XML 18 R8.htm IDEA: XBRL DOCUMENT
v3.20.2

Nature of Operations and Summary of Significant Accounting Policies | 9 Months Ended
--- | ---
Sep. 30, 2020
Accounting Policies [Abstract] |
Nature of Operations and Summary of Significant Accounting Policies | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, September 30 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2020 and 2019 quarters, the actual closing dates were October 2 and September 27, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The inputs into our judgments and estimates consider the current economic implications of the novel coronavirus ("COVID-19") on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long lived assets. Actual results could differ from those estimates. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company's statement of cash flows periods ended September 30, 2020 and September 30, 2019 to the amounts reported in the Company's balance sheet as at September 30, 2020, December 31, 2019, September 30, 2019 and December 31, 2018.
(DOLLARS IN THOUSANDS) | September 30, 2020 |  | December 31, 2019 |  | September 30, 2019 |  | December 31, 2018
Current assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 469,840 |  |  | $ | 606,823 |  |  | $ | 494,897 |  |  | $ | 634,897 |
Restricted cash | 12,841 |  |  | 17,122 |  |  | 9,157 |  |  | 13,625 |
Noncurrent assets |  |  |  |  |  |  |
Restricted cash included in Other assets | 845 |  |  | — |  |  | — |  |  | — |
Cash, cash equivalents and restricted cash | $ | 483,526 |  |  | $ | 623,945 |  |  | $ | 504,054 |  |  | $ | 648,522 |
Accounts Receivable The Company has various factoring agreements in the U.S. and The Netherlands under which it can factor up to approximately $100 million in receivables. In addition, the Company has factoring agreements sponsored by certain customers. Under all of the arrangements, the Company sells the receivables on a non-recourse basis to unrelated financial institutions and accounts for the transactions as a sale of receivables. The applicable receivables are removed from the Company's Consolidated Balance Sheet when the cash proceeds are received by the Company. Through these factoring programs, the Company removed $209.3 million and $205.7 million of receivables from its balance sheets as of September 30, 2020 and December 31, 2019, respectively, which are primarily related to the factoring agreements sponsored by certain customers. The impact on cash provided by operations from participating in these programs was an increase of $3.6 million for the nine months ended September 30, 2020 and an increase of $36.8 million for the nine months ended September 30, 2019. The cost of participating in these programs was $1.1 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively, and was $3.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively. Revenue Recognition The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value added, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms. The following table presents the Company's revenues disaggregated by product categories:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) | 2020 |  | 2019 |  | 2020 |  | 2019
Taste |  |  |  |  |  |  |
Flavor compounds | $ | 674,240 |  |  | $ | 697,787 |  |  | $ | 2,062,718 |  |  | $ | 2,112,801 |
Flavor ingredients | 90,998 |  |  | 84,641 |  |  | 281,166 |  |  | 285,748 |
Total Taste | 765,238 |  |  | 782,428 |  |  | 2,343,884 |  |  | 2,398,549 |
Scent |  |  |  |  |  |  |
Fragrance compounds | 404,524 |  |  | 389,949 |  |  | 1,170,860 |  |  | 1,155,127 |
Fragrance ingredients | 98,314 |  |  | 94,968 |  |  | 299,422 |  |  | 302,639 |
Total Scent | 502,838 |  |  | 484,917 |  |  | 1,470,282 |  |  | 1,457,766 |
Total revenues | $ | 1,268,076 |  |  | $ | 1,267,345 |  |  | $ | 3,814,166 |  |  | $ | 3,856,315 |
Contract Assets With respect to a small number of contracts for the sale of compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. The following table reflects the balances in the Company's accounts receivable, contract assets, and contract liabilities for the periods ended September 30, 2020 and December 31, 2019:
(DOLLARS IN THOUSANDS) | September 30, 2020 |  | December 31, 2019
Receivables (included in Trade receivables) | $ | 951,138 |  |  | $ | 892,625 |
Contract asset - Short term | 960 |  |  | 2,736 |
Contract liabilities - Short term | 4,648 |  |  | 11,107 |
Recent Accounting Pronouncements In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for the period from March 12, 2020 to December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through September 30, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements. In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial Statements and will have a minimal impact on its disclosures in future periods. Adoption of Standard Related to Expected Credit Losses In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses, which may result in earlier recognition of losses. The Company adopted the guidance effective the first day of its 2020 fiscal year and performed an evaluation of the applicable criteria, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions. As a result of the evaluation, the Company determined that no adjustment would be required to the level of its allowances for bad debts or to the carrying value of any other financial asset. The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves. The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of trade receivables, and ii) a specific reserve for accounts identified as uncollectable. The Company also considers current and future economic conditions in the determination of the allowance. At September 30, 2020, the Company reported $928.6 million of trade receivables, net of allowances of $22.5 million. Based on the aging analysis as of September 30, 2020, approximately 87% of our accounts receivable were current based on the payment terms of the invoice. Receivables that are past due by over 365 days account for approximately 1% of our accounts receivable. The following is a rollforward of the Company's allowances for bad debts for the nine months ended September 30, 2020:
(DOLLARS IN THOUSANDS) | Allowances for Bad Debts
Balance at December 31, 2019 | $ | 16,428 |
Bad debt expense | 7,443 |
Write-offs | (587) |
Foreign exchange | (771) |
Balance at September 30, 2020 | $ | 22,513 |
The Company adjusted the amount of the allowances for bad debts as of December 31, 2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables. The adjustment was for $8.2 million and had the effect of increasing both the allowances for bad debts and Trade Receivables. During the first quarter of 2020, the Company increased its allowances for bad debts by approximately $3.0 million to reflect higher expected future write-offs of receivables due to the impact of the COVID-19 pandemic and its impact on the liquidity of certain customers. The Company has not made any additional increases to its allowances for bad debts, as a result of COVID-19, in the second and third quarters of 2020.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration