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Operations and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2022
Accounting Policies [Abstract] |
Operations and Summary of Significant Accounting Policies | Operations and Summary of Significant Accounting Policies Business AGCO Corporation and subsidiaries (“AGCO” or the “Company”) is a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. The Company sells a full range of agricultural equipment, including tractors, combines, hay tools, sprayers, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brand names including Fendt®, GSI®, Massey Ferguson®, Precision Planting® and Valtra®, supported by our FUSE® precision agriculture solutions. The Company distributes most of its products through a combination of approximately 3,100 independent dealers and distributors as well as the Company utilizes associates and licensees to provide a distribution channel for its products. In addition, the Company provides retail financing through its finance joint ventures with Coöperatieve Rabobank U.A., or “Rabobank.” Basis of Presentation and Consolidation The Company’s Consolidated Financial Statements represent the consolidation of all wholly-owned companies, majority-owned companies and joint ventures in which the Company has been determined to be the primary beneficiary. The Company consolidates a variable interest entity (“VIE”) if the Company determines it is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company also consolidates all entities that are not considered VIEs if it is determined that the Company has a controlling voting interest to direct the activities that most significantly impact the joint venture or entity. The Company records investments in all other affiliate companies using the equity method of accounting when it has significant influence. Other investments, including those representing an ownership interest of less than 20%, are recorded at cost. All significant intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 during the reporting period. Actual results could differ from those estimates. The estimates made by management primarily relate to accounts and notes receivable, inventories, deferred income tax valuation allowances, uncertain tax positions, goodwill and other identifiable intangible assets, and certain accrued liabilities, principally relating to reserves for volume discounts and sales incentives, warranty obligations, product liability and workers’ compensation obligations, recoverable indirect taxes and pensions and postretirement benefits. The Company cannot predict the ongoing impact of the COVID-19 pandemic due to volatility in global economic and political environments, the cyclicality of market demand for its products, supply chain disruptions, possible workforce unavailability, exchange rate and commodity and protein price volatility and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial condition and available funding. Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries are translated into United States currency in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters.” Assets and liabilities are translated to United States dollars at period-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are included in “Accumulated other comprehensive loss” in stockholders’ equity within the Company’s Consolidated Balance Sheets. Gains and losses, which result from foreign currency transactions, are included in the accompanying Consolidated Statements of Operations. The Company changed the functional currency of its wholly-owned subsidiary from the Argentinian peso to the U.S. dollar effective July 1, 2018. The Company is subject to the risk of the imposition of limitations by governments on international transfers of funds. For example, in recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina. As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain U.S. dollars, has broadened significantly. The net monetary assets of the Company’s operations in Argentina denominated in pesos at the official government rate were approximately 4.1 billion (or approximately $23.0 million) as of December 31, 2022, inclusive of approximately 6.8 billion pesos (or approximately $38.1 million) in cash and cash equivalents. In addition, the Company has an obligation to reimburse AGCO Capital Argentina S.A., one of its finance joint ventures with Rabobank, up to $10 million under a guarantee related to the ability of AGCO Capital Argentina S.A. to transfer funds out of Argentina. The finance joint venture in Argentina has net monetary assets denominated in pesos at the official government rate of approximately 4.1 billion (or approximately $22.9 million) as of December 31, 2022, of which a majority is cash and cash equivalents. Future impairments and charges are possible in connection with these exposures. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents reported in the Consolidated Balance Sheets as of December 31, 2022, 2021 and 2020 and cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 are as follows (in millions):
| December 31, 2022 |  | December 31, 2021 |  | December 31, 2020
Cash(1) | $ | 656.7 |  |  | $ | 833.0 |  |  | $ | 1,022.0 |
Cash equivalents(2) | 130.8 |  |  | 49.2 |  |  | 89.7 |
Restricted cash(3) | 2.0 |  |  | 6.9 |  |  | 7.4 |
Total | $ | 789.5 |  |  | $ | 889.1 |  |  | $ | 1,119.1 |
____________________________________ (1) Consisted primarily of cash on hand and bank deposits. (2) Consisted primarily of money market deposits, certificates of deposits and overnight investments. The Company considers all investments with an original maturity of three months or less to be cash equivalents. (3) Consisted primarily of cash in escrow or held as guarantee to support specific requirements. Accounts and Notes Receivable Accounts and notes receivable arise from the sale of equipment and replacement parts to independent dealers, distributors or other customers. In the United States and Canada, amounts due from sales to dealers are immediately due upon a retail sale of the underlying equipment by the dealer with the exception of sales of grain storage and protein production systems as discussed further below. If not previously paid by the dealer in the United States and Canada, installment payments are required generally beginning after the interest-free period with the remaining outstanding equipment balance generally due within 12 months after shipment or delivery. These interest-free periods vary by product and generally range from one to 12 months. In limited circumstances, the Company provides sales terms, and in some cases, interest-free periods that are longer than 12 months for certain products. These are typically specified programs predominately in the United States and Canada, that allow for interest-free periods and due dates of up to 24 months for certain products depending on the year of the sale and the dealer or distributor’s ordering or sales volume during the preceding year. Interest generally is charged at or above prime lending rates on the outstanding receivable balances after shipment or delivery and after interest-free periods. Sales terms of some highly seasonal products provide for payment and due dates based on a specified date during the year regardless of the shipment date. Equipment sold to dealers in the United States and Canada is paid in full on average within 12 months of shipment. Sales of replacement parts generally are payable within 30 days of shipment, with terms for some larger, seasonal stock orders generally requiring payment within six months of shipment. Under normal circumstances, equipment may not be returned. In certain regions, with respect to most equipment sales, including the United States and Canada, the Company is obligated to repurchase equipment and replacement parts upon cancellation of a dealer or distributor contract. These obligations are required by national, state or provincial laws and require the Company to repurchase a dealer or distributor’s unsold inventory, including inventories for which the receivable already has been paid. Actual interest-free periods are shorter than described above because the equipment receivable from dealers or distributors in some countries, such as in the United States and Canada, is generally due immediately upon sale of the equipment to a retail customer as discussed above. Receivables can also be paid prior to terms specified in sales agreements. Under normal circumstances, interest is not forgiven and interest-free periods are not extended. In other international markets, equipment sales generally are payable in full within 30 days to 180 days of shipment or delivery. Payment terms for some highly seasonal products have a specified due date during the year regardless of the shipment or delivery date. For sales in most markets outside of the United States and Canada, the Company generally does not charge interest on outstanding receivables with its dealers and distributors. Sales of replacement parts generally are payable within 30 days to 90 days of shipment, with terms for some larger, seasonal stock orders generally payable within six months of shipment. In certain markets, there is a time lag, which varies based on the timing and level of retail demand, between the date the Company records a sale and when the dealer sells the equipment to a retail customer. Sales of grain storage and protein production systems both in the United States and in other countries generally are payable within 30 days of shipment. In certain countries, sales of such systems for which the Company is responsible for construction or installation may be contingent upon customer acceptance. Payment terms vary by market and product, with fixed payment schedules on all sales. When the Company is responsible for installation services, fixed payment schedules may include upfront deposits, progress payments and final payment upon customer acceptance. The following summarizes by geographic region, as a percentage of the Company’s consolidated net sales, amounts with maximum interest-free periods as presented below (in millions):
Year Ended December 31, 2022 |  | North America |  | South America |  | Europe/ Middle East |  | Asia/ Pacific/Africa |  | Consolidated
0 to 6 months |  | $ | 2,519.6 |  |  | $ | 2,023.2 |  |  | $ | 6,444.6 |  |  | $ | 907.4 |  |  | $ | 11,894.8 |  |  | 94.0 | %
7 to 12 months |  | 650.9 |  |  | 96.6 |  |  | 2.7 |  |  | — |  |  | 750.2 |  |  | 5.9 | %
13 to 24 months |  | 4.6 |  |  | 1.8 |  |  | — |  |  | — |  |  | 6.4 |  |  | 0.1 | %
|  | $ | 3,175.1 |  |  | $ | 2,121.6 |  |  | $ | 6,447.3 |  |  | $ | 907.4 |  |  | $ | 12,651.4 |  |  | 100.0 | %
The Company has an agreement to permit transferring, on an ongoing basis, a majority of its wholesale interest-bearing and non-interest bearing accounts receivable in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. Qualified dealers may obtain additional financing through the Company’s U.S., Canadian, European and Brazilian finance joint ventures at the joint ventures’ discretion. The Company provides various volume bonus and sales incentive programs with respect to its products. These sales incentive programs include reductions in invoice prices, reductions in retail financing rates, dealer commissions and dealer incentive allowances. In most cases, incentive programs are established and communicated to the Company’s dealers on a quarterly basis. The incentives are paid either at the time of the cash settlement of the receivable (which is generally at the time of retail sale), at the time of retail financing, at the time of warranty registration, or at a subsequent time based on dealer purchase volumes. The incentive programs are product-line specific and generally do not vary by dealer. The cost of sales incentives associated with dealer