Accounting Policies

9 Months Ended

Sep. 30, 2024

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (the “Company,” “Goodyear,” “we,” “us” or “our”) in accordance with Securities and Exchange Commission (“SEC”) rules and regulations and generally accepted accounting principles in the United States of America ("U.S. GAAP") and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2024.

Recently Issued Accounting Standards

On March 6, 2024, the SEC issued final rules that require registrants to enhance and standardize climate-related disclosures in their annual reports beginning with periods ending December 31, 2025. The final rules will require information about climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, a registrant’s business strategy, results of operations or financial condition, the governance of climate-related matters, certain climate-related targets and goals, and certain greenhouse gas emissions. The rules will also require certain financial statement disclosures related to the impact of severe weather events and other natural disasters. On April 4, 2024, the SEC stayed the final rules pending completion of judicial review of several lawsuits challenging the rules that have been consolidated in the U.S. Court of Appeals for the 8th Circuit. We are currently assessing the impact of these rules on our disclosures in both our Annual Report on Form 10-K and the notes to the consolidated financial statements.

Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets with finite lives are amortized over their useful lives and are reviewed for impairment whenever events or circumstances warrant such review. Goodwill and intangible assets are written down to fair value if considered impaired. Goodwill and Intangible Assets totaled $759 million and $814 million, respectively, at September 30, 2024, compared to $781 million and $969 million, respectively, at December 31, 2023. The goodwill associated with reporting units in our Americas and Asia Pacific segments was $715 million and $44 million, respectively, at September 30, 2024, and $724 million and $57 million, respectively, at December 31, 2023.

In the third quarter, we experienced a decline in our market capitalization as a result of a decrease in our stock price. Our stock price has a history of volatility, however, given the decrease was sustained throughout the quarter, we viewed this event as a triggering event and performed a quantitative analysis of the fair value of the North America reporting unit in our Americas segment. We determined the estimated fair value of our North America reporting unit based on discounted cash flow projections. The most critical assumptions used in the calculation of the fair value of our North America reporting unit are the projected revenue, projected operating margin and discount rate. Our forecast of future cash flows is based on our best estimate of projected revenue and projected operating margin, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve Americas' operating margin. Based on our interim impairment test, the North America reporting unit had an estimated fair value that exceeded its carrying value, including goodwill, by approximately 14%.

The fair value of the North America reporting unit’s goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margin and discount rate used to evaluate the fair value of these assets. Although we believe our estimate of fair value is reasonable, the reporting unit’s future financial performance is dependent on our ability to execute our business plan and to successfully implement strategic actions which we expect will improve our long-term operating margin. If a reporting unit’s future financial performance falls below our expectations, there are adverse revisions to significant assumptions, or our market capitalization declines further or does not improve from the strategic actions we are implementing, this could be indicative that the fair values of each of our reporting units has declined below their carrying values, and therefore we may need to record a material, non-cash goodwill impairment charge in a future period.

During the third quarter, we experienced a decline in volumes primarily in our lower tier indefinite-lived intangible assets related to the acquisition of Cooper Tire as a result of increased competition from lower tier imports in the market. We viewed this event as a triggering event and performed a quantitative analysis of the fair value of our indefinite-lived intangible assets related to the acquisition of Cooper Tire as of September 30, 2024. Based on the results of the quantitative impairment assessments, the fair value of the intangible assets was less than the carrying value, resulting in a non-cash impairment charge of $125 million during the third quarter of 2024. We determined the fair value of the indefinite-lived intangible assets using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. The most critical assumptions used in the calculation of the fair value are projected revenue, discount rate and royalty rate. The fair value of the indefinite-lived intangible assets is sensitive to differences between estimated and actual revenue, including changes in the discount rate and royalty rate used to evaluate the fair value of these assets.

At September 30, 2024, after evaluating macroeconomic conditions and our current and future results of operations, we concluded that there were no triggering events and it was not more likely than not that the fair values of goodwill of our reporting unit within our Asia Pacific segment or remaining indefinite-lived intangible assets were less than their respective carrying values and, therefore, did not have any impairment.

Principles of Consolidation

The consolidated financial statements include the accounts of all legal entities in which we hold a controlling financial interest. A controlling financial interest generally arises from our ownership of a majority of the voting shares of our subsidiaries. We would also hold a controlling financial interest in variable interest entities if we are considered to be the primary beneficiary. Investments in companies in which we do not own a majority interest and we have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. Investments in other companies are primarily carried at cost. All intercompany balances and transactions have been eliminated in consolidation.

Assets and Liabilities Held for Sale

Assets and liabilities are classified as held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the assets is probable and expected to be completed within one year, and it is unlikely that significant changes will be made to the plan. When all of these criteria have been met, the assets and liabilities are classified as held for sale in the balance sheet. Assets classified as held for sale are reported at the lower of their carrying value or fair value less costs to sell. Depreciation of assets ceases upon designation as held for sale.

On July 22, 2024, we signed a definitive agreement to sell our off-the-road ("OTR") tire business to The Yokohama Rubber Company, Limited ("Yokohama") for $905 million in cash, subject to certain adjustments. Pursuant to a product supply agreement to be entered into with Yokohama in connection with the closing of the transaction, we will manufacture certain OTR tires for Yokohama at some of our manufacturing facilities for an initial period of up to five years after the closing of the transaction. The closing of the transaction is expected to occur in early 2025 and is subject to regulatory approvals and other customary closing conditions and consultations. At September 30, 2024, assets classified as held for sale of $495 million were included in Assets Held for Sale and liabilities of $56 million were included in Other Current Liabilities in the Consolidated Balance Sheets.

Restricted Cash

The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:


	September 30,
(In millions)	2024		2023
Cash and Cash Equivalents	$	905	$	1,002
Restricted Cash		35		56
Total Cash, Cash Equivalents and Restricted Cash	$	940	$	1,058

Restricted Cash primarily represents amounts required to be set aside for accounts receivable factoring programs. The restrictions lapse when cash from factored accounts receivable is remitted to the purchaser of those receivables. At both September 30, 2024 and 2023, restricted cash was recorded in Prepaid Expenses and Other Current Assets in the Consolidated Balance Sheets.

Reclassifications and Adjustments

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.