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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended
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Mar. 31, 2022
Accounting Policies [Abstract] |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation.
Management Estimates | Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.
Currency Translation and Transactions | Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $13 million and $(143) million, net of tax, during the three months ended March 31, 2022 and 2021, respectively, and $(182) million and $175 million, net of tax, during the nine months ended March 31, 2022 and 2021, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity. The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading. The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $3 million and $(3) million during the three months ended March 31, 2022 and March 31, 2021, respectively, and $(15) million and $(5) million during the nine months ended March 31, 2022 and 2021, respectively.
Concentration of Credit Risk | Concentration of Credit RiskThe Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment consists of the following:
(In millions) |  | March 31, 2022 |  | June 30, 2021
Assets (Useful Life) |  |  |  |
Land |  | $ | 56 |  |  | $ | 55 |
Buildings and improvements (10 to 40 years) |  | 496 |  |  | 256 |
Machinery and equipment (3 to 10 years) |  | 992 |  |  | 920 |
Computer hardware and software (4 to 10 years) |  | 1,428 |  |  | 1,303 |
Furniture and fixtures (5 to 10 years) |  | 129 |  |  | 125 |
Leasehold improvements |  | 2,307 |  |  | 2,312 |
Construction in progress |  | 589 |  |  | 647 |
|  | 5,997 |  |  | 5,618 |
Less accumulated depreciation and amortization |  | (3,504) |  |  | (3,338) |
|  | $ | 2,493 |  |  | $ | 2,280 |
Depreciation and amortization of property, plant and equipment was $140 million and $129 million during the three months ended March 31, 2022 and 2021, respectively, and $406 million and $380 million during the nine months ended March 31, 2022 and 2021, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Income Taxes | Income Taxes The effective rate for income taxes for the three and nine months ended March 31, 2022 and 2021 are as follows:
| Three Months Ended March 31 |  | Nine Months Ended March 31
| 2022 |  | 2021 |  | 2022 |  | 2021
Effective rate for income taxes | 18.5 | % |  | 21.0 | % |  | 21.1 | % |  | 18.5 | %
Basis-point change from the prior-year period | (250) |  |  |  |  | 260 |  |  |
The effective tax rate for the three and nine months ended March 31, 2021 included the retroactive impact relating to fiscal 2020 and 2019 of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. The impact of the final issuance of GILTI tax regulations with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second and third quarters of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis points to the effective tax rates for the three and nine months ended March 31, 2021, respectively. For the three months ended March 31, 2022, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations, partially offset by a decrease in excess tax benefits associated with stock-based compensation arrangements. For the nine months ended March 31, 2022, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company’s foreign operations, which includes the retroactive impact of the final GILTI tax regulations recognized in the prior period. Also contributing to the increase was a decrease in excess tax benefits associated with stock-based compensation arrangements. As of March 31, 2022 and June 30, 2021, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $63 million and $62 million, respectively. The total amount of unrecognized tax benefits at March 31, 2022 that, if recognized, would affect the effective tax rate was $53 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $5 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, was $15 million and $14 million, respectively. On the basis of the information available as of March 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. During the fiscal 2022 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2020 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2022.
Recently Adopted and Issued Accounting Standards | Recently Adopted Accounting Standards Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes) In December 2019, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas. Effective for the Company – Fiscal 2022 first quarter. Impact on consolidated financial statements – On July 1, 2021, the Company adopted this standard and recorded a cumulative adjustment of $121 million as an increase to its fiscal 2022 opening retained earnings balance to derecognize a deferred tax liability related to a previously held equity method investment that became a foreign subsidiary. Recently Issued Accounting Standards Reference Rate Reform (ASC Topic 848 “ASC 848”) In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform. In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848. Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022. Impact on consolidated financial statements – The Company currently has an implementation team in place that is performing a comprehensive evaluation and assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company does not expect any qualifying contract modifications related to reference rate reform and therefore does not expect that the optional guidance in ASC 848 will need to be applied through December 31, 2022. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2022. No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

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