commissions and dealer incentive allowances is estimated based upon the terms of the programs and historical experience, is based on a percentage of the sales price, and estimates for sales incentives are made and recorded at the time of sale for expected incentive programs using the expected value method. These estimates are reassessed each reporting period and are revised in the event of subsequent modifications to incentive programs, as they are communicated to dealers. The related provisions and accruals are made on a product or product-line basis and are monitored for adequacy and revised at least quarterly in the event of subsequent modifications to the programs. Interest rate subsidy payments, which are a reduction in retail finance rates, are recorded in the same manner as dealer commissions and dealer incentive allowances. Volume discounts are estimated and recognized based on historical experience, and related reserves are monitored and adjusted based on actual dealer purchase volumes and the dealer’s progress towards achieving specified cumulative target levels. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. In the United States and Canada, reserves for incentive programs related to accounts receivable not sold to Company’s U.S. and Canadian finance joint ventures are recorded as “Accounts receivable allowances” within the Company’s Consolidated Balance Sheets due to the fact that the incentives are paid through a reduction of future cash settlement of the receivable. Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of the Company’s volume discount programs, as well as sales with incentives associated with accounts receivable sold to its finance joint ventures, are recorded within “Accrued expenses” within the Company’s Consolidated Balance Sheets. Accounts and notes receivable are shown net of allowances for sales incentive discounts available to dealers and for doubtful accounts. Cash flows related to the collection of receivables are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. Accounts and notes receivable allowances at December 31, 2022 and 2021 were as follows (in millions):
| 2022 |  | 2021
Sales incentive discounts | $ | 7.6 |  |  | $ | 8.0 |
Doubtful accounts | 31.3 |  |  | 32.6 |
| $ | 38.9 |  |  | $ | 40.6 |
The Company accounts for its provision for doubtful accounts in accordance with Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”). In the United States and Canada, sales incentives can be paid through future cash settlements of receivables and through credit memos to Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. Outside of the United States and Canada, sales incentives can be paid through cash or credit memos to the Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. The Company transfers certain accounts receivable under its accounts receivable sales agreements with its finance joint ventures and other financial institutions (see Note 4). The Company records such transfers as sales of accounts receivable when it is considered to have surrendered control of such receivables under the provisions of ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” Cash payments made to the Company’s finance joint ventures for sales incentive discounts provided to dealers related to outstanding accounts receivables sold are recorded within “Accrued expenses.” Inventories Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At December 31, 2022 and 2021, the Company had recorded $211.6 million and $202.6 million, respectively, as an adjustment for surplus and obsolete inventories. These adjustments are reflected within “Inventories, net” within the Company’s Consolidated Balance Sheets. Inventories, net at December 31, 2022 and 2021 were as follows (in millions):
| 2022 |  | 2021
Finished goods | $ | 994.9 |  |  | $ | 718.2 |
Repair and replacement parts | 750.1 |  |  | 697.8 |
Work in process | 369.8 |  |  | 282.8 |
Raw materials | 1,074.9 |  |  | 894.9 |
Inventories, net | $ | 3,189.7 |  |  | $ | 2,593.7 |
Cash flows related to the sale of inventories are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. Recoverable Indirect Taxes The Company’s Brazilian operations incur value added taxes (“VAT”) on certain purchases of raw materials, components and services. These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from the Company’s sales in the Brazilian market. The Company regularly assesses the recoverability of these tax credits, and establishes reserves when necessary against them, through analyses that include, amongst others, the history of realization, the transfer of tax credits to third parties as authorized by the government, anticipated changes in the supply chain and the future expectation of tax debits from the Company’s ongoing operations. The Company believes that these tax credits, net of established reserves, are realizable. The Company had recorded approximately $94.6 million and $114.4 million, respectively, of VAT tax credits, net of reserves, as of December 31, 2022 and 2021. Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of two to 40 years for buildings and improvements, three to 20 years for machinery and equipment and three to ten years for furniture and fixtures. Expenditures for maintenance and repairs are primarily charged to expense as incurred. Property, plant and equipment, net at December 31, 2022 and 2021 consisted of the following (in millions):
| 2022 |  | 2021
Land | $ | 141.1 |  |  | $ | 141.0 |
Buildings and improvements | 920.7 |  |  | 875.9 |
Machinery and equipment | 2,789.8 |  |  | 2,702.3 |
Furniture and fixtures | 182.8 |  |  | 171.1 |
Gross property, plant and equipment | 4,034.4 |  |  | 3,890.3 |
Accumulated depreciation and amortization | (2,443.2) |  |  | (2,425.5) |
Property, plant and equipment, net | $ | 1,591.2 |  |  | $ | 1,464.8 |
Goodwill, Other Intangible Assets and Long-Lived Assets The Company tests goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. The Company combines and aggregates two or more components of an operating segment as a single reporting unit if the components have similar economic characteristics. The Company’s reportable segments are not its reporting units. Goodwill is evaluated annually as of October 1 st for impairment using a qualitative assessment or a quantitative one-step assessment. If the Company elects to perform a qualitative assessment and determines the fair value of its reporting units more likely than not exceed the carrying value of their net assets, no further evaluation is necessary. For reporting units where the Company performs a one-step quantitative assessment, the Company compares the fair value of each reporting unit, which is determined based on a combination of a discounted cash flow valuation approach and a market multiple valuation approach, to its respective carrying value of net assets, including goodwill. If the fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired. If the carrying value of net assets is higher than the fair value of the reporting unit, an impairment charge is recorded in the amount by which the carrying value exceeds the reporting unit’s fair value in accordance with ASU 2017-04. The Company reviews its long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If the Company determines that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. The Company also evaluates the amortization periods assigned to its intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell. The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2022, 2021 and 2020 indicated that no indicators of impairment existed and no reduction in the carrying amount of goodwill and long-lived assets was required. The COVID-19 pandemic has adversely impacted the global economy as a whole since its inception. Based on macroeconomic conditions throughout 2020, the Company assessed its goodwill and other intangible assets for indications of impairment, and as of June 30, 2020, the Company concluded there were indicators of impairment during the three months ended June 30, 2020 related to one of its smaller reporting units, which was a 50%-owned tillage and seeding equipment joint venture. As a result, the entire goodwill balance of this reporting unit was impaired, and during the three months ended June 30, 2020, the Company recorded a non-cash impairment charge of approximately $20.0 million as “Impairment charges” within the Company’s Consolidated Statements of Operations, with an offsetting benefit of approximately $10.0 million included within “Net (income) loss attributable to noncontrolling interests.” During the three months ended June 30, 2021, the Company sold its 50% interest in the joint venture. The Company’s accumulated goodwill impairment is approximately $354.1 million related to impairment charges the Company recorded during 2019, 2012 and 2006 pertaining to its grain storage and protein production systems business in Europe/Middle East, its Chinese harvesting reporting unit and its former sprayer reporting unit, respectively. The Company’s grain storage and protein production systems Europe/Middle East reporting unit operates within the Europe/Middle East geographical reportable segment. The Chinese harvesting business operates within the Asia/Pacific/Africa geographical reportable segment and the former sprayer reporting unit operates within the North American geographical reportable segment. Changes in the carrying amount of goodwill during the years ended December 31, 2022, 2021 and 2020 are summarized as follows (in millions):
| North America |  | South America |  | Europe/ Middle East |  | Asia/ Pacific/Africa |  | Consolidated
Balance as of December 31, 2019 | $ | 606.0 |  |  | $ | 112.2 |  |  | $ | 463.3 |  |  | $ | 116.8 |  |  | $ | 1,298.3 |
Acquisitions | 7.2 |  |  | — |  |  | — |  |  | — |  |  | 7.2 |
Impairment charge | (20.0) |  |  | — |  |  | — |  |  | — |  |  | (20.0) |
Foreign currency translation | 0.2 |  |  | (24.7) |  |  | 38.0 |  |  | 7.5 |  |  | 21.0 |
Balance as of December 31, 2020 | 593.4 |  |  | 87.5 |  |  | 501.3 |  |  | 124.3 |  |  | 1,306.5 |
Acquisition | 16.2 |  |  | — |  |  | 0.6 |  |  | — |  |  | 16.8 |
Foreign currency translation | — |  |  | (5.8) |  |  | (32.4) |  |  | (4.3) |  |  | (42.5) |
Balance as of December 31, 2021 | 609.6 |  |  | 81.7 |  |  | 469.5 |  |  | 120.0 |  |  | 1,280.8 |
Acquisitions | 59.8 |  |  | — |  |  | — |  |  | — |  |  | 59.8 |
Foreign currency translation | (2.1) |  |  | 4.3 |  |  | (25.2) |  |  | (6.8) |  |  | (29.8) |
Balance as of December 31, 2022 | $ | 667.3 |  |  | $ | 86.0 |  |  | $ | 444.3 |  |  | $ | 113.2 |  |  | $ | 1,310.8 |
The Company amortizes certain acquired identifiable intangible assets primarily on a straight-line basis over their estimated useful lives, which range from four to 50 years. External-use software, which is or will be marketed for sale, was approximately $3.4 million as of December 31, 2022 and classified within “Intangible assets, net.” Amortization of external-use software has not started as the product is still being developed. The acquired intangible assets have a weighted average useful life as follows:
Intangible Assets |  | Weighted-Average Useful Life
Patents and technology |  | 11 years
Customer relationships |  | 13 years
Trademarks and trade names |  | 19 years
Land use rights |  | 46 years
For the years ended December 31, 2022, 2021 and 2020, acquired intangible asset amortization was $60.1 million, $60.9 million and $59.5 million, respectively. The Company estimates amortization of existing intangible assets will be $56.3 million in 2023, $55.1 million in 2024, $51.2 million in 2025, $22.8 million in 2026, and $18.7 million in 2027. The Company has previously determined that two of its trademarks have an indefinite useful life. The Massey Ferguson trademark has been in existence since 1952 and was formed from the merger of Massey-Harris (established in the 1890’s) and Ferguson (established in the 1930’s). The Massey Ferguson brand is currently sold in approximately 110 countries worldwide, making it one of the most widely sold tractor brands in the world. The Company also has identified the Valtra trademark as an indefinite-lived asset. The Valtra trademark has been in existence since the late 1990’s, but is a derivative of the Valmet trademark which has been in existence since 1951. The Valmet name transitioned to the Valtra name over a period of time in the marketplace. The Valtra brand is currently sold in approximately 60 countries around the world. Both the Massey Ferguson brand and the Valtra brand are primary product lines of the Company’s business, and the Company plans to use these trademarks for an indefinite period of time. The Company plans to continue to make investments in product development to enhance the value of these brands into the future. There are no legal, regulatory, contractual, competitive, economic or other factors that the Company is aware of or that the Company believes would limit the useful lives of the trademarks. The Massey Ferguson and Valtra trademark registrations can be renewed at a nominal cost in the countries in which the Company operates. Changes in the carrying amount of acquired intangible assets during 2022 and 2021 are summarized as follows (in millions):
Gross Carrying Amounts | Trademarks and Trade Names |  | Customer Relationships |  | Patents and Technology |  | Land Use Rights |  | Total
Gross carrying amounts: |  |  |  |  |  |  |  |  |
Balance as of December 31, 2020 | $ | 195.1 |  |  | $ | 580.6 |  |  | $ | 157.2 |  |  | $ | 6.8 |  |  | $ | 939.7 |
Acquisitions | 0.7 |  |  | 3.2 |  |  | 6.1 |  |  | — |  |  | 10.0 |
Sale of business | (1.3) |  |  | (4.4) |  |  | (17.1) |  |  | — |  |  | (22.8) |
Foreign currency translation | (5.5) |  |  | (10.8) |  |  | (6.3) |  |  | 0.2 |  |  | (22.4) |
Balance as of December 31, 2021 | 189.0 |  |  | 568.6 |  |  | 139.9 |  |  | 7.0 |  |  | 904.5 |
Acquisitions | 7.1 |  |  | 15.4 |  |  | 15.4 |  |  | — |  |  | 37.9 |
Foreign currency translation | (4.3) |  |  | (9.5) |  |  | (4.7) |  |  | (0.5) |  |  | (19.0) |
Balance as of December 31, 2022 | $ | 191.8 |  |  | $ | 574.5 |  |  | $ | 150.6 |  |  | $ | 6.5 |  |  | $ | 923.4 |
Accumulated Amortization | Trademarks and Trade Names |  | Customer Relationships |  | Patents and Technology |  | Land Use Rights |  | Total
Accumulated amortization: |  |  |  |  |  |  |  |  |
Balance as of December 31, 2020 | $ | 85.3 |  |  | $ | 384.7 |  |  | $ | 102.4 |  |  | $ | 1.1 |  |  | $ | 573.5 |
Amortization expense | 10.8 |  |  | 37.4 |  |  | 12.5 |  |  | 0.2 |  |  | 60.9 |
Sale of business | (1.3) |  |  | (4.4) |  |  | (15.2) |  |  | — |  |  | (20.9) |
Foreign currency translation | (1.7) |  |  | (8.0) |  |  | (5.0) |  |  | 0.2 |  |  | (14.5) |
Balance as of December 31, 2021 | 93.1 |  |  | 409.7 |  |  | 94.7 |  |  | 1.5 |  |  | 599.0 |
Amortization expense | 11.7 |  |  | 37.9 |  |  | 10.4 |  |  | 0.1 |  |  | 60.1 |
Foreign currency translation | (1.5) |  |  | (6.8) |  |  | (3.6) |  |  | — |  |  | (11.9) |
Balance as of December 31, 2022 | $ | 103.3 |  |  | $ | 440.8 |  |  | $ | 101.5 |  |  | $ | 1.6 |  |  | $ | 647.2 |
Indefinite-Lived Intangible Assets |  | Trademarks and Trade Names
Balance as of December 31, 2020 |  | $ | 89.4 |
Foreign currency translation |  | (2.7) |
Balance as of December 31, 2021 |  | 86.7 |
Foreign currency translation |  | (1.9) |
Balance as of December 31, 2022 |  | $ | 84.8 |
During the years ended December 31, 2022 and December 31, 2021, the Company acquired approximately $2.0 million and $16.3 million, respectively, of functional intellectual property licenses associated with various component technology related to the Company’s products. The Company is amortizing these licenses over a period of five years, and recorded amortization expense of approximately $3.0 million during 2022 within “Engineering expenses” and $0.2 million during 2021 within “Amortization of intangibles” in the Company's Consolidated Statements of Operations, resulting in a remaining unamortized amount of approximately $15.1 million as of December 31, 2022, reflected within “Other assets” in the Company's Consolidated Balance Sheets. Accrued Expenses Accrued expenses at December 31, 2022 and 2021 consisted of the following (in millions):
| 2022 |  | 2021
Reserve for volume discounts and sales incentives | $ | 630.8 |  |  | $ | 602.3 |
Warranty reserves | 546.0 |  |  | 492.7 |
Accrued employee compensation and benefits | 390.2 |  |  | 322.3 |
Accrued taxes | 344.8 |  |  | 282.5 |
Other | 359.5 |  |  | 362.4 |
Balance at the end of the year | $ | 2,271.3 |  |  | $ | 2,062.2 |
Warranty Reserves The warranty reserve activity for the years ended December 31, 2022, 2021 and 2020 consisted of the following (in millions):
| 2022 |  | 2021 |  | 2020
Balance at beginning of the year | $ | 592.5 |  |  | $ | 521.8 |  |  | $ | 392.8 |
Acquisitions | — |  |  | — |  |  | 0.2 |
Accruals for warranties issued during the year | 338.8 |  |  | 344.9 |  |  | 310.2 |
Settlements made (in cash or in kind) during the year | (261.7) |  |  | (241.8) |  |  | (204.3) |
Foreign currency translation | (29.6) |  |  | (32.4) |  |  | 22.9 |
Balance at the end of the year | $ | 640.0 |  |  | $ | 592.5 |  |  | $ | 521.8 |
The Company’s agricultural equipment products generally are under warranty against defects in materials and workmanship for a period of one to four years. The Company accrues for future warranty costs at the time of sale based on historical warranty experience. Approximately $94.0 million and $99.8 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively. The Company recognizes recoveries of the costs associated with warranties it provides when the collection is probable. When specifics of the recovery have been agreed upon with the Company’s suppliers through confirmation of liability for the recovery, the Company records the recovery within “Accounts and notes receivable, net.” Estimates of the amount of warranty claim recoveries to be received from the Company’s suppliers based upon contractual supplier arrangements are recorded within “Other current assets.” Insurance Reserves Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected losses primarily related to workers’ compensation and comprehensive general liability, product and vehicle liability. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Revenue The Company accounts for revenue recognition pursuant to ASU 2014-09, “Revenue from Contracts with Customers.” Revenue is recognized when the Company satisfies the performance obligation by transferring control over goods or services to a dealer, distributor or other customer. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those goods or services pursuant to a contract with the customer. A contract exists once the Company receives and accepts a purchase order under a dealer sales agreement, or once the Company enters into a contract with an end user. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generates revenue from the manufacture and distribution of agricultural equipment and replacement parts. Sales of equipment and replacement parts, which represents a majority of the Company’s net sales, are recorded by the Company at the point in time when title and control have been transferred to an independent dealer, distributor or other customer. Title generally passes to the dealer or distributor upon shipment or specified delivery, and the risk of loss upon damage, theft or destruction of the equipment is the responsibility of the dealer, distributor or designated third-party carrier. The Company believes control passes and the performance obligation is satisfied at the point of the stated shipping or delivery term with respect to such sales. As previously discussed, the amount of consideration the Company receives and the revenue recognized varies with certain sales incentives the Company offers to dealers and distributors. Estimates for sales incentives are made at the time of sale for expected incentive programs using the expected value method. These estimates are revised in the event of subsequent modification to the incentive program. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. Dealers or distributors may not return equipment or replacement parts while their contract with the Company is in force, except for under established promotional and annual replacement parts return programs. At the time of sale, the Company estimates the amount of returns based on the terms of promotional and annual return programs and anticipated returns in the future. Sales and other related taxes are excluded from the transaction price. Shipping and handling costs associated with freight activities after the customer has obtained control are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized in “Cost of goods sold” and “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Operations. As afforded under the practical expedient in ASU 2014-09, the Company does not adjust the amount of revenue to be recognized under a contract with a dealer, distributor or other customer for the time value of money when the difference between the receipt of payment and the recognition of revenue is less than one year. Although, substantially all revenue is recognized at a point in time, a relatively insignificant amount of installation revenue associated with the sale of grain storage and protein production systems is recognized on an “over time” basis as discussed below. The Company also recognizes revenue “over time” with respect to extended warranty and maintenance contracts and certain precision technology services. Generally, almost all of the grain storage and protein production systems contracts with customers that relate to “over time” revenue recognition have contract durations of less than 12 months. Extended warranty, maintenance services contracts and certain precision technology services generally have contract durations of more than 12 months. Grain Storage and Protein Production Systems Installation Revenue. In certain countries, the Company sells grain storage and protein production systems where the Company is responsible for construction and installation, and the sale is contingent upon customer acceptance. Under these conditions, the revenues are recognized over the term of the contract when the Company can objectively determine control has been transferred to the customer in accordance with agreed-upon specifications in the contract. For these contracts, the Company may be entitled to receive an advance payment, which is recognized as a contract liability for the amount in excess of the revenue recognized. The Company uses the input method using costs incurred to date relative to total estimated costs at completion to measure the progress toward satisfaction of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs include labor, material and overhead. The estimation of the progress toward completion is subject to various assumptions. As part of the estimation process, the Company reviews the length of time to complete the performance obligation, the cost of materials and labor productivity. If a significant change in one of the assumptions occurs, then the Company will recognize an adjustment under the cumulative catch-up method and the impact of the adjustment on the revenue recorded to date is recognized in the period the adjustment is identified. Extended Warranty Contracts. The Company sells separately priced extended warranty contracts and maintenance contracts, which extends coverage beyond the base warranty period, or covers maintenance over a specified period. Revenue is recognized for the extended warranty contract on a straight-line basis, which the Company believes approximates the costs expected to be incurred in satisfying the obligations, over the extended warranty period. The extended warranty period ranges from one to five years. Payment is received or revenue is deferred for free contracts at the inception of the extended warranty contract or maintenance contract, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of extended warranty contracts is not significant. Precision Technology Services Revenue. The Company sells a combination of precision technology products and services. When the bundled package of technology products and services is sold, the portion of the consideration received related to the services component is recognized over time as the Company satisfies the future performance obligation. Revenue is recognized for the hardware component when control is transferred to the dealer or distributor. Payment is received or revenue is deferred for free subscriptions at inception of the precision technology subscription period, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of precision technology services is not significant. The costs of the software directly associated with the installation and functionality of precision technology products and services, including amortization and hosting costs, are reflected within “Cost of goods sold” and “Engineering expenses” within the Company’s Consolidated Statements of Operations. See Note 16 for additional information regarding the Company’s sources of revenue and associated contract liabilities and performance obligations. Stock Incentive Plans Stock compensation expense was recorded as follows (in millions). Refer to Note 10 for additional information regarding the Company’s stock incentive plans during 2022, 2021 and 2020:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Cost of goods sold | $ | 1.3 |  |  | $ | 1.0 |  |  | $ | 1.1 |
Selling, general and administrative expenses | 32.7 |  |  | 26.6 |  |  | 36.8 |
Total stock compensation expense | $ | 34.0 |  |  | $ | 27.6 |  |  | $ | 37.9 |
The Company recognizes the effect of award forfeitures as an adjustment to stock compensation expense in the period in which the forfeiture occurs. Research and Development Expenses Research and development expenses are expensed as incurred and are included in “Engineering expenses” in the Company’s Consolidated Statements of Operations. Advertising Costs The Company expenses all advertising costs as incurred. Cooperative advertising costs normally are expensed at the time the revenue is earned. Advertising expenses for the years ended December 31, 2022, 2021 and 2020 totaled approximately $50.9 million, $54.2 million and $45.3 million, respectively. Shipping and Handling Expenses All shipping and handling fees charged to customers are included as a component of net sales, and are associated with freight activities after the customer has obtained control. Shipping and handling costs are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized within “Cost of goods sold,” with the exception of certain handling costs included in “Selling, general and administrative expenses” in the amount of $48.4 million, $43.6 million and $38.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Interest Expense, Net Interest expense, net for the years ended December 31, 2022, 2021 and 2020 consisted of the following (in millions):
| 2022 |  | 2021 |  | 2020
Interest expense | $ | 46.0 |  |  | $ | 25.4 |  |  | $ | 24.9 |
Interest income | (33.0) |  |  | (18.7) |  |  | (9.9) |
| $ | 13.0 |  |  | $ | 6.7 |  |  | $ | 15.0 |
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. See Note 6 for additional information regarding the Company’s income taxes. Net Income Per Common Share Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per common share assumes the exercise of outstanding stock-settled stock appreciation rights (“SSARs”) and the vesting of performance share awards and restricted stock units using the treasury stock method when the effects of such assumptions are dilutive. A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share during the years ended December 31, 2022, 2021 and 2020 is as follows (in millions, except per share data):
| 2022 |  | 2021 |  | 2020
Basic net income per share: |  |  |  |  |
Net income attributable to AGCO Corporation and subsidiaries | $ | 889.6 |  |  | $ | 897.0 |  |  | $ | 427.1 |
Weighted average number of common shares outstanding | 74.6 |  |  | 75.2 |  |  | 75.0 |
Basic net income per share attributable to AGCO Corporation and subsidiaries | $ | 11.92 |  |  | $ | 11.93 |  |  | $ | 5.69 |
Diluted net income per share: |  |  |  |  |
Net income attributable to AGCO Corporation and subsidiaries | $ | 889.6 |  |  | $ | 897.0 |  |  | $ | 427.1 |
Weighted average number of common shares outstanding | 74.6 |  |  | 75.2 |  |  | 75.0 |
Dilutive SSARs, performance share awards and restricted stock units | 0.3 |  |  | 0.5 |  |  | 0.6 |
Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share | 74.9 |  |  | 75.7 |  |  | 75.6 |
Diluted net income per share attributable to AGCO Corporation and subsidiaries | $ | 11.87 |  |  | $ | 11.85 |  |  | $ | 5.65 |
Comprehensive Income (Loss) The Company reports comprehensive income (loss), defined as the total of net income (loss) and all other non-owner changes in equity, and the components thereof in its Consolidated Statements of Stockholders’ Equity and Consolidated Statements of Comprehensive Income. The components of other comprehensive income (loss) and the related tax effects for the years ended December 31, 2022, 2021 and 2020 are as follows (in millions):
| AGCO Corporation and Subsidiaries |  | Noncontrolling Interests
| 2022 |  | 2022
| Before-tax Amount |  | Income Taxes |  | After-tax Amount |  | After-tax Amount
Defined benefit pension plans | $ | (2.0) |  |  | $ | 1.2 |  |  | $ | (0.8) |  |  | $ | — |
Net loss on derivatives | (0.5) |  |  | — |  |  | (0.5) |  |  | — |
Foreign currency translation adjustments | (30.9) |  |  | — |  |  | (30.9) |  |  | 0.9 |
Total components of other comprehensive income | $ | (33.4) |  |  | $ | 1.2 |  |  | $ | (32.2) |  |  | $ | 0.9 |
| AGCO Corporation and Subsidiaries |  | Noncontrolling Interests
| 2021 |  | 2021
| Before-tax Amount |  | Income Taxes |  | After-tax Amount |  | After-tax Amount
Defined benefit pension plans | $ | 110.1 |  |  | $ | (27.2) |  |  | $ | 82.9 |  |  | $ | — |
Net gain on derivatives | 2.5 |  |  | (0.4) |  |  | 2.1 |  |  | — |
Foreign currency translation adjustments | (45.1) |  |  | — |  |  | (45.1) |  |  | (0.4) |
Total components of other comprehensive income | $ | 67.5 |  |  | $ | (27.6) |  |  | $ | 39.9 |  |  | $ | (0.4) |
| AGCO Corporation and Subsidiaries |  | Noncontrolling Interests
| 2020 |  | 2020
| Before-tax Amount |  | Income Taxes |  | After-tax Amount |  | After-tax Amount
Defined benefit pension plans | $ | (19.3) |  |  | $ | 2.4 |  |  | $ | (16.9) |  |  | $ | — |
Net loss on derivatives | (1.5) |  |  | 0.3 |  |  | (1.2) |  |  | — |
Foreign currency translation adjustments | (197.5) |  |  | — |  |  | (197.5) |  |  | (4.3) |
Total components of other comprehensive loss | $ | (218.3) |  |  | $ | 2.7 |  |  | $ | (215.6) |  |  | $ | (4.3) |
Derivatives The Company uses foreign currency contracts to hedge the foreign currency exposure of certain receivables and payables. The contracts are for periods consistent with the exposure being hedged and generally have maturities of one year or less. These contracts are classified as non-designated derivative instruments. The Company also enters into foreign currency contracts designated as cash flow hedges of expected sales. The Company’s foreign currency contracts mitigate risk due to exchange rate fluctuations because gains and losses on these contracts generally offset losses and gains on the exposure being hedged. The notional amounts of the foreign currency contracts do not represent amounts exchanged by the parties and, therefore, are not a measure of the Company’s risk. The amounts exchanged are calculated on the basis of the notional amounts and other terms of the contracts. The credit and market risks under these contracts are not considered to be significant. The Company’s interest expense is, in part, sensitive to the general level of interest rates, and the Company manages its exposure to interest rate risk through the mix of floating rate and fixed rate debt. From time to time, the Company enters into interest rate swap agreements in order to manage the Company’s exposure to interest rate fluctuations. The Company uses non-derivative and, periodically, derivative instruments to hedge a portion of the Company’s net investment in foreign operations against adverse movements in exchange rates. The Company’s gross profit is sensitive to the cost of steel and other raw materials. From time to time, the Company enters into derivative instruments to hedge a portion of its commodity purchases against adverse movements in commodity prices. The Company’s hedging policy prohibits it from entering into any foreign currency contracts for speculative trading purposes. See Note 11 for additional information regarding the Company’s derivative instruments and hedging activities. Recent Accounting Pronouncements In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance,” which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance was effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company receives government assistance generally in the form of research and development grants and employee payroll assistance, among others. The Company’s policy is to account for government assistance using guidance analogous to government grants found in International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. The Company has adopted this guidance and the adoption did not have a material impact on the Company’s results of operations, financial condition and cash flows and was deemed not material for annual disclosure as of December 31, 2022. New Accounting Pronouncements to be Adopted In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected versus incurred credit losses for financial assets. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which delays the effective date of ASU 2016-13 for smaller reporting companies and other non-SEC reporting entities. This applies to the Company’s equity method finance joint ventures, which are now required to adopt ASU 2016-13 for annual periods beginning after December 15, 2022 and interim periods within those annual periods. The standard, and its subsequent modification, impacts the results of operations and financial condition of the Company’s finance joint ventures. As such, adoption of the standard by the Company’s finance joint ventures on January 1, 2023 impacted the Company’s “Investments in affiliates” and “Retained earnings” by an immaterial amount. In September 2022, the FASB issued ASU 2022-04, “Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The new standard requires that a buyer in a supplier finance program disclose sufficient information about the key terms of the program, the amount of outstanding confirmed obligations at period end, where the obligations are presented in the balance sheet, and a rollforward of the obligations during the annual period. This guidance will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the rollforward, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The adoption of ASU 2022-04 will result in disclosure of the Company’s supplier financing programs. The Company has adopted ASU 2021-08, “Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” effective for fiscal years beginning after December 15, 2022, which did not have a material impact on the Company’s results of operations, financial condition or cash flows but is dependent on future acquisitions.

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