Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Business and Principles of Consolidation

Business and Principles of Consolidation. The consolidated financial statements include the accounts of Crown Holdings, Inc. (the “Company”) and its consolidated subsidiary companies (where the context requires, the “Company” shall include reference to the Company and its consolidated subsidiary companies).

The Company is a worldwide leader in the design, manufacture and sale of packaging products and equipment for consumer goods and industrial products. The Company’s packaging for consumer goods include steel and aluminum cans for food, beverage, household and other consumer products, glass bottles for beverage products and metal vacuum closures and steel crowns sold through the Company's sales organization to the soft drink, food, citrus, brewing, household products, personal care and various other industries. The Company's packaging for industrial products includes steel and plastic strap consumables and equipment, paper-based protective packaging, and plastic film consumables and equipment, which are sold into the metals, food and beverage, construction, agricultural, corrugated and general industries.

The financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s estimates and assumptions. Actual results could differ from those estimates, impacting reported results of operations and financial position. All intercompany accounts and transactions are eliminated in consolidation. In deciding which entities should be reported on a consolidated basis, the Company first determines whether the entity is a variable interest entity (“VIE”). If an entity is a VIE, the Company determines whether it is the primary beneficiary and therefore, should consolidate the VIE. If an entity is not a VIE, the Company consolidates those entities in which it has control, including certain subsidiaries that are not majority-owned. Certain of the Company’s agreements with noncontrolling interests contain provisions in which the Company would surrender certain decision-making rights upon a change in control of the Company. Accordingly, consolidation of these operations may no longer be appropriate subsequent to a change in control of the Company, as defined in the agreements. Investments in companies in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are carried at cost.

Foreign Currency Translation

Foreign Currency Translation. For non-U.S. subsidiaries which operate in a local currency environment, assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income, expense and cash flow items are translated at average exchange rates prevailing during the year. Translation adjustments for these subsidiaries are accumulated as a separate component of accumulated other comprehensive income in equity. For non-U.S. subsidiaries that use a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at approximate rates prevailing when acquired; all other assets and liabilities are translated at year-end exchange rates. Inventories charged to cost of sales and depreciation are remeasured at historical rates; all other income and expense items are translated at average exchange rates prevailing during the year. Gains and losses which result from remeasurement are included in earnings.

Revenue Recognition

Revenue Recognition. On January 1, 2018, the Company adopted new accounting guidance which outlined a single comprehensive model to use in accounting for revenue arising from contracts with customers and superseded most previous revenue recognition guidance. Under previous guidance, the Company generally recognized revenue from products sales when the goods were shipped and title and risk of loss passed to the customer. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services which is either at a point in time or over time. In addition to accelerating the timing of revenue recognition, an unbilled receivable is recognized with an offsetting decrease to inventory. See Note C for more information on the Company's accounting policies related to revenue under the new guidance.

Stock-Based Compensation

Stock-Based Compensation. For awards with a service or market condition, compensation expense is recognized over the vesting period on a straight-line basis using the grant date fair value of the award and the estimated number of awards that are expected to vest. For awards with a performance condition, the Company reassess the probability of vesting at each reporting period and adjust compensation cost based on its probability assessment. The Company’s plans provide for stock awards which may include accelerated vesting upon retirement, disability, or death of eligible employees. The Company considers a stock-based award to be vested when the service period is no longer contingent on the employee providing future service. Accordingly, the related compensation cost is recognized immediately for awards granted to retirement-eligible individuals, or over the period from the grant date to the date that retirement eligibility is achieved if less than the stated vesting period.

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash. Cash equivalents represent investments with maturities of three months or less from the time of purchase and are carried at cost, which approximates fair value because of the short maturity of those instruments. Outstanding checks in excess of funds on deposit are included in accounts payable.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance is determined based on a review of individual accounts for collectability, generally focusing on those accounts that are past due or experiencing financial difficulties. The current year expense to adjust the allowance for doubtful accounts is recorded within selling and administrative expense in the Consolidated Statements of Operations.

