in the range of approximately $10.5 billion to $12.5 billion. At transition, the Right of Use Asset and Lease Liability reflect a present value of the Company's current minimum lease payments over a lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate. The impact of ASU 2016-02 is non-cash in nature, therefore, it will not affect the Company’s cash flows. The Company has also made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. It will continue to recognize those lease payments in the Consolidated Statement of Income on a straight-line basis over the lease term.

REVENUE RECOGNITION

The Company’s revenues consist of sales by Company-operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and foreign affiliates. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees. Revenues from restaurants licensed to foreign affiliates and developmental licensees include a royalty based on a percent of sales, and may include initial fees.

ASC 606 provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services. This standard does not impact the Company's recognition of revenue from Company-operated restaurants as those sales are recognized on a cash basis at the time of the underlying sale and are presented net of sales tax and other sales-related taxes. The standard also does not change the recognition of royalties from restaurants operated by franchisees or licensed to affiliates and developmental licensees, which are based on a percent of sales and recognized at the time the underlying sales occur. Rental income from restaurants operated by conventional franchisees is also not impacted by this standard as those revenues are subject to the guidance in ASC 840, "Leases." The standard does change the timing in which the Company recognizes initial fees from franchisees for new restaurant openings and new franchise terms. The Company's accounting policy through December 31, 2017, was to recognize initial franchise fees when received, upon a new restaurant opening and at the start of a new franchise term. Beginning in January 2018, initial franchise fees have been recognized as the Company satisfies the performance obligation over the franchise term, which is generally 20 years. Refer to the Franchise Arrangements footnote on page 44 for additional information.

The Company adopted ASC 606 as of January 1, 2018, using the modified retrospective method. This method allows the standard to be applied retrospectively through a cumulative catch up adjustment recognized upon adoption. As such, comparative information in the Company’s financial statements has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative adjustment recorded upon adoption of ASC 606 consisted of deferred revenue of approximately $600 million within long-term liabilities and approximately $150 million of associated adjustments to the deferred tax balances which are recorded in Deferred income taxes and Miscellaneous other assets on the Consolidated Balance Sheet.

The following table presents revenue disaggregated by revenue source (in millions):



Years ended December 31,	2018		2017		2016
Company-operated sales:
U.S.	$	2,664.6	$	3,260.4	$	3,742.6
International Lead Markets	3,961.6		4,080.0		4,278.5
High Growth Markets	2,847.8		4,591.5		5,377.9
Foundational Markets & Corporate	538.7		787.0		1,896.0
Total	$	10,012.7	$	12,718.9	$	15,295.0
Franchised revenues:
U.S.	$	5,001.2	$	4,746.0	$	4,510.1
International Lead Markets	3,638.5		3,260.3		2,944.9
High Growth Markets	1,140.9		941.7		782.8
Foundational Markets & Corporate	1,231.9		1,153.5		1,089.1
Total *	$	11,012.5	$	10,101.5	$	9,326.9
Total revenues:
U.S.	$	7,665.8	$	8,006.4	$	8,252.7
International Lead Markets	7,600.1		7,340.3		7,223.4
High Growth Markets	3,988.7		5,533.2		6,160.7
Foundational Markets & Corporate	1,770.6		1,940.5		2,985.1
Total	$	21,025.2	$	22,820.4	$	24,621.9

Revenues for 2018 reflected a negative impact of approximately $42 million as a result of the change in timing of recognizing revenue associated with initial fees.

FOREIGN CURRENCY TRANSLATION

FOREIGN CURRENCY TRANSLATIONGenerally, the functional currency of operations outside the U.S. is the respective local currency.

ADVERTISING COSTS

ADVERTISING COSTSAdvertising costs included in operating expenses of Company-operated restaurants primarily consist of contributions to advertising cooperatives and were (in millions): 2018–$388.8; 2017–$532.9; 2016–$645.8. Production costs for radio and television advertising are expensed when the commercials are initially aired. These production costs, primarily in the U.S., as well as other marketing-related expenses included in Selling, general & administrative expenses were (in millions): 2018–$88.0; 2017–$100.2; 2016–$88.8. Costs related to the Olympics sponsorship are included in the expenses for 2018 and 2016. In addition, significant advertising costs are incurred by franchisees through contributions to advertising cooperatives in individual markets.

