17. NEW ACCOUNTING PRONOUNCEMENTS


			Required
	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements

Standards that are not yet adopted:

ASU 2018-02 - Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	February 2018	Amends ASC 220 to allow entities to reclassify stranded tax effects resulting from the Tax Cut and Jobs Act (“the Act”) from accumulated OCI to retained earnings. Tax effects stranded in OCI for reasons other than the impact of the Act cannot be reclassified.	January 1, 2019	The Company is currently evaluating the impact of adoption.

ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	August 2017	Amends the hedge accounting recognition and presentation requirements in ASC 815. Simplifies the guidance on the application of hedge accounting and the requirements for hedge documentation and effectiveness testing. Requires presentation of all items that affect earnings in the same income statement line as the hedged item.	January 1, 2019	The Company is currently evaluating the impact of adoption, and certain transition elections provided for by the ASU.

ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	January 2017	Simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.	January 1, 2020	The ASU must be applied on a prospective basis upon adoption. Adoption of the ASU is not expected to have a material impact on the Company's financial statements.

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	June 2016	Addresses the recognition, measurement, presentation and disclosure of credit losses on trade and reinsurance receivables, loans, debt securities, net investments in leases, off-balance-sheet credit exposures and certain other instruments. Amends guidance on reporting credit losses from an incurred model to an expected model for assets held at amortized cost, such as accounts receivable, loans and held-to-maturity debt securities. Additional disclosures will also be required.	January 1, 2020	Adoption of the standard will change how the allowance for trade and other receivables is calculated. The Company is currently evaluating the impact of adoption.

Lease ASUs: ASU 2016-02 - Leases (Topic 842) ASU 2018-01 - Leases (Topic 842): Land Easement Practical Expedient	Various	Introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.	January 1, 2019	See additional information regarding the impact of this guidance on the Company's financial statements at the bottom of this table in note (a).

(a)

As part of implementing the new standard, the Company has reviewed current accounting policies, and is in the process of developing future policies and electing practical expedients allowed under the new accounting guidance and proposed under the FASB’s tentative decision on November 29, 2017. The tentative decision relieves the requirements to restate comparative periods in the period of adoption and to separately disclose lease and nonlease components for lessor accounting when certain conditions are met. The Company is implementing a global lease accounting software, which will be designed to facilitate adoption and reporting in accordance with the standard. The Company is accumulating leases for inclusion into the software, and the project team is designing future processes to identify, accumulate, and report on the Company’s leases. The Company expects most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption and is evaluating other impacts on the consolidated financial statements. The standard currently requires a modified retrospective transition to be applied at the beginning of the earliest comparative period presented in the year of adoption; however, this requirement may be relieved based upon the tentative decision.


	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements

Standards that were adopted:

ASU 2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting	May 2017	Clarifies the definition of what's considered a substantive modification related to a change in terms or conditions of a share-based payment award and when it's appropriate to apply modification accounting. The current definition of "modification" is too broad, resulting in diverse interpretations of what's considered a substantive modification.	January 1, 2018	The adoption of the guidance did not have a material impact on the Company's financial statements.

ASU 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets	February 2017	Clarifies the scope of guidance on nonfinancial asset derecognition (ASC 610-20) including the accounting for partial sales of nonfinancial assets. The ASU defines "in-substance nonfinancial asset". Also clarifies the derecognition of all businesses should be accounted for in accordance with derecognition and deconsolidation guidance in 810-10.	January 1, 2018	The adoption of the guidance did not have a material impact on the Company's financial statements.

ASU 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business	January 2017	Clarifies the definition of a business and provides guidance on whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.	January 1, 2018	The adoption of the guidance did not have a material impact on the Company's financial statements.

ASU 2016-16 - Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	October 2016	Simplifies the guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory (e.g. intellectual property).	January 1, 2018	During the first quarter of 2018, the Company adopted the accounting guidance issued in October 2016 that requires recognition of the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. Under previous guidance the income tax effects of intercompany transfers of assets were deferred until the asset had been sold to an outside party or otherwise recognized (e.g., depreciated, amortized, impaired). Upon adoption of the standard, only the income tax effects of intercompany transfers of inventory are deferred. The standard was adopted using the modified retrospective approach with a cumulative-effective adjustment of $43.6 million to opening retained earnings on the date of adoption. Income tax effects of intra-entity inventory transfers will continue to be deferred until the inventory is sold.

ASU 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments	August 2016	The guidance's objective is to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flow.	January 1, 2018	The adoption of the guidance did not have a material impact on the Company's financial statements and elected to account for distributions received from equity method investees as cash flows from operating activities using the nature of distribution approach accounting policy election.

ASU 2014-09 – Revenue from Contracts with Customers

On January 1, 2018, the Company retrospectively adopted Accounting Standards Codification Topic 606 Revenue from Contracts with Customers and the related amendments (“the new revenue standard”). The new revenue standard was applied to all periods presented and the cumulative effect of applying the standard is recognized at the beginning of the earliest year presented. The Company identified additional performance obligations primarily related to performing service activities, which were explicitly or implicitly included in contracts with customers. These performance obligations, when aggregated with service revenue currently reported, represent more than 10% of sales. Upon adoption of the new standard, service and lease revenue are reported separately from product and sold equipment revenue. Concurrent with the adoption of the new revenue standard, the Company reclassified certain costs to cost of sales from selling, general and administrative expenses, to align providing the service with the recognition of service revenue. The Company recorded a reduction to opening retained earnings of $29.3 million, net of tax, as of January 1, 2016 due to the impact of adopting the new revenue standard, with the impact primarily related to deferring service revenue. Further information related to the Company’s adoption of the new revenue standard is included in Note 14.

ASU 2017-07 – Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and the Net Periodic Postretirement Benefit Cost

On January 1, 2018, the Company retrospectively adopted guidance relating to the presentation of the components of net periodic benefit costs for pension and other post-retirement benefits within the Consolidated Statement of Income. Under the new guidance, the non-service cost components of net periodic benefit cost are presented in other (income) expense, while the service cost component will continue to be recorded with compensation cost in cost of sales and selling, general and administrative expenses. The Company elected to use the practical expedient that allows entities to estimate the amount for comparative periods using the information previously disclosed in the pension and postretirement health care benefits footnote. As a result, the Company has changed its accounting principle, and revised prior period presentation related to the presentation of the non-service cost components.

The following table presents the effect of the adoptions of the revenue recognition and pension standards on the Company’s Consolidated Statement of Income:


(millions, except per share amounts)	First Quarter Ended March 31
	2017 Reported	Revenue Standard Adoption	Pension Standard Adoption	2017 Revised
Net sales	$3,161.6	$(3,161.6)	$-	$-
Product and equipment sales	-	2,604.4	-	2,604.4
Service and lease sales	-	558.0	-	558.0
Total net sales	3,161.6	0.8	-	3,162.4

Cost of sales	1,691.5	(1,691.5)	-	-
Product and equipment cost of sales	-	1,499.8	0.9	1,500.7
Service and lease cost of sales	-	350.9	0.2	351.1
Total cost of sales (including special charges)	1,691.5	159.2	1.1	1,851.8

Selling, general and administrative expenses	1,090.6	(159.1)	15.7	947.2
Special (gains) and charges	6.2	-	-	6.2
Operating income	373.3	0.7	(16.8)	357.2

Other (income) expense	-	-	(16.8)	(16.8)
Interest expense, net	62.5	-	-	62.5

Income before income taxes	310.8	0.7	-	311.5
Provision for income taxes	54.0	0.2	-	54.2
Net income including noncontrolling interest	256.8	0.5	-	257.3
Net income attributable to noncontrolling interest	3.3	-	-	3.3
Net income attributable to Ecolab	$253.5	$0.5	$-	$254.0

Earnings attributable to Ecolab per common share
Basic	$ 0.87	$ -		$ 0.87
Diluted	$ 0.86	$ -		$ 0.86

The following table presents the effect of the adoption of the new revenue standard on the selected accounts which were impacted in the Consolidated Balance Sheet:




(millions)	Year ended December 31
	2017 Reported	Revenue Standard Adoption	2017 Revised

ASSETS
Current assets
Accounts receivable, net	$2,574.1	$(2.7)	$2,571.4
Inventories	1,445.9	0.6	1,446.5
Total current assets	4,596.4	(2.1)	4,594.3
Other assets	474.2	3.2	477.4
Total assets	19,962.4	1.1	19,963.5

LIABILITIES AND EQUITY
Current liabilities
Other current liabilities	957.3	43.4	1,000.7
Total current liabilities	3,431.8	43.4	3,475.2
Deferred income taxes	642.8	(7.4)	635.4
Total liabilities	12,273.7	36.0	12,309.7

Equity
Retained earnings	8,045.4	(33.8)	8,011.6
Accumulated other comprehensive loss (a)	(1,642.3)	(1.1)	(1,643.4)
Total Ecolab shareholders’ equity	7,618.5	(34.9)	7,583.6
Total equity	7,688.7	(34.9)	7,653.8
Total liabilities and equity	$19,962.4	$1.1	$19,963.5

(a)

On a quarterly basis throughout 2017, revenue recognition adjustments had a nominal impact on foreign currency translation within accumulated other comprehensive loss. These revisions have been reflected within the Statement of Comprehensive Income.

ASU 2016-18 – Statement of Cash Flows (Topic 230): Restricted Cash

During the first quarter of 2018, the Company adopted the accounting guidance issued in 2016 that requires companies to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The Company’s restricted cash is primarily associated with acquisitions, and the escrow payment associated with the proposed acquisition. As a result of the new guidance, the Company has updated the policy so restricted cash will no longer be shown as a transfer on the statement of cash flows, and a reconciliation of restricted cash will be added to the statement of cash flows.

The following table presents the effect of the adoptions of the restricted cash and revenue recognition standards on selected accounts in the Consolidated Statement of Cash Flows:





(millions)	First Quarter Ended March 31
	2017 Reported	Restricted Cash Standard Adoption	Revenue Standard Adoption	2017 Revised
OPERATING ACTIVITIES
Net income including noncontrolling interest	$256.8	$-	$0.5	$257.3
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income taxes	3.2	-	0.1	3.3
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	76.3	-	0.1	76.4
Other liabilities	(73.5)	-	(0.7)	(74.2)
Cash provided by operating activities	425.7	-	-	425.7

INVESTING ACTIVITIES
Restricted cash activity	53.8	(53.8)	-	-
Cash used for investing activities	(941.5)	(53.8)	-	(995.3)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	5.0	0.8	-	5.8

(Decrease) increase in cash, cash equivalents and restricted cash	(115.3)	(53.0)	-	(168.3)
Cash, cash equivalents and restricted cash, beginning of period	327.4	53.0	-	380.4
Cash, cash equivalents and restricted cash, end of period	$212.1	$-	$-	$212.1