| Inventories |
Inventories | | | | | | | | | | | | | | September 30, 2020 | | December 31, 2019 | | Finished goods | $ | 242 | | | $ | 237 | | | Work-in-process | 525 | | | 746 | | | Purchased raw materials | 66 | | | 85 | | | Operating supplies | 68 | | | 69 | | | | $ | 901 | | | $ | 1,137 | |
Effective July 1, 2020, the Company changed its inventory cost method to average cost for all U.S. inventories previously carried at LIFO cost. Management determined that this change in accounting principle is preferable because the average cost method more closely reflects the physical flow of inventories, improves comparability of the Company’s operating results with its industry peers, and provides an increased level of consistency in the measurement of inventories in the Company’s consolidated financial statements. All non-U.S. inventories and a small portion of U.S. inventories were previously, and continue to be, measured using a combination of first in, first out (FIFO) and average cost methods. The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all prior periods presented. This change resulted in an increase to Parent Company net investment of $293 as of January 1, 2019. Additionally, certain financial statement line items in the accompanying Consolidated Balance Sheet as of December 31, 2019 and each of the Statement of Consolidated Operations, Statement of Consolidated Comprehensive Income, and Statement of Consolidated Cash Flows for the 2019 third quarter and nine-month period were recast as follows: | | | | | | | | | | | | | | | | | | | As Previously Reported | | Effect of Change | | As Recast | Statement of Consolidated Operations for the third quarter ended September 30, 2019: | | | | | | | Cost of goods sold | $ | 1,543 | | | $ | 22 | | | $ | 1,565 | | | Operating income | 44 | | | (22) | | | 22 | | | Income (loss) before income taxes | 15 | | | (22) | | | (7) | | | Provision for income taxes | 22 | | | (5) | | | 17 | | | Net loss | (7) | | | (17) | | | (24) | | | Net loss attributable to Arconic Corporation | (7) | | | (17) | | | (24) | | | Earnings per share attributable to Arconic Corporation common shareholders: | | | | | | | Basic | $ | (0.07) | | | $ | (0.15) | | | $ | (0.22) | | | Diluted | (0.07) | | | (0.15) | | | (0.22) | | | | | | | | Statement of Consolidated Operations for the nine months ended September 30, 2019: | | | | | | | Cost of goods sold | $ | 4,810 | | | $ | 39 | | | $ | 4,849 | | | Operating income | 176 | | | (39) | | | 137 | | | Income before income taxes | 94 | | | (39) | | | 55 | | | Provision for income taxes | 55 | | | (9) | | | 46 | | | Net income | 39 | | | (30) | | | 9 | | | Net income attributable to Arconic Corporation | 39 | | | (30) | | | 9 | | | Earnings per share attributable to Arconic Corporation common shareholders: | | | | | | | Basic | $ | 0.35 | | | $ | (0.27) | | | $ | 0.08 | | | Diluted | 0.35 | | | (0.27) | | | 0.08 | |
| | | | | | | | | | | | | | | | | | | As Previously Reported | | Effect of Change | | As Recast | Statement of Consolidated Comprehensive Income for the third quarter ended September 30, 2019: | | | | | | | Comprehensive income | $ | 39 | | | $ | (17) | | | $ | 22 | | | Comprehensive income attributable to Arconic Corporation | 39 | | | (17) | | | 22 | | | | | | | | Statement of Consolidated Comprehensive Income for the nine months ended September 30, 2019: | | | | | | | Comprehensive income | $ | 99 | | | $ | (30) | | | $ | 69 | | | Comprehensive income attributable to Arconic Corporation | 99 | | | (30) | | | 69 | | | | | | | | | Consolidated Balance Sheet as of December 31, 2019: | | | | | | | Inventories | $ | 820 | | | $ | 317 | | | $ | 1,137 | | | Deferred income tax liabilities | 87 | | | 72 | | | 159 | | | Parent Company net investment | 2,419 | | | 245 | | | 2,664 | | | | | | | | | Statement of Consolidated Cash Flows for the nine months ended September 30, 2019: | | | | | | | Net income | $ | 39 | | | $ | (30) | | | $ | 9 | | | Deferred income taxes | 20 | | | (9) | | | 11 | | | (Increase) in inventories | (69) | | | 39 | | | (30) | |
The following table compares the amounts that were reported under average cost in the Consolidated Financial Statements as of and for the quarter and nine months ended September 30, 2020 with the amounts had they continued to be reported under LIFO: | | | | | | | | | | | | | | | | | | | As Reported under
Average Cost | | As Computed under LIFO | | Effect of Change | Statement of Consolidated Operations for the third quarter ended September 30, 2020: | | | | | | | Cost of goods sold | $ | 1,218 | | | $ | 1,232 | | | $ | (14) | | | Operating income | 64 | | | 50 | | | 14 | | | Income before income taxes | 15 | | | 1 | | | 14 | | | Provision for income taxes | 10 | | | 6 | | | 4 | | | Net income (loss) | 5 | | | (5) | | | 10 | | | Net income (loss) attributable to Arconic Corporation | 5 | | | (5) | | | 10 | | | Earnings per share attributable to Arconic Corporation common shareholders: | | | | | | | Basic | $ | 0.05 | | | $ | (0.05) | | | $ | 0.10 | | | Diluted | 0.05 | | | (0.05) | | | 0.10 | | | | | | | | Statement of Consolidated Operations for the nine months ended September 30, 2020: | | | | | | | Cost of goods sold | $ | 3,614 | | | $ | 3,605 | | | $ | 9 | | | Operating income | 126 | | | 135 | | | (9) | | | Loss before income taxes | (40) | | | (31) | | | (9) | | | Provision for income taxes | 5 | | | 6 | | | (1) | |
| | | | | | | | | | | | | | | | | | | As Reported under
Average Cost | | As Computed under LIFO | | Effect of Change | | Net loss | (45) | | | (37) | | | (8) | | | Net loss attributable to Arconic Corporation | (45) | | | (37) | | | (8) | | | Earnings per share attributable to Arconic Corporation common shareholders: | | | | | | | Basic | $ | (0.41) | | | $ | (0.34) | | | $ | (0.07) | | | Diluted | (0.41) | | | (0.34) | | | (0.07) | | | | | | | | Statement of Consolidated Comprehensive Income for the third quarter ended September 30, 2020: | | | | | | | Comprehensive income | $ | 85 | | | $ | 75 | | | $ | 10 | | | Comprehensive income attributable to Arconic Corporation | 85 | | | 75 | | | 10 | | | | | | | | Statement of Consolidated Comprehensive Income for the nine months ended September 30, 2020: | | | | | | | Comprehensive income | $ | 94 | | | $ | 102 | | | $ | (8) | | | Comprehensive income attributable to Arconic Corporation | 94 | | | 102 | | | (8) | | | | | | | | Consolidated Balance Sheet as of September 30, 2020: | | | | | | | Inventories | $ | 901 | | | $ | 591 | | | $ | 310 | | | Deferred income tax assets | 296 | | | 366 | | | (70) | | | Additional capital | 3,332 | | | 3,098 | | | 234 | | | Accumulated deficit | (91) | | | (97) | | | 6 | | | | | | | | Statement of Consolidated Cash Flows for the nine months ended September 30, 2020: | | | | | | | Net loss | $ | (45) | | | $ | (37) | | | $ | (8) | | | Deferred income taxes | 28 | | | 29 | | | (1) | | | Decrease in inventories | 197 | | | 188 | | | 9 | |
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