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DESCRIPTION Of BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1 — DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business We are an innovator of materials solutions to help our customers succeed, while enabling a sustainable world. Our products include specialty engineered materials, performance fibers, advanced composites, and color and additive solutions. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants, and fluoropolymer and silicone colorants. Headquartered in Avon Lake, Ohio, we have employees at, sales, and manufacturing sites across North America, South America, Europe, the Middle East, Asia, and Africa. We provide value to our customers through our ability to link our knowledge of polymers and materials science with our manufacturing and supply chain to provide value added solutions to designers, assemblers and processors of materials. When used in these notes to the consolidated financial statements, the terms “we,” “us,” “our,” “Avient” and the “Company” mean Avient Corporation and its consolidated subsidiaries. Our operations are reported in two reportable segments: Color, Additives and Inks, and Specialty Engineered Materials. See Note 14, Segment Information, for more information. Accounting Standards Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires additional segment disclosures on an annual and interim basis, including significant segment expenses that are regularly provided to the chief operating decision maker. The Company adopted this standard for the year ended December 31, 2024, and applied retrospective changes to all periods presented in the consolidated financial statements. The adoption of ASU 2023-07 impacted segment disclosures within Note 14, Segment Information. Accounting Standards Not Yet Adopted ASU 2023-09, Income Taxes, provides guidance requiring disaggregated income tax disclosures on an annual basis, including information on the Company's effective tax rate reconciliation and income taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024, and may be applied prospectively or retrospectively. The Company is currently evaluating the standards impacts on its income taxes disclosures. ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures, provides guidance requiring disaggregated disclosure of income statement expenses. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. This guidance may be applied prospectively or retrospectively. The Company is currently evaluating the impacts of adopting this standard to its financial statement disclosures. Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Avient and its subsidiaries. All majority-owned affiliates over which we have control are consolidated. Transactions with related parties, including joint ventures, are in the ordinary course of business. Certain prior year amounts have been adjusted to conform to current year presentation. Use of Estimates Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates. Cash and Cash Equivalents We consider all highly liquid investments purchased with a maturity of less than three months to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. Allowance for Doubtful Accounts We evaluate the collectability of receivables based on a combination of factors, each of which are adjusted if specific circumstances change. We reserve for amounts determined to be uncollectible based on a specific customer’s inability to meet its financial obligation to us. We also record a general reserve based on the age of receivables past due, current conditions and forecasted information, the credit risk of specific customers, economic conditions and historical experience. In estimating the allowance, we take into consideration the existence of credit insurance. Inventories Raw materials and finished goods are carried at lower of cost or net realizable value using either the weighted average cost or the first-in, first-out (FIFO) method. We record reserves for inventory that is damaged, obsolete, excess and slow-moving to Cost of sales. Long-lived Assets Property, plant and equipment is carried at historical cost, net of depreciation and amortization that is computed using the straight-line method over the estimated useful lives of the assets, which generally ranges from 3 to 15 years for machinery and equipment and up to 40 years for buildings. We depreciate certain assets associated with closing manufacturing locations over a shortened life (through the cease-use date). We expense repair and maintenance costs as incurred. We capitalize replacements and improvements that increase the estimated useful life of an asset. We retain fully depreciated assets in property and accumulated depreciation accounts until we remove them from service. We account for operating and finance leases under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842. Finite-lived intangible assets, which consist primarily of customer relationships, patents and technology are amortized over their estimated useful lives. The useful lives range up to 25 years. We assess the recoverability of long-lived assets when events or changes in circumstances indicate that we may not be able to recover the assets’ carrying amount. We measure the recoverability of assets to be held and used by a comparison of the carrying amount of the asset to the expected future undiscounted cash flows associated with the asset. We measure the amount of impairment of long-lived assets as the amount by which the carrying value of the asset exceeds the fair value of the asset, which is generally determined based on projected discounted future cash flows or appraised values. Internal-Use Software and Cloud Computing Arrangements We capitalize costs related to computer software obtained or developed for internal use. Software obtained for internal use has