Inventory Valuation

Inventory Valuation. Inventories are stated at the lower of cost or market, with cost principally determined under the first-in, first-out (“FIFO”) or average cost method.

Property, Plant And Equipment

Property, Plant and Equipment. Property, plant and equipment (“PP&E”) is carried at cost less accumulated depreciation and includes expenditures for new facilities and equipment and those costs which substantially increase the useful lives or capacity of existing PP&E. Cost of constructed assets includes capitalized interest incurred during the construction and development period. Maintenance and repairs, including labor and material costs for planned major maintenance such as annual production line overhauls, are expensed as incurred. When PP&E is retired or otherwise disposed, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time.

Depreciation is provided on a straight-line basis over the estimated useful lives of the assets described below (in years). The Company periodically reviews the estimated useful lives of its PP&E and, where appropriate, changes are made prospectively.

Goodwill and Intangible Assets

Goodwill and Intangible Assets. Assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying identifiable net assets of acquired businesses. Goodwill is carried at cost and reviewed for impairment annually in the fourth quarter of each year or when facts and circumstances indicate goodwill may be impaired. Goodwill was allocated to the reporting units at the time of each acquisition based on the relative fair values of the reporting units. In assessing goodwill for impairment, the Company may first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Further quantitative assessment may then be required. If the carrying value of a reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit to its fair value, not to exceed the carrying amount of goodwill.

Definite-lived intangible assets are carried at cost less accumulated amortization. Definite-lived intangibles are amortized on a straight-line basis over their estimated useful lives. Definite-lived intangible assets are tested for impairment when facts and circumstances indicate the carrying value may not be recoverable from their undiscounted cash flows. If impaired, the assets are written down to fair value based on either discounted cash flows or appraised values.

Impairment or Disposal of Long-Lived Assets

Impairment or Disposal of Long-Lived Assets. In the event that facts and circumstances indicate that the carrying value of long-lived assets, primarily PP&E and certain identifiable intangible assets with finite lives, may be impaired, the Company performs a recoverability evaluation. If the evaluation indicates that the carrying value of an asset is not recoverable from its undiscounted cash flows, an impairment loss is measured by comparing the carrying value of the asset to its fair value, based on discounted cash flows. Long-lived assets classified as held for sale are presented in the balance sheet at the lower of their carrying value or fair value less cost to sell.

Taxes on Income

Taxes on Income. The provision for income taxes is determined using the asset and liability approach. Deferred taxes represent the future expected tax consequences of differences between the financial reporting and tax bases of assets and liabilities based upon enacted tax rates and laws. The Tax Act created a new requirement that certain intangible income of foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. The Company has made an accounting policy election to treat taxes due on future U.S. inclusions in taxable income related to this intangible income as a current period expense when incurred.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Investment tax credits are accounted for using the deferral method. Income tax-related interest and penalties are reported as income tax expense.

Derivatives and Hedging

Derivatives and Hedging. All outstanding derivative financial instruments are recognized in the balance sheet at their fair values. The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities are reported currently in earnings along with changes in the fair values of the hedged items. Changes in the effective portions of the fair values of instruments used to reduce or eliminate adverse fluctuations in cash flows of anticipated or forecasted transactions are reported in equity as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items impact earnings or the anticipated transactions are no longer probable. Changes in the fair values of derivative instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported currently in earnings. Amounts reported in earnings are classified consistent with the item being hedged.

The effectiveness of derivative instruments in reducing risks associated with the hedged exposures is assessed at inception and on an ongoing basis. Time value, a component of an instrument’s fair value, is excluded in assessing effectiveness for fair value hedges, except hedges of firm commitments, and included for cash flow hedges.

Hedge accounting is discontinued prospectively when (i) the instrument is no longer effective in offsetting changes in fair value or cash flows of the underlying hedged item, (ii) the instrument expires, is sold, terminated or exercised, or (iii) designating the instrument as a hedge is no longer appropriate.

The Company formally documents all relationships between its hedging instruments and hedged items at inception, including its risk management objective and strategy for establishing various hedge relationships. Cash flows from hedging instruments are classified in the Consolidated Statements of Cash Flows consistent with the items being hedged.

