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Recent Accounting Guidance Recent Accounting Guidance (Policies) | 6 Months Ended
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Jun. 30, 2018
Accounting Policies [Abstract] |
Recent Accounting Guidance | RECENT ACCOUNTING GUIDANCE Recently Adopted Accounting Guidance In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) which was further updated in March, April, May and December 2016, as well as September and November 2017. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard resulted in additional disclosure requirements to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard permits the use of either the retrospective or modified retrospective (cumulative-effect) transition method of adoption. The company adopted this standard in the first quarter of 2018 and applied the modified retrospective transition method to contracts not completed at the date of initial application. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under Topic 605 (Revenue Recognition). The company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of retained earnings in the beginning of 2018. See Note 5 for additional disclosures regarding the company's contracts with customers. In accordance with Topic 606, the disclosure of the impact of adoption to the company's Consolidated Balance Sheet was as follows:
(In millions, except per share amounts) | As Reported December 31, 2017 | Effect of Adoption of ASU 2014-09 | Updated January 1, 2018
Current assets |  |  |
Accounts and notes receivable - net | $ | 5,239 |  | $ | 79 |  | $ | 5,318 |
Inventories | 8,633 |  | (53 | ) | 8,580 |
Other current assets | 981 |  | 101 |  | 1,082 |
Deferred income taxes | $ | 480 |  | $ | 1 |  | $ | 481 |
Liabilities and Equity |  |  |
Current liabilities |  |  |
Accounts payable | $ | 4,831 |  | $ | (3 | ) | $ | 4,828 |
Accrued and other current liabilities | 4,384 |  | 120 |  | 4,504 |
Deferred income tax liabilities | $ | 5,836 |  | $ | 3 |  | $ | 5,839 |
Retained earnings | $ | 175 |  | $ | 8 |  | $ | 183 |
The most significant changes as a result of adopting ASU No. 2014-09 relate to the reclassification of the company's return assets and refund liabilities in the agriculture product line on the interim Condensed Consolidated Balance Sheets. Under previous guidance, the company accrued the amount of expected product returns as a reduction of net sales and a reduction of accounts and notes receivable - net, and the value associated with the products expected to be recovered in inventory along with a corresponding reduction in cost of goods sold. Under Topic 606, the company now separately presents the amount of expected product returns as refund liabilities, included in accrued and other current liabilities, and the products expected to be recovered as return assets, included in other current assets in the consolidated balance sheets. The reclassification of return assets and refund liabilities was $61 million and $119 million, respectively, at January 1, 2018. The effect on the interim Condensed Consolidated Statement of Cash Flows was not material. The following table summarizes the effects of adopting the new accounting standard related to revenue recognition on the company's interim Condensed Consolidated Balance Sheet:
| June 30, 2018
(In millions, except per share amounts) | As Reported | Effect of Change | Balance without Adoption of Topic 606
Current assets |  |  |
Accounts and notes receivable - net | $ | 7,734 |  | $ | (150 | ) | $ | 7,584 |
Inventories | 6,303 |  | 57 |  | 6,360 |
Other current assets | 1,311 |  | (119 | ) | 1,192 |
Deferred income taxes | $ | 361 |  | $ | (1 | ) | $ | 360 |
Liabilities and Equity |  |  |
Current liabilities |  |  |
Accrued and other current liabilities | $ | 3,024 |  | $ | (168 | ) | $ | 2,856 |
Deferred income tax liabilities | $ | 5,424 |  | $ | (11 | ) | $ | 5,413 |
Accumulated deficit | $ | (1,201 | ) | $ | (34 | ) | $ | (1,235 | )
In accordance with Topic 606, the impact of adoption to the company’s interim Consolidated Income Statements primarily related to the accounting for interest income from its customer financing arrangements in the agriculture product line. Under previous guidance, the company recorded the interest income from these arrangements over the financing period within sundry income (expense) - net. Under Topic 606, the company elected the practical expedient and does not adjust the promised amount of consideration for the effects of a significant financing component for contracts where payment terms are one year or less. Accordingly, the entire arrangement consideration is recorded in net sales upon satisfaction of the performance obligation. Performance obligations for these arrangements are generally satisfied during the first half of the fiscal year, consistent with the North America growing season. The following tables summarize the effects of adopting the new accounting standard related to revenue recognition on the company's interim Consolidated Income Statements for the three and six months ended June 30, 2018:
| For the Three Months Ended June 30, 2018 (Successor)
(In millions, except per share amounts) | As Reported | Effect of Change | Balance without Adoption of Topic 606
Net sales | $ | 8,545 |  | $ | (49 | ) | $ | 8,496 |
Sundry income (expense) - net | $ | 194 |  | $ | 31 |  | $ | 225 |
Income from continuing operations before income taxes | $ | 655 |  | $ | (18 | ) | $ | 637 |
Provision for income taxes on continuing operations | $ | 141 |  | $ | (4 | ) | $ | 137 |
Income from continuing operations after income taxes | $ | 514 |  | $ | (14 | ) | $ | 500 |
| For the Six Months Ended June 30, 2018 (Successor)
(In millions, except per share amounts) | As Reported | Effect of Change | Balance without Adoption of Topic 606
Net sales | $ | 15,244 |  | $ | (72 | ) | $ | 15,172 |