generally been enterprise-level business software that the Company customizes to meet its specific operational needs. Costs incurred in the application development phase are capitalized as Property, Net in the Company’s Consolidated Balance Sheets and are depreciated using the straight-line method over their estimated useful lives. We also enter into certain cloud-based software hosting arrangements. Capitalizable cloud computing arrangement costs are generally consistent with those incurred during the application development stage for internal-use software, however, these costs are capitalized as Other assets in the Company's Consolidated Balance Sheets. As of December 31, 2024, there is $76.4 million capitalized within Other non-current assets. Goodwill and Indefinite Lived Intangible Assets Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. We assess goodwill for impairment on an annual basis or more frequently when events or changes in circumstance indicate that the asset may be impaired. Goodwill is tested for impairment at the reporting unit level. The Company's reporting units are at a level below the Company's reportable operating segments. Goodwill is allocated to the reporting units based on the estimated fair value at the date of acquisition. Our annual measurement date for testing impairment of goodwill and indefinite-lived intangible assets is October 1. The Company may perform a qualitative test to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount in order to determine whether it is necessary to perform a quantitative goodwill impairment test. For our quantitative test, we use an income approach to estimate the fair value of our reporting units. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that is determined based on current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period, including sales growth rates, operating margins, capital expenditures, working capital, discount rates and terminal value growth rates. We validate our estimates of fair value under the income approach by considering the implied control premium and conclude whether the implied control premium is reasonable based on other recent market transactions. Indefinite-lived intangible assets primarily consist of the Dyneema, GLS, ColorMatrix, Gordon Composites, and Fiber-Line trade names. Indefinite-lived intangible assets are tested qualitatively or quantitatively for impairment at least annually as of October 1 to determine whether their fair values exceed their respective carrying amounts, unless events or changes in circumstance indicate that the asset may be impaired prior to the annual test. For our quantitative test, the implied fair value of indefinite-lived intangible assets is determined based on significant unobservable inputs. The fair value of the trade names is calculated using a “relief from royalty” methodology. This approach involves two steps: (1) estimating reasonable royalty rates for the trade name and (2) applying this royalty rate to a net sales stream and discounting the resulting cash flows to determine fair value using a weighted-average cost of capital that is determined based on current market conditions. This fair value is then compared with the carrying value of the trade name. In 2023, the annual goodwill impairment test was performed using a quantitative approach. In 2024, the Company performed a qualitative approach, including assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data and other relevant qualitative factors. These trends and factors were compared to the assumptions used in the 2023 quantitative analysis for each reporting unit. The results of the qualitative assessment did not indicate a need to perform a quantitative analysis. In 2023, the indefinite-lived intangible asset impairment tests were performed using a quantitative approach. In 2024, the Company performed both qualitative and quantitative approaches. The qualitative approach includes assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales, discount rates, other relevant qualitative factors. These trends and factors were compared to the assumptions used in the 2023 quantitative analysis. The quantitative analysis was performed by estimating the fair value of the indefinite-lived trade name using a royalty relief methodology. This analysis includes estimates of future cash flows that are based on the Company's long-term strategic plan and the applicable weighted-average cost of capital used to discount estimated cash flows. Based on the results of our impairment analyses, the Company concluded the fair value of its reporting units and trade names continued to exceed their respective carrying value. Litigation Reserves We accrue for loss contingencies associated with outstanding litigation, claims and assessments for which management has determined it is probable that a loss contingency exists and the amount of loss can be reasonably estimated. We recognize expense associated with professional fees related to litigation claims and assessments as incurred. Refer to Note 11, Commitments and Contingencies, for further information. Derivative Financial Instruments All derivative financial instruments, such as foreign exchange contracts, are recognized in the financial statements and measured at fair value, regardless of the purpose or intent in holding them. We are exposed to changes in foreign currency exchange changes and to changes in cash flows due to changes in our contractually specified interest rates (e.g., SOFR) in the normal course of business. We have established policies and procedures that manage this exposure through the use of financial instruments. By policy, we do not enter into these instruments for trading purposes or speculation. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess at inception whether the financial instruments used in the hedging transaction are highly effective at offsetting changes in either the fair values or cash flows of the underlying exposures. If highly effective, any subsequent test may be done qualitatively. We have executed cross-currency swaps which are documented and designated as net investment hedges of our Euro denominated investment in foreign entities. We pay fixed-rate interest in Euros and receive fixed-rate interest in U.S. dollars related to our future obligations to exchange Euros for U.S. dollars. The interest receivable on the swaps is accrued each month for effective instruments designated as a hedge and is reflected within Interest expense, net within the Consolidated Statements of Income and the remaining change in the fair value of the derivatives is recorded as a component of Accumulated Other Comprehensive Income (Loss) (AOCI). From time to time, we may enter into certain foreign currency exchange forward contracts, which are not designated as hedges and are adjusted to fair value at each period end, with the resulting gains and losses recognized in the accompanying Consolidated Statements of Income immediately. In 2022, we entered into certain foreign currency derivative contracts to mitigate the potential impact of foreign currency exchange rate changes on the purchase price associated with the APM Acquisition, which the Company did not originally designate as hedges. Refer to Note 15, Derivatives and Hedging, for more information. Pension and Other Post-retirement Plans We immediately recognize actuarial gains and losses in our operating results in the year in which the gains or losses occur. Refer to Note 10, Employee Benefit Plans, for more information. Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) in 2024, 2023 and 2022 were as follows:
(In millions) |  | Cumulative Translation Adjustment and Related Hedging Instruments |  | Pension and other post-retirement benefits |  |  |  |  |  | Total
Balance at January 1, 2022 |  | $ | (50.8) |  |  | $ | 5.2 |  |  |  |  |  |  | $ | (45.6) |
Translation Adjustments |  | (60.3) |  |  | — |  |  |  |  |  |  | (60.3) |
Unrealized gains on derivatives |  | 23.9 |  |  | — |  |  |  |  |  |  | 23.9 |
Prior service credit |  | — |  |  | 6.2 |  |  |  |  |  |  | 6.2 |
Balance at December 31, 2022 |  | (87.2) |  |  | 11.4 |  |  |  |  |  |  | (75.8) |
Translation Adjustments |  | 90.9 |  |  | — |  |  |  |  |  |  | 90.9 |
Unrealized losses on derivatives |  | (96.1) |  |  | — |  |  |  |  |  |  | (96.1) |
Amortization of prior service credit |  | — |  |  | (6.4) |  |  |  |  |  |  | (6.4) |
Balance at December 31, 2023 |  | (92.4) |  |  | 5.0 |  |  |  |  |  |  | (87.4) |
Translation Adjustments |  | (167.7) |  |  | — |  |  |  |  |  |  | (167.7) |
Unrealized gains on derivatives |  | 77.3 |  |  | — |  |  |  |  |  |  | 77.3 |
Balance at December 31, 2024 |  | $ | (182.8) |  |  | $ | 5.0 |  |  |  |  |  |  | $ | (177.8) |
Fair Value of Financial Instruments The estimated fair values of financial instruments were principally based on market prices where such prices were available and, where unavailable, fair values were estimated based on market prices of similar instruments. Foreign Currency Translation Revenues and expenses are translated at average currency exchange rates during the related period. Assets and liabilities of foreign subsidiaries are translated using the exchange rate at the end of the reporting period. The resulting translation adjustments are recorded as accumulated other comprehensive income or loss. Gains and losses resulting from foreign currency transactions, including intercompany transactions that are not considered long-term investments, are included in Other income (expense), net. Revenue Recognition We recognize revenue once control of the product is transferred to the customer, which typically occurs when products are shipped from our facilities. Shipping and Handling Costs Shipping and handling costs are included in Cost of sales. Research and Development Expense Research and development costs of $98.7 million in 2024, $90.3 million in 2023 and $84.9 million in 2022 are charged to expense as incurred. Environmental Remediation Costs We expense costs that are associated with managing hazardous substances and pollution in ongoing operations on a current basis. Costs associated with environmental contamination are accrued when it becomes probable that a liability has been incurred and our proportionate share of the cost can be reasonably estimated. Any such provision is recognized using the Company's best estimate of the amount of loss incurred, or at the lower end of an estimated range, when a single best estimate is not determinable. In some cases, the Company recovers a portion of the costs relating to these obligations from insurers or other third parties, and the recovery is recognized when realization of the proceeds is deemed as probable. Share-Based Compensation In accounting for share-based compensation, we estimate the fair value of share-based awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying Consolidated Statements of Income. As of December 31, 2024, we had one active share-based employee compensation plan, which is described more fully in Note 13, Share-Based Compensation. Income Taxes Deferred income tax liabilities and assets are determined based upon the differences between the financial reporting and tax basis of assets and liabilities and are measured using the tax rate and laws currently in effect. We evaluate our deferred income taxes to determine whether a valuation allowance should be established against the deferred tax assets or whether the valuation allowance should be reduced based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. See Note 12, Income Taxes, for additional detail.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
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