REVENUE RECOGNITION

On January 1, 2018, Eastman adopted ASU 2014-09 Revenue Recognition (ASC 606). Under this standard, the Company recognizes revenue when performance obligations of the sale are satisfied. Eastman sells to customers through master sales agreements or standalone purchase orders. The majority of the Company's terms of sale have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when control has been transferred to the customer, generally at the time of shipment of products. Under the previous revenue recognition accounting standard, the Company recognized revenue upon the transfer of title and risk of loss, generally upon delivery of goods. For further information, see Note 1, "Significant Accounting Policies".

The Company's arrangement with a customer may include the act of shipping product to customers after the performance obligation related to that product has been satisfied. The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the good and has not allocated revenue to the shipping activity. All related shipping and handling costs are recognized at the time of shipment. Further, the Company's sales arrangements may include the collection of sales and other similar taxes that are then remitted to the related taxing authority. The Company has elected to present the amounts collected for these taxes net of the related tax expense rather than presenting them as additional revenue.

The Company has elected to adopt several practical expedients as part of the adoption of ASU 2014-09 / ASC 606. The Company has elected the practical expedient to recognize the incremental cost of obtaining a sale (selling expense) as an expense when incurred given the potential amortization period for such asset is one year or less. Further, the Company has elected to use the practical expedient that allows the Company to ignore the possible existence of a significant financing component within sales arrangements where the time between cash collection and performance is less than one year. Finally, the Company has elected the practical expedient to not disclose unfulfilled obligations as customer purchase order commitments have an original expected duration of one year or less and no consideration from customers was excluded from the transaction price.

The timing of billings does not always match the timing of revenue recognition. When the Company is entitled to bill a customer in advance of the recognition of revenue, a contract liability is recognized. When the Company is not entitled to bill a customer until a period after the related recognition of revenue, a contract asset is recognized. Contract assets represent the Company's right to consideration for the exchange of goods under a contract, but which are not yet billable to a customer for consignment inventory or pursuant to certain shipping terms. Contract liabilities were not material as of January 1, 2018 or December 31, 2018. Contract assets were $42 million as of January 1, 2018 and $62 million as of December 31, 2018 and are included as a component of "Miscellaneous receivables" in the Consolidated Statements of Financial Position.

The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary between the Company's business operating segments and the geographical regions in which they serve. For disaggregation of revenue by major product lines and regions for each business operating segment, see Note 19, "Segment Information".

The tables below summarize the impact of adopting the new standard on fourth quarter and full year 2018 financial statements:



	Fourth Quarter 2018							Twelve Months 2018
(Dollars in millions, except per share amounts)	Previous Standard		Change			Current Standard		Previous Standard		Change		Current Standard
Sales	$	2,387	$	(11	)	$	2,376	$	10,108	$	43	$	10,151
Cost of sales	1,909		1			1,910		7,642		30		7,672
Gross profit	478		(12		)	466		2,466		13		2,479
EBIT	147		(12		)	135		1,539		13		1,552
Net earnings attributable to Eastman	44		(10		)	34		1,069		11		1,080

Basic earnings per share attributable to Eastman	$	0.33	$	(0.08	)	$	0.25	$	7.58	$	0.07	$	7.65
Diluted earnings per share attributable to Eastman	$	0.31	$	(0.07	)	$	0.24	$	7.49	$	0.07	$	7.56



	Fourth Quarter 2018									Twelve Months 2018
(Dollars in millions)	Previous Standard			Change			Current Standard			Previous Standard			Change			Current Standard
Additives & Functional Products
Sales	$	853		$	(2	)	$	851		$	3,642		$	5		$	3,647
EBIT	87			(2		)	85			634			5			639
Advanced Materials
Sales	640			(16		)	624			2,741			14			2,755
EBIT	82			(11		)	71			506			3			509
Chemical Intermediates
Sales	682			7			689			2,831			—			2,831
EBIT	41			3			44			312			(4		)	308
Fibers
Sales	212			—			212			894			24			918
EBIT	49			(2		)	47			248			9			257
Other
Sales	—			—			—			—			—			—
EBIT	(112		)	—			(112		)	(161		)	—			(161		)



	As of December 31, 2018
(Dollars in millions)	Previous Standard		Change			Current Standard
Trade receivables, net of allowance for doubtful accounts	$	968	$	186		$	1,154
Miscellaneous receivables	282		47			329
Inventories	1,739		(156		)	1,583
Total current assets	3,288		77			3,365