Sundry income (expense) - net | $ | 241 |  | $ | 37 |  | $ | 278 |
Income from continuing operations before income taxes | $ | 466 |  | $ | (35 | ) | $ | 431 |
Provision for income taxes on continuing operations | $ | 168 |  | $ | (8 | ) | $ | 160 |
Income from continuing operations after income taxes | $ | 298 |  | $ | (27 | ) | $ | 271 |
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The new guidance makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the company would be required to apply the amendments prospectively as of the earliest date practicable. The company adopted this standard on January 1, 2018 and there was no material impact. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. The new guidance requires that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset is sold to an outside party. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The new guidance requires adoption on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The company adopted this standard on January 1, 2018 and there was no adjustment to retained earnings. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The company adopted this standard on January 1, 2018. See the interim Condensed Consolidated Statement of Cash Flows for the new presentation of restricted cash as well as Note 8 for a reconciliation of cash, cash equivalents and restricted cash (included in other current assets) presented on the interim Condensed Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash presented in the interim Condensed Consolidated Statements of Cash Flows. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The new guidance narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the "set") is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs, as defined by the ASU. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods, and should be applied prospectively. Early adoption is permitted. The company adopted this standard on January 1, 2018 and will apply it prospectively to all applicable transactions after the adoption date. In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires registrants to present the service cost component of net periodic benefit cost in the same income statement line item or items as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Registrants will present the other components of net periodic benefit cost separately from the service cost component; and, the line item or items used in the income statement to present the other components of net periodic benefit cost must be disclosed. The new standard must be adopted retrospectively for the presentation of the service cost component and the other components of net periodic benefit cost in the income statement, and prospectively for the capitalization of the service cost component of net periodic benefit cost in assets. The company adopted this guidance on January 1, 2018, and will record the other components of net periodic benefit cost in sundry income (expense) - net. The following tables summarize the reclassification of those costs from cost of goods sold, research and development expense, and selling, general and administrative expenses to sundry income (expense) - net in the interim Consolidated Income Statements:
Summary of Changes to the interim Consolidated Income Statement | For the Three Months Ended June 30, 2017 (Predecessor)
(in millions) | As Restated for Discontinued Operations | Effect of Change | Updated
Cost of goods sold | $ | 4,021 |  | $ | (58 | ) | $ | 3,963 |
Research and development expense | $ | 402 |  | $ | (15 | ) | $ | 387 |
Selling, general and administrative expenses | $ | 1,287 |  | $ | (31 | ) | $ | 1,256 |
Sundry income (expense) - net | $ | (28 | ) | $ | (104 | ) | $ | (132 | )
Summary of Changes to the interim Consolidated Income Statement | For the Six Months Ended June 30, 2017 (Predecessor)
(in millions) | As Restated for Discontinued Operations | Effect of Change | Updated
Cost of goods sold | $ | 8,230 |  | $ | (115 | ) | $ | 8,115 |
Research and development expense | $ | 786 |  | $ | (31 | ) | $ | 755 |
Selling, general and administrative expenses | $ | 2,508 |  | $ | (62 | ) | $ | 2,446 |
Sundry income (expense) - net | $ | 278 |  | $ | (208 | ) | $ | 70 |
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The new guidance expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged items in the financial statements. For cash flow and net investment hedges existing as of the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year in which an entity adopts. Presentation and disclosure guidance is required to be adopted prospectively. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted in any interim period. All transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The company early adopted the new guidance in the second quarter of 2018, and adoption did not have a material impact on the interim Consolidated Financial Statements. Accounting Guidance Issued But Not Adopted as of June 30, 2018 In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under the new guidance will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability, other than leases that meet the definition of a short-term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new leasing standard will be effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented. The company is working to quantify the impact and anticipates that the adoption of the new standard will result in a material increase in lease-related assets and liabilities in the Consolidated Balance Sheets. The company is the lessee under various agreements for facilities and equipment that are currently accounted for as operating leases. A complete discussion of these leases is included in the company's 2017 Annual Report in Note 14, "Commitments and Contingent Liabilities."

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