Accounting and Reporting Developments

Recently Adopted Accounting Standards

Statement of Cash Flows

In August 2016, the FASB issued new guidance related to the classification of certain cash receipts and payments on the statement of cash flows. Under the new guidance, premiums paid for debt extinguishments are classified as cash outflows from financing activities. In addition, beneficial interests obtained in a securitization of financial assets are disclosed as a noncash activity and cash receipts from the beneficial interests are classified as cash inflows from investing activities. Under previous guidance, the Company classified cash receipts from beneficial interests in securitized receivables and premiums paid for debt extinguishments as cash flows from operating activities. The Company adopted this guidance on January 1, 2018 and recast prior period amounts to conform to the current year presentation. For the period ended September 30, 2017, the Company reclassified $758 from net cash used for operating activities to net cash provided by investing activities. Additionally, for the nine months ended September 30, 2018 and 2017, beneficial interests obtained in securitized receivables were $456 and $817.

In November 2016, new accounting guidance was issued that requires the statement of cash flows to explain the change in the total of cash, cash equivalents and restricted cash. In addition, restricted cash is included in a cash reconciliation of beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted this guidance on January 1, 2018 and recast prior period amounts to conform to the current year presentation.

Cash, cash equivalents and restricted cash included in the Company's Consolidated Balance Sheets were as follows:



	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	298	$	424
Restricted cash included in prepaid expenses and other current assets	48		2
Restricted cash included in other non-current assets	8		9
Total cash, cash equivalents and restricted cash	$	354	$	435



	September 30, 2017		December 31, 2016
Cash and cash equivalents	$	374	$	559
Restricted cash included in prepaid expenses and other current assets	2		8
Restricted cash included in other non-current assets	10		9
Total cash, cash equivalents and restricted cash	$	386	$	576

Amounts included in restricted cash primarily represent amounts required to be set aside by certain of the Company's receivables securitization agreements.

Pension and other postretirement benefit costs

In March 2017, the FASB issued new guidance on the presentation of pension and other postretirement benefit costs. Under the new guidance, only the service cost component of pension and other postretirement benefit costs is presented with other employee compensation costs within income from operations or capitalized in assets. The other components are reported separately outside of income from operations and are not eligible for capitalization. The Company adopted this guidance on January 1, 2018 and recast prior period amounts to conform to the current year presentation.

The Company reclassified the following net (benefits) charges on the Statement of Operations for the three and nine months ended September 30, 2017 to conform to current year presentation:



	Three Months Ended			Nine Months Ended
	September 30, 2017			September 30, 2017
Cost of products sold, excluding depreciation and amortization	$	(16	)	$	(41	)
Selling and administrative expense	1			2
Restructuring and other	(4		)	(4		)
Other pension and postretirement	(19		)	(43		)

Revenue recognition

In May 2014, the FASB issued new guidance which outlined a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. Under previous guidance, the Company generally recognized revenue upon shipment or delivery. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services which is either at a point in time or over time. In addition to accelerating the timing of revenue recognition, an unbilled receivable is recognized with an offsetting decrease to inventory. The new guidance will not have a material impact on the Company's annual income from operations but could impact income from operations in certain quarters as the Company may recognize revenue from certain products as it builds inventory in anticipation of seasonal demands.

On January 1, 2018, the Company adopted the new revenue standard using the modified retrospective method applied to those contracts which were outstanding as of January 1, 2018. The Company recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with accounting standards in effect for those periods.

The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet as of January 1, 2018 for the adoption of the new revenue standard was as follows:



	As reported					As revised
	December 31, 2017		Adjustment			January 1, 2018
Receivables, net	$	1,041	$	154		$	1,195
Inventories	1,385		(144		)	1,241
Prepaid and other current assets	224		26			250
Total current assets	3,074		36			3,110
Other non-current assets	832		1			833
Total assets	10,663		37			10,700
Accrued liabilities	757		17			774
Total current liabilities	3,250		17			3,267
Other non-current liabilities	685		10			695
Noncontrolling interests	322		1			323
Accumulated earnings	3,004		9			3,013
Crown Holdings shareholders' equity	601		9			610
Total equity	923		10			933
Total liabilities and equity	10,663		37			10,700

The impact of adoption on the Company’s Consolidated Balance Sheet as of September 30, 2018 and Statements of Operations for the three and nine months ended September 30, 2018 was as follows:



	As reported					Balances without adoption of new standard
Consolidated Balance Sheet	September 30, 2018		Effects of change			Balances without adoption of new standard
Receivables, net	$	1,968	$	(226	)	$	1,742
Inventories	1,639		199			1,838
Prepaid and other current assets	193		(28		)	165
Total current assets	4,098		(55		)	4,043
Other non-current assets	762		2			764
Total assets	15,335		(53		)	15,282
Accrued liabilities	952		(24		)	928
Total current liabilities	3,601		(24		)	3,577
Other non-current liabilities	880		(11		)	869
Noncontrolling interests	369		(2		)	367
Accumulated earnings	3,396		(16		)	3,380
Crown Holdings shareholders' equity	941		(16		)	925
Total equity	1,310		(18		)	1,292
Total liabilities and equity	15,335		(53		)	15,282



	As reported For the three months ended
	As reported For the three months ended			Effects of change			Balances without adoption of new standard
Statement of Operations	September 30, 2018			Effects of change			Balances without adoption of new standard
Net sales	$	3,174		$	(6	)	$	3,168
Cost of products sold, excluding depreciation and amortization	2,530			(6		)	2,524
Income from operations	365			—			365
Foreign exchange	(14		)	(1		)	(15		)
Income before income taxes	293			1			294
Provision for income taxes	102			—			102
Net income	193			1			194
Net income attributable to Crown Holdings	164			1			165
Earnings per common share attributable to Crown Holdings:
Basic	$	1.23		$	0.01		$	1.24
Diluted	$	1.23		$	—		$	1.23



	As reported For the nine months ended
	As reported For the nine months ended		Effects of change			Balances without adoption of new standard
Statement of Operations	September 30, 2018		Effects of change			Balances without adoption of new standard
Net sales	$	8,417	$	(83	)	$	8,334
Cost of products sold, excluding depreciation and amortization	6,804		(69		)	6,735
Income from operations	878		(14		)	864
Foreign exchange	14		(4		)	10
Income before taxes	646		(10		)	636
Provision for income taxes	196		(3		)	193
Net income	453		(7		)	446
Net income attributable to Crown Holdings	386		(7		)	379
Earnings per common share attributable to Crown Holdings:
Basic	$	2.89	$	(0.05	)	$	2.84
Diluted	$	2.88	$	(0.05	)	$	2.83

Hedge Accounting

In August 2017, the FASB issued new guidance on hedge accounting. The new guidance allows contractually-specified price components of a commodity purchase or sale to be eligible for hedge accounting. Additionally, the new standard permits qualitative effectiveness assessments for certain hedges after the initial hedge qualification analysis. The Company adopted this guidance on January 1, 2018 using the modified retrospective approach. Upon adoption, the Company reclassified a net charge of $3 for the cumulative ineffectiveness of these contracts from retained earnings to accumulated other comprehensive income as a cumulative-effect adjustment.

Intercompany transfers

In October 2016, the FASB issued new guidance related to intercompany transfers of assets other than inventory. Under previous guidance, income tax expense associated with intercompany profits in an intercompany sale or transfer of assets was deferred until the assets left the consolidated group. Similarly, deferred tax assets were not recognized for any increase in tax bases due to the intercompany sale or transfer. The new guidance allows for the recognition of income tax expense and deferred tax benefits on increases in tax bases when an intercompany sale or transfer occurs. Income tax effects of intercompany inventory transactions continue to be deferred until the assets leave the consolidated group. The guidance was effective for the Company on January 1, 2018 and did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

In February 2016, the FASB issued new guidance on lease accounting. Under the new guidance, lease classification criteria and income statement recognition are similar to current guidance; however, all leases with a term longer than one year will be recorded on the balance sheet through a right-of-use asset and a corresponding lease liability. The Company will adopt the guidance on a modified retrospective basis on January 1, 2019. The guidance is not expected to have a material impact on the Company's consolidated statement of operations or cash flows but is expected to have a material impact on its statement of financial position.