Treasury Stock

Treasury Stock. Treasury stock is reported at par value. The excess of fair value over par value is first charged to paid-in capital, if any, and then to retained earnings.

Research and Development

Research and Development. Research, development and engineering costs of $51 in 2018, $39 in 2017, and $41 in 2016 were expensed as incurred and reported in selling and administrative expense in the Consolidated Statements of Operations. Substantially all engineering and development costs are related to developing new products or designing significant improvements to existing products or processes. Costs primarily include employee salaries and benefits and facility costs.

Reclassifications

Reclassifications. Certain reclassifications of prior years’ data have been made to conform to the current year presentation.

Recent Accounting and Reporting Pronouncements

Recent Accounting and Reporting Pronouncements.

Recently Adopted Accounting Standards

Pension and other postretirement benefit costs

On January 1, 2018, the Company adopted new guidance related to the presentation of pension and other postretirement benefit costs. Under the new guidance, only the service cost component of pension and other postretirement benefit costs is presented with other employee compensation costs within income from operations or capitalized in assets. The other components are reported separately outside of income from operations and are not eligible for capitalization.

The Company reclassified the following net (benefits) charges on the Statement of Operations to conform to current year presentation:



	2017			2016
Cost of products sold, excluding depreciation and amortization	$	54		$	40
Selling and administrative expense	(4		)	(2		)
Restructuring and other	3			(14		)
Other pension and postretirement	(53		)	(24		)

Statement of Cash Flows

On January 1, 2018, the Company adopted new guidance related to the classification of certain cash receipts and payments on the Statement of Cash Flows. Under the new guidance, premiums paid for debt extinguishments are classified as cash outflows from financing activities. For the year ended December 31, 2016, the Company reclassified $22 of premiums paid from net cash used for operating activities to net cash used for financing activities. In addition, beneficial interests obtained in a securitization of financial assets are disclosed as a noncash activity and cash receipts from the beneficial interests are classified as cash inflows from investing activities. Under previous guidance, the Company classified cash receipts from beneficial interests in securitized receivables and premiums paid for debt extinguishments as cash flows from operating activities. The Company recast prior period amounts to conform to the current year presentation. For the years ended December 31, 2017 and 2016, the Company reclassified $1,010 and $1,086 from net cash used for operating activities to net cash provided by investing activities. Additionally, for the years ended December 31, 2018, 2017 and 2016, beneficial interests obtained in securitized receivables were $456, $1,047 and $1,032.

On January 1, 2018, the Company adopted new accounting guidance that requires the Statement of Cash Flows to explain the change in the total of cash, cash equivalents and restricted cash. In addition, restricted cash is included in a cash reconciliation of beginning of- period and end-of-period total amounts shown on the Statements of Cash Flows. The Company recast prior period amounts to conform to the current year presentation.

Cash, cash equivalents and restricted cash included in the Company's Consolidated Balance Sheets were as follows:



	2018		2017
Cash and cash equivalents	$	607	$	424
Restricted cash included in prepaid expenses and other current assets	45		2
Restricted cash included in other non-current assets	7		9
Total cash, cash equivalents and restricted cash	$	659	$	435

Amounts included in restricted cash primarily represent amounts required to be segregated by certain of the Company's receivables securitization agreements.

Revenue recognition

The Company adopted the new revenue guidance discussed above using the modified retrospective method applied to those contracts which were outstanding as of January 1, 2018. The Company recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue guidance, while prior period amounts are not adjusted and continue to be reported in accordance with accounting guidance in effect for those periods.