SHARE-BASED COMPENSATION

Share-based compensation includes the portion vesting of all share-based awards granted based on the grant date fair value.

Share-based compensation expense and the effect on diluted earnings per common share were as follows:



In millions, except per share data	2018		2017		2016
Share-based compensation expense	$	125.1	$	117.5	$	131.3
After tax	$	108.1	$	82.0	$	89.6
Earnings per common share-diluted	$	0.14	$	0.10	$	0.11

Compensation expense related to share-based awards is generally amortized on a straight-line basis over the vesting period in Selling, general & administrative expenses. As of December 31, 2018, there was $114.3 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 2.1 years.

The fair value of each stock option granted is estimated on the date of grant using a closed-form pricing model. The following table presents the weighted-average assumptions used in the option pricing model for the 2018, 2017 and 2016 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. Expected stock price volatility is generally based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected dividend yield is based on the Company’s most recent annual dividend rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected life.

Weighted-average assumptions



	2018			2017			2016
Expected dividend yield	2.6		%	3.1		%	3.0		%
Expected stock price volatility	18.7		%	18.4		%	19.2		%
Risk-free interest rate	2.7		%	2.2		%	1.2		%
Expected life of options (in years)	5.8			5.9			5.9
Fair value per option granted	$	23.80		$	16.10		$	13.65

The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant, and prior to 2018 included a reduction for the present value of expected dividends over the vesting period. For performance-based RSUs granted beginning in 2016, the Company includes a relative TSR modifier to determine the number of shares earned at the end of the performance period. The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENTProperty and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings–up to 40 years; leasehold improvements–the lesser of useful lives of assets or lease terms, which generally include certain option periods; and equipment–3 to 12 years.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of annually reviewing McDonald’s restaurant assets for potential impairment, assets are initially grouped together in the U.S. at a field office level, and internationally, at a market level. The Company manages its restaurants as a group or portfolio with significant common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows produced by each individual restaurant within the asset grouping is compared to its carrying value. If an individual restaurant is determined to be impaired, the loss is measured by the excess of the carrying amount of the restaurant over its fair value as determined by an estimate of discounted future cash flows.

Losses on assets held for disposal are recognized when management and the Board of Directors, as required, have approved and committed to a plan to dispose of the assets, the assets are available for disposal and the disposal is probable of occurring within 12 months, and the net sales proceeds are expected to be less than its net book value, among other factors. Generally, such losses are related to restaurants that have closed and ceased operations as well as other assets that meet the criteria to be considered “available for sale."

GOODWILL

Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurant businesses. The Company's goodwill primarily results from purchases of McDonald's restaurants from franchisees and ownership increases in subsidiaries or affiliates, and it is generally assigned to the reporting unit (defined as each individual market) expected to benefit from the synergies of the combination. If a Company-operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the reporting unit.

The following table presents the 2018 activity in goodwill by segment:



In millions	U.S.		International Lead Markets				High Growth Markets				Foundational Markets & Corporate				Consolidated
Balance at December 31, 2017	$	1,274.0		$	750.5			$	316.7			$	38.5			$	2,379.7
Net restaurant purchases (sales)	2.5			20.2				(1.3		)		(0.3		)		21.1
Impairment losses	—			—				—				(1.1		)		(1.1		)
Currency translation				(52.4		)		(14.1		)		(1.7		)		(68.2		)
Balance at December 31, 2018	$	1,276.5		$	718.3			$	301.3			$	35.4			$	2,331.5

The Company conducts goodwill impairment testing in the fourth quarter of each year or whenever an indicator of impairment exists. If an indicator of impairment exists (e.g., estimated earnings multiple value of a reporting unit is less than its carrying value), the goodwill impairment test compares the fair value of a reporting unit, generally based on discounted future cash flows, with its carrying amount including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is measured as the difference between the implied fair value of the reporting unit's goodwill and the carrying amount of goodwill. Historically, goodwill impairment has not significantly impacted the consolidated financial statements. Accumulated goodwill impairment losses on the Consolidated Balance Sheet at December 31, 2018 and 2017 were $15.6 million and $14.5 million, respectively.

FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis, and certain non-financial assets and liabilities on a nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:


▪	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.


▪	Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.


▪	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

Certain of the Company’s derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves, option volatilities and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.


▪	Certain Financial Assets and Liabilities Measured at Fair Value

The following tables present financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance:



December 31, 2018
In millions	Level 1*		Level 2			Carrying Value
Derivative assets	$	167.1	$	39.2			$	206.3
Derivative liabilities			$	(16.6	)		$	(16.6	)

December 31, 2017
In millions	Level 1*		Level 2			Carrying Value
Derivative assets	$	167.3	$	0.6			$	167.9
Derivative liabilities			$	(45.4	)		$	(45.4	)


*	Level 1 is comprised of derivatives that hedge market driven changes in liabilities associated with the Company’s supplemental benefit plans.


▪	Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). For the year ended December 31, 2018, the Company recorded fair value adjustments to its long-lived assets, primarily to property and equipment, based on Level 3 inputs which includes the use of a discounted cash flow valuation approach.


▪	Certain Financial Assets and Liabilities not Measured at Fair Value

At December 31, 2018, the fair value of the Company’s debt obligations was estimated at $31.7 billion, compared to a carrying amount of $31.1 billion. The fair value was based on quoted market prices, Level 2 within the valuation hierarchy. The carrying amount for both cash equivalents and notes receivable approximate fair value.

FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In 2018, the Company adopted ASU 2017-12, "Derivatives and Hedging (Topic 815)", utilizing the modified retrospective transition method. The adoption of this standard did not have a material impact on the consolidated financial statements.

The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes.

The Company documents its risk management objective and strategy for undertaking hedging transactions, as well as all relationships between hedging instruments and hedged items. The Company’s derivatives that are designated for hedge accounting consist mainly of interest rate swaps, foreign currency forwards, and cross-currency swaps, and are classified as either fair value, cash flow or net investment hedges. Further details are explained in the "Fair Value," "Cash Flow" and "Net Investment" hedge sections.

The Company also enters into certain derivatives that are not designated for hedge accounting. The Company has entered into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. Further details are explained in the “Undesignated Derivatives” section.

All derivatives (including those not designated for hedge accounting) are recognized on the Consolidated Balance Sheet at fair value and classified based on the instruments’ maturity dates. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to AOCI and/or current earnings.

The following table presents the fair values of derivative instruments included on the Consolidated Balance Sheet as of December 31, 2018 and 2017:



	Derivative Assets					Derivative Liabilities
In millions	Balance Sheet Classification	2018		2017		Balance Sheet Classification	2018			2017
Derivatives designated as hedging instruments
Foreign currency	Prepaid expenses and other current assets	$	30.9	$	0.5	Accrued payroll and other liabilities	$	(0.7	)	$	(31.0	)
Interest rate	Prepaid expenses and other current assets					Accrued payroll and other liabilities	(0.1		)	(0.3		)
Foreign currency	Miscellaneous other assets	3.8		0.1		Other long-term liabilities	(1.3		)	(1.4		)
Interest rate	Miscellaneous other assets	—		—		Other long-term liabilities	(11.8		)	(5.9		)
Total derivatives designated as hedging instruments		$	34.7	$	0.6		$	(13.9	)	$	(38.6	)
Derivatives not designated as hedging instruments
Equity	Prepaid expenses and other current assets	$	167.1	$	—	Accrued payroll and other liabilities	$	(2.7	)	$	(1.3	)
Foreign currency	Prepaid expenses and other current assets	4.5		—		Accrued payroll and other liabilities	—			(5.5		)
Equity	Miscellaneous other assets	—		167.3
Total derivatives not designated as hedging instruments		$	171.6	$	167.3		(2.7		)	$	(6.8	)
Total derivatives		$	206.3	$	167.9		$	(16.6	)	$	(45.4	)

The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the year ended December 31, 2018 and 2017, respectively:



	Location of Gain or Loss Recognized in Income on Derivative	Gain (Loss) Recognized in Accumulated OCI					Gain (Loss) Reclassified into Income from Accumulated OCI						Gain (Loss) Recognized in Income on Derivative


In millions		2018		2017			2018			2017			2018		2017
Foreign currency	Nonoperating income/expense	$	60.0	$	(76.0	)	$	(2.2	)	$	(13.7	)
Interest rate	Interest expense	—		—			(1.2		)	(0.5		)
Cash flow hedges		$	60.0	$	(76.0	)	$	(3.4	)	$	(14.2	)

Foreign currency denominated debt	Nonoperating income/expense	$	682.9	$	(1,599.7	)	$	—		$	—
Foreign currency derivatives	Nonoperating income/expense	1.3		(8.9		)	—			8.6
Foreign currency derivatives⁽¹⁾	Interest expense												$	4.0	$	—
Net investment hedges		$	684.2	$	(1,608.6	)	$	—		$	8.6		$	4.0	$	—

Foreign currency	Nonoperating income/expense												$	22.1	$	(24.2	)
Equity	Selling, general & administrative expenses												0.4		92.7
Undesignated derivatives													$	22.5	$	68.5
⁽¹⁾The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.

Fair Value Hedges

The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At December 31, 2018, the carrying amount of fixed-rate debt that was effectively converted was $738.0 million, which included a decrease of $12.0 million of cumulative hedging adjustments. For the year ended December 31, 2018, the Company recognized a $5.8 million loss on the fair value of interest rate swaps, and a corresponding gain on the fair value of the related hedged debt instrument to Interest expense.

Cash Flow Hedges

The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover the next 18 months for certain exposures and are denominated in various currencies. As of December 31, 2018, the Company had derivatives outstanding with an equivalent notional amount of $726.3 million that hedged a portion of forecasted foreign currency denominated cash flows.

Based on market conditions at December 31, 2018, the $32.4 million in cumulative cash flow hedging gains, after tax, is not expected to have a significant effect on earnings over the next 12 months.

Net Investment Hedges

The Company primarily uses foreign currency denominated debt (third party and intercompany) to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of OCI and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of December 31, 2018, $10.8 billion of the Company's third party foreign currency denominated debt and $3.5 billion of intercompany foreign currency denominated debt were designated to hedge investments in certain foreign subsidiaries and affiliates.

Undesignated Derivatives

The Company enters into certain derivatives that are not designated for hedge accounting, therefore the changes in the fair value of these derivatives are recognized immediately in earnings together with the gain or loss from the hedged balance sheet position. As an example, the Company enters into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. Changes in the fair value of these derivatives are recorded in Selling, general & administrative expenses together with the changes in the supplemental benefit plan liabilities. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position.

Credit Risk

The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at December 31, 2018 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in the financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At December 31, 2018, the Company was required to post an immaterial amount of collateral due to the negative fair value of certain derivative positions. The Company's counterparties were not required to post collateral on any derivative position, other than on certain hedges of the Company’s supplemental benefit plan liabilities where the counterparties were required to post collateral on their liability positions.

INCOME TAX UNCERTAINTIES

INCOME TAXES

Income Tax Uncertainties

The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax liabilities are recorded when, in management’s judgment, a tax position does not meet the more likely than not threshold for recognition. For tax positions that meet the more likely than not threshold, a tax liability may still be recorded depending on management’s assessment of how the tax position will ultimately be settled.

The Company records interest and penalties on unrecognized tax benefits in the provision for income taxes.

Accounting for Global Intangible Low-Taxed Income ("GILTI")

The Tax Act requires a U.S. shareholder of a foreign corporation to include GILTI in taxable income. The accounting policy of the Company is to record any tax on GILTI in the provision for income taxes in the year it is incurred.

PER COMMON SHARE INFORMATION

PER COMMON SHARE INFORMATIONDiluted earnings per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation calculated using the treasury stock method, of (in millions of shares): 2018–7.3; 2017–8.1; 2016–6.8. Stock options that were not included in diluted weighted-average shares because they would have been antidilutive were (in millions of shares): 2018–0.5; 2017–0.1; 2016–1.2.

CASH AND EQUIVALENTS

CASH AND EQUIVALENTSThe Company considers short-term, highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTSThe Company evaluated subsequent events through the date the financial statements were issued and filed with the SEC. There were no subsequent events that required recognition or disclosure.