RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

9 Months Ended

Sep. 30, 2019

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections


Baxter International Inc.
Condensed Consolidated Statement of Changes in Equity
(in millions)
	For the Three Months Ended September 30, 2018
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
As previously reported
Balance as of July 1, 2018	683	$	683	148	$	(8,485)	$	5,916	$	14,966	$	(4,199)	$	8,881	$	(12)	$	8,869
Net income	—	—		—	—		—		544		—		$	544	—		$	544
Other comprehensive income (loss)	—	—		—	—		—		—		(40)		(40)		—		(40)
Purchases of treasury stock	—	—		4	(247)		—		—		—		(247)		—		(247)
Stock issued under employee benefit plans and other	—	—		(2)	93		15		(14)		—		94		—		94
Dividends declared on common stock	—	—		—	—		—		(102)		—		(102)		—		(102)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		(5)		(5)
Balance as of September 30, 2018	683	$	683	150	$	(8,639)	$	5,931	$	15,394	$	(4,239)	$	9,130	$	(17)	$	9,113
Restatement impacts
Balance as of July 1, 2018	—	$	—	—	$	—	$	—	$	(482)	$	443	$	(39)	$	—	$	(39)
Net income	—	—		—	—		—		(26)		—		(26)		—		(26)
Other comprehensive income (loss)	—	—		—	—		—		—		42		42		—		42
Balance as of September 30, 2018	—	$	—	—	$	—	$	—	$	(508)	$	485	$	(23)	$	—	$	(23)
As restated
Balance as of July 1, 2018	683	$	683	148	$	(8,485)	$	5,916	$	14,484	$	(3,756)	$	8,842	$	(12)	$	8,830
Net income	—	—		—	—		—		518		—		518		—		518
Other comprehensive income (loss)	—	—		—	—		—		—		2		2		—		2
Purchases of treasury stock	—	—		4	(247)		—		—		—		(247)		—		(247)
Stock issued under employee benefit plans and other	—	—		(2)	93		15		(14)		—		94		—		94
Dividends declared on common stock	—	—		—	—		—		(102)		—		(102)		—		(102)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		(5)		(5)
Balance as of September 30, 2018	683	$	683	150	$	(8,639)	$	5,931	$	14,886	$	(3,754)	$	9,107	$	(17)	$	9,090


Baxter International Inc.
Condensed Consolidated Statement of Changes in Equity
(in millions)
	For the Nine Months Ended September 30, 2018
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
As previously reported
Balance as of January 1, 2018	683	$	683	142	$	(7,981)	$	5,940	$	14,483	$	(4,001)	$	9,124	$	(8)	$	9,116
Adoption of new accounting standards	—	—		—	—		—		(16)		(3)		$	(19)	—		$	(19)
Net income	—	—		—	—		—		1,276		—		$	1,276	—		$	1,276
Other comprehensive income (loss)	—	—		—	—		—		—		(235)		(235)		—		(235)
Purchases of treasury stock	—	—		15	(1,028)		—		—		—		(1,028)		—		(1,028)
Stock issued under employee benefit plans and other	—	—		(7)	370		(9)		(59)		—		302		—		302
Dividends declared on common stock	—	—		—	—		—		(290)		—		(290)		—		(290)
Other changes in noncontrolling interests	—	—		—	—		—		—		—		—		(9)		(9)
Balance as of September 30, 2018	683	$	683	150	$	(8,639)	$	5,931	$	15,394	$	(4,239)	$	9,130	$	(17)	$	9,113
Restatement impacts
Balance as of January 1, 2018	—	$	—	—	$	—	$	—	$	(469)	$	462	$	(7)	$	—	$	(7)
Adoption of new accounting standards	—	—		—	—		—		(4)		—		(4)		—		(4)
Net income	—	—		—	—		—		(35)		—		(35)		—		(35)
Other comprehensive income (loss)	—	—		—	—		—		—		23		23		—		23
Balance as of September 30, 2018	—	$	—	—	$	—	$	—	$	(508)	$	485	$	(23)	$	—	$	(23)
As restated
Balance as of January 1, 2018	683	$	683	142	$	(7,981)	$	5,940	$	14,014	$	(3,539)	$	9,117	$	(8)	$	9,109
Adoption of new accounting standards	—	—		—	—		—		(20)		(3)		(23)		—		(23)
Net income	—	—		—	—		—		1,241		—		1,241		—		1,241
Other comprehensive income (loss)	—	—		—	—		—		—		(212)		(212)		—		(212)
Purchases of treasury stock	—	—		15	(1,028)		—		—		—		(1,028)		—		(1,028)
Stock issued under employee benefit plans and other	—	—		(7)	370		(9)		(59)		—		302		—		302
Dividends declared on common stock	—	—		—	—		—		(290)		—		(290)		—		(290)
Other changes in noncontrolling interests	—	—		—	—		—		—		—		—		(9)		(9)
Balance as of September 30, 2018	683	$	683	150	$	(8,639)	$	5,931	$	14,886	$	(3,754)	$	9,107	$	(17)	$	9,090

The adjustment to the January 1, 2018 retained earnings and accumulated other comprehensive loss represent the cumulative impacts of foreign exchange gains and losses and the translation of our financial position and results of operations for our foreign operations into U.S. dollars for the periods prior to January 1, 2018. Retained earnings also includes the cumulative impacts of equipment leased to customers under operating leases and other miscellaneous adjustments for the periods prior to January 1, 2018.

See descriptions of the net income and other comprehensive income impacts in the condensed consolidated statement of income and condensed consolidated statement of comprehensive income for the nine months ended September 30, 2018 sections above. Additionally, we recorded an adjustment to the opening balance of retained earnings on January 1, 2018 for the adoption of ASU No. 2016-16, which was impacted by our adjustments to equipment leased to customers under operating leases.


Baxter International Inc.
Condensed Consolidated Statement of Cash Flows
(in millions)

	For the Nine Months Ended September 30, 2018
	As previously reported		Restatement impacts		Restatement reference	As restated
Cash flows from operations
Net income	$	1,276	$	(35)		$	1,241
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	594		(8)		(c)	586
Deferred income taxes	(284)		(7)		(c)(g)	(291)
Stock compensation	87		—			87
Net periodic pension benefit and other postretirement costs	31		—			31
Other	6		17		(d)	23
Changes in balance sheet items:
Accounts receivable, net	(16)		—			(16)
Inventories	(226)		—			(226)
Accounts payable and accrued liabilities	(31)		(1)		(b)	(32)
Other	(96)		1		(e)	(95)
Cash flows from operations	1,341		(33)			1,308
Cash flows from investing activities
Capital expenditures	(468)		15		(c)	(453)
Acquisitions and investments, net of cash acquired	(255)		—			(255)
Other investing activities, net	8		—			8
Cash flows from investing activities	(715)		15			(700)
Cash flows from financing activities
Cash dividends on common stock	(274)		—			(274)
Proceeds from stock issued under employee benefit plans	232		—			232
Purchases of treasury stock	(1,028)		—			(1,028)
Other financing activities, net	(25)		—			(25)
Cash flows from financing activities	(1,095)		—			(1,095)
Effect of foreign exchange rate changes on cash and cash equivalents	(65)		12		(a)(d)(e)	(53)
Increase (decrease) in cash and cash equivalents	(534)		(6)			(540)
Cash and cash equivalents at beginning of period	3,394		9		(e)	3,403
Cash and cash equivalents at end of period	$	2,860	$	3	(e)	$	2,863

The $35 million decrease to net income was driven by the items described above in the condensed consolidated statement of income for the nine months ended September 30, 2018 section.

(a) Foreign Currency Denominated Monetary Assets and Liabilities—The correction of these misstatements resulted in an increase to the effect of foreign exchange rate changes on cash and cash equivalents of $35 million for the nine months ended September 30, 2018.

(b) Foreign Currency Derivative Contracts—The correction of these misstatements resulted in a decrease to changes in accounts payable and accrued liabilities of $1 million for the nine months ended September 30, 2019.

(c) Equipment Leased to Customers under Operating Leases—The correction of these misstatements resulted in decreases to depreciation and amortization of $8 million, deferred income taxes of $2 million and capital expenditures of $15 million for the nine months ended September 30, 2018.

(d) Classification of Foreign Currency Gains and Losses in our Consolidated Statements of Cash Flows - The corrections of these misstatements resulted in a decrease to the effect of foreign exchange rate changes on cash and cash equivalents and an increase to other adjustments to reconcile net income to net cash from operating activities of $17 million for the nine months ended September 30, 2018.

(e) Translation of the Financial Position and Results of Operations of our Foreign Operations into U.S. Dollars - The corrections of these misstatements resulted in an increase in cash and cash equivalents at the beginning of the period of $9 million, at the end of the period of $3 million, and other changes in balance sheet items of $1 million and a decrease to the effect of foreign exchange rate changes on cash and cash equivalents of $6 million for the nine months ended September 30, 2018.

(g) Other miscellaneous adjustments - The correction of these misstatements resulted in a decrease to deferred income taxes of $5 million for the nine months ended September 30, 2018.