The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet as of January 1, 2018 for the adoption of the new revenue guidance was as follows:



	As reported					As revised
Consolidated Balance Sheet	December 31, 2017		Adjustment			January 1, 2018
Receivables, net	$	1,041	$	154		$	1,195
Inventories	1,385		(144		)	1,241
Prepaid and other current assets	224		26			250
Total current assets	3,074		36			3,110
Other non-current assets	832		1			833
Total assets	10,663		37			10,700
Accrued liabilities	757		17			774
Total current liabilities	3,250		17			3,267
Other non-current liabilities	685		10			695
Noncontrolling interests	322		1			323
Accumulated earnings	3,004		9			3,013
Crown Holdings shareholders' equity	601		9			610
Total equity	923		10			933
Total liabilities and equity	10,663		37			10,700

The impact of adoption on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018 was as follows:



	As reported December 31, 2018					Balances without adoption of new standard
Consolidated Balance Sheet	As reported December 31, 2018		Effects of change			Balances without adoption of new standard
Receivables, net	$	1,602	$	(181	)	$	1,421
Inventories	1,690		155			1,845
Prepaid and other current assets	180		(16		)	164
Total current assets	4,079		(42		)	4,037
Total assets	15,262		(42		)	15,220
Accrued liabilities	1,006		(21		)	985
Total current liabilities	3,913		(21		)	3,892
Other non-current liabilities	863		(9		)	854
Noncontrolling interests	349		(1		)	348
Accumulated earnings	3,449		(11		)	3,438
Crown Holdings shareholders' equity	937		(11		)	926
Total equity	1,286		(12		)	1,274
Total liabilities and equity	15,262		(42		)	15,220



	As reported For the year ended
	As reported For the year ended		Effects of change			Amounts without adoption of new standard
Statement of Operations	December 31, 2018		Effects of change			Amounts without adoption of new standard
Net sales	$	11,151	$	(27	)	$	11,124
Cost of products sold, excluding depreciation and amortization	9,028		(21		)	9,007
Income from operations	1,096		(6		)	1,090
Foreign exchange	18		(3		)	15
Income before taxes	740		(3		)	737
Provision for income taxes	216		(1		)	215
Net income	528		(2		)	526
Net income attributable to Crown Holdings	439		(2		)	437
Earnings per common share attributable to Crown Holdings:						—
Basic	$	3.28	$	(0.02	)	$	3.26
Diluted	$	3.28	$	(0.01	)	$	3.27

Hedge Accounting

On January 1, 2018, the Company adopted new guidance on hedge accounting. The new guidance allows contractually-specified price components of a commodity purchase or sale to be eligible for hedge accounting. Additionally, the new standard permits qualitative effectiveness assessments for certain hedges after the initial hedge qualification analysis. The Company adopted this guidance using the modified retrospective approach. Upon adoption, the Company reclassified a net charge of $3 for the cumulative ineffectiveness of these contracts from retained earnings to accumulated other comprehensive income as a cumulative-effect adjustment.

Intercompany transfers

On January 1, 2018, the Company adopted new guidance related to intercompany transfers of assets other than inventory. Under previous guidance, income tax expense associated with intercompany profits in an intercompany sale or transfer of assets was deferred until the assets left the consolidated group. Similarly, deferred tax assets were not recognized for any increase in tax bases due to the intercompany sale or transfer. The new guidance allows for the recognition of income tax expense and deferred tax benefits on increases in tax bases when an intercompany sale or transfer occurs. Income tax effects of intercompany inventory transactions continue to be deferred until the assets leave the consolidated group. The guidance did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

In February 2016, the FASB issued new guidance on lease accounting. Under the new guidance, lease classification criteria and income statement recognition are similar to current guidance; however, all leases with a term longer than one year will be recorded on the balance sheet through a right-of-use asset and a corresponding lease liability. The Company is in the process of implementing changes to processes, systems and controls to adopt the standard on a modified retrospective basis on January 1, 2019. The Company plans to elect the package of practical expedients that provides certain relief from reassessing prior lease accounting conclusions and will not apply the recognition requirements to short-term leases. Although the Company continues to evaluate the effect on the Company's Consolidated Balance Sheet, the Company currently anticipates that the impact of adoption will result in an insignificant cumulative effect of adoption and the recognition of material right of use assets and operating lease liabilities. The Company does not expect a material impact on its Consolidated Statement of Operations or Cash Flows.

In June 2016, the FASB issued revised guidance for the accounting for credit losses on financial instruments. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This guidance is effective for the Company on January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard.