Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K/A for the year ended December 31, 2023 for Archer-Daniels-Midland Company (the Company or ADM).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company consolidates all entities, including variable interest entities (VIEs), in which it has a controlling financial interest. For VIEs, the Company assesses whether it is the primary beneficiary as defined under the applicable accounting standard. Investments in affiliates, including VIEs through which the Company exercises significant influence but does not control the investee and is not the primary beneficiary of the investee’s activities, are carried at cost plus equity in undistributed earnings since acquisition and are adjusted, where appropriate, for basis differences between the investment balance and the underlying net assets of the investee and impairments determined to be other than temporary in nature. The Company’s portion of the results of certain affiliates and results of certain VIEs are included using the most recent available financial statements. In each case, the financial statements are within 93 days of the Company’s year end and are consistent from period to period.

Restatement of Previously Filed Financial Statements

Following ongoing dialogue with the staff of the United States Securities and Exchange Commission, the Company concluded that it would amend its fiscal year 2023 Form 10-K (the “FY2023 Form 10-K”) and Forms 10-Q for the first and second quarters of 2024 (collectively, the “Q1 and Q2 2024 Form 10-Qs”) to restate the segment information disclosure included in those filings. These restatements do not impact ADM’s Consolidated Statements of Earnings, Consolidated Statements of Comprehensive Income (Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows or Consolidated Statements of Shareholders’ Equity as of and for the periods presented in the Amended Reports.

As previously disclosed in Note 13. Segment Information, to ADM’s consolidated financial statements included in the Form 10-Q for the quarter ended March 31, 2024, ADM identified and corrected certain intersegment sales amounts that either (i) were not in accordance with prior disclosures about presenting such sales at amounts approximating market or (ii) included intrasegment sales (resulting from sales within the segment) and should have included exclusively intersegment sales (resulting from sales from one segment to another). In connection with the error corrections, ADM identified a material weakness in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales. The Company put in place a plan to remediate this material weakness, as disclosed in the FY2023 Form 10-K and Q1 and Q2 2024 Form 10-Qs.

In the course of testing new controls implemented as part of the Company’s material weakness remediation plan in the third quarter of 2024, ADM identified additional intrasegment sales previously misclassified and reported as intersegment sales. These newly identified errors concern intersegment sales for each of its Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments that included certain additional intrasegment sales and should have included exclusively intersegment sales. The Company also identified some intersegment sales between Ag Services and Oilseeds and Carbohydrate Solutions that were not accounted for consistently in accordance with revenue recognition and segment reporting standards and should not have been reported as intersegment sales.

The Company also is correcting certain segment disclosure presentation errors. In this Amendment, the Company is revising its reconciliation and calculation of total segment operating profit. The revised reconciliation in Note 13. Segment Information presents a subtotal for total segment operating profit that is equal to the sum of the segment operating profit reported for each of the Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments. Amounts for other business and specified items,

which previously were reflected in the calculation of total segment operating profit, are now reflected as reconciling items, similar to Corporate, between total segment operating profit and earnings before income taxes.

The Company has restated its Consolidated Financial Statements for the quarters ended March 31, 2024 and 2023 in Note 13, Segment Information (Unaudited).

Segregated Cash and Investments

The Company segregates certain cash, cash equivalents, and investment balances in accordance with regulatory requirements, commodity exchange requirements, and insurance arrangements. These balances represent deposits received from customers of the Company’s registered futures commission merchant and commodity brokerage services, cash margins and securities pledged to commodity exchange clearinghouses, and cash pledged as security under certain insurance arrangements. Segregated cash and investments also include restricted cash collateral for the various insurance programs of the Company’s captive insurance business. To the degree these segregated balances are comprised of cash and cash equivalents, they are considered restricted cash and cash equivalents on the consolidated statements of cash flows.

Receivables

The Company records receivables at net realizable value in trade receivables, other current assets, and other assets. These amounts include allowances for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances including any accrued interest thereon. The Company estimates uncollectible accounts by pooling receivables according to type, region, credit risk rating, and age. Each pool is assigned an expected loss co-efficient to arrive at a general reserve based on historical write-offs adjusted, as needed, for regional, economic, and other forward-looking factors. The Company minimizes credit risk due to the large and diversified nature of its worldwide customer base. ADM manages its exposure to counter-party credit risk through credit analysis and approvals, credit limits, and monitoring procedures. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.

Changes to the allowance for estimated uncollectible accounts are as follows:


	March 31, 2024		March 31, 2023
	(In millions)
Beginning, January 1	$	215	$	199
Current year provisions	5		4
Recoveries	8		1
Write-offs against allowance	(13)		(24)
Foreign exchange translation adjustment	1		1
Other	—		1
Ending, March 31	$	216	$	182

Write-offs against allowance in the three months ended March 31, 2024 were primarily related to long-term receivables. Write-offs against allowance in the three months ended March 31, 2023 were primarily related to allowance on receivables that were subsequently sold.

Inventories

Certain merchandisable agricultural commodity inventories, which include inventories acquired under deferred pricing contracts, are stated at market value. In addition, the Company values certain inventories using the first-in, first-out (FIFO) method at the lower of cost or net realizable value.

The following table sets forth the Company’s inventories as of March 31, 2024 and December 31, 2023.


	March 31, 2024		December 31, 2023
	(In millions)
Raw materials and supplies	$	1,880	$	1,944
Finished goods	3,047		3,026
Market inventories	6,707		6,987
Total inventories	$	11,634	$	11,957

Included in raw materials and supplies are work in process inventories which were not material as of March 31, 2024 and December 31, 2023.

Cost Method Investments

Cost method investments of $421 million and $438 million as of March 31, 2024 and December 31, 2023, respectively, were included in Other Assets in the Company’s consolidated balance sheets. Revaluation loss of $18 million in the three months ended March 31, 2024 was related to an investment in alternative protein and precision fermentation, partially offset by an upward adjustment of $2 million. There were no revaluation gains or losses in the three months ended March 31, 2023. Revaluation gains and losses are recorded in interest and investment income in the Company’s consolidated statements of earnings. As of March 31, 2024, the cumulative amounts of upward and downward adjustments were $115 million and $94 million, respectively.