NOTE 1. BUSINESS OVERVIEW

Fortive Corporation (“Fortive”, the “Company,” “we,” “us,” or “our”) is a diversified industrial growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in advanced instrumentation and solutions, transportation technology, sensing, automation and specialty, and franchise distribution markets. Our businesses design, develop, service, manufacture and market professional and engineered products, software and services for a variety of end markets, building upon leading brand names, innovative technology and significant market positions.

We prepared the unaudited consolidated condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, 2017 and the footnotes (“Notes”) thereto included within our 2017 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of June 29, 2018 and December 31, 2017, and our results of operations and cash flows for the three and six months ended June 29, 2018 and June 30, 2017. Reclassification of certain prior year amounts have been made to conform to current year presentation.

Accumulated Other Comprehensive Income (Loss)—Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. The changes in accumulated other comprehensive income (loss) by component are summarized below ($ in millions):



	Foreign currency translation adjustments			Pension adjustments				Total
For the Three Months Ended June 29, 2018:
Balance, March 30, 2018	$	100.4		$	(70.9	)		$	29.5
Other comprehensive income (loss) before reclassifications, net of income taxes	(99.8		)	—				(99.8		)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			0.9			^(a)	0.9
Income tax impact	—			(0.2		)		(0.2		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			0.7				0.7
Net current period other comprehensive income (loss), net of income taxes	(99.8		)	0.7				(99.1		)
Balance, June 29, 2018	$	0.6		$	(70.2	)		$	(69.6	)
^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 7 for additional details).



	Foreign currency translation adjustments			Pension adjustments				Total
For the Three Months Ended June 30, 2017:
Balance, March 31, 2017	$	(29.0	)	$	(72.4	)		$	(101.4	)
Other comprehensive income (loss) before reclassifications, net of income taxes	45.2			—				45.2
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			1.1			^(a)	1.1
Income tax impact	—			(0.2		)		(0.2		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			0.9				0.9
Net current period other comprehensive income (loss), net of income taxes	45.2			0.9				46.1
Balance, June 30, 2017	$	16.2		$	(71.5	)		$	(55.3	)

For the Six Months Ended June 29, 2018:
Balance, December 31, 2017	$	64.0		$	(71.6	)		$	(7.6	)
Other comprehensive income (loss) before reclassifications, net of income taxes	(63.4		)	—				(63.4		)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			1.8			^(a)	1.8
Income tax impact	—			(0.4		)		(0.4		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			1.4				1.4
Net current period other comprehensive income (loss)	(63.4		)	1.4				(62.0		)
Balance, June 29, 2018	$	0.6		$	(70.2	)		$	(69.6	)

For the Six Months Ended June 30, 2017:
Balance, December 31, 2016	$	(72.6	)	$	(73.2	)		$	(145.8	)
Other comprehensive income (loss) before reclassifications, net of income taxes	88.8			—				88.8
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			2.2			^(a)	2.2
Income tax impact	—			(0.5		)		(0.5		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			1.7				1.7
Net current period other comprehensive income (loss)	88.8			1.7				90.5
Balance, June 30, 2017	$	16.2		$	(71.5	)		$	(55.3	)

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 7 for additional details).

Recently Issued Accounting Standards—In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This standard is effective for us beginning January 1, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. The standard also requires lessees and lessors to disclose the amount, timing and uncertainty of cash flows arising from leases. The accounting applied by a lessor is largely unchanged from the current standard. This standard is effective for us beginning January 1, 2019 (with early adoption permitted) using a modified retrospective transition approach and provides for certain practical expedients. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provided additional implementation guidance on the previously issued ASU. We are in the process of assessing the impact of the standard and designing related internal control procedures. Based on our efforts to date, we expect the recognition of the right-of-use asset and lease liability for our real estate and equipment leases will have a material impact on the Consolidated Balance Sheets. We do not expect this standard to have a material impact on our future Consolidated Statements of Earnings.