Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2018shares | |
Document and Entity Information | |
Entity Registrant Name | ABB LTD |
Entity Central Index Key | 0001091587 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2018 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 2,131,962,406 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | FY |
Consolidated Income Statements
Consolidated Income Statements - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Total revenues | $ 27,662 | $ 25,196 | $ 24,929 |
Total cost of sales | (19,118) | (17,350) | (17,396) |
Gross profit | 8,544 | 7,846 | 7,533 |
Selling, general and administrative expenses | (5,295) | (4,765) | (4,532) |
Non-order related research and development expenses | (1,147) | (1,013) | (967) |
Other income (expense), net | 124 | 162 | (105) |
Income from operations | 2,226 | 2,230 | 1,929 |
Interest and dividend income | 72 | 73 | 71 |
Interest and other finance expense | (262) | (234) | (201) |
Non-operational pension (cost) credit | 83 | 33 | (38) |
Income from continuing operations before taxes | 2,119 | 2,102 | 1,761 |
Provision for taxes | (544) | (583) | (526) |
Income from continuing operations, net of tax | 1,575 | 1,519 | 1,235 |
Income from discontinued operations, net of tax | 723 | 846 | 799 |
Net income | 2,298 | 2,365 | 2,034 |
Net income attributable to noncontrolling interests | (125) | (152) | (135) |
Net income attributable to ABB | 2,173 | 2,213 | 1,899 |
Amounts attributable to ABB shareholders: | |||
Income from continuing operations, net of tax | 1,514 | 1,441 | 1,172 |
Income from discontinued operations, net of tax | 659 | 772 | 727 |
Net income | $ 2,173 | $ 2,213 | $ 1,899 |
Basic earnings per share attributable to ABB shareholders: | |||
Income from continuing operations, net of tax (in dollars per share) | $ 0.71 | $ 0.67 | $ 0.54 |
Income from discontinued operations, net of tax (in dollars per share) | 0.31 | 0.36 | 0.34 |
Net income (in dollars per share) | 1.02 | 1.04 | 0.88 |
Diluted earnings per share attributable to ABB shareholders: | |||
Income from continuing operations, net of tax (in dollars per share) | 0.71 | 0.67 | 0.54 |
Income from discontinued operations, net of tax (in dollars per share) | 0.31 | 0.36 | 0.34 |
Net income (in dollars per share) | $ 1.02 | $ 1.03 | $ 0.88 |
Weighted-average number of shares outstanding (in millions) used to compute: | |||
Basic earnings per share attributable to ABB shareholders (in shares) | 2,132 | 2,138 | 2,151 |
Diluted earnings per share attributable to ABB shareholders (in shares) | 2,139 | 2,148 | 2,154 |
Products | |||
Total revenues | $ 22,366 | $ 20,438 | $ 20,327 |
Cost | (15,961) | (14,485) | (14,629) |
Services and other | |||
Total revenues | 5,296 | 4,758 | 4,602 |
Cost | $ (3,157) | $ (2,865) | $ (2,767) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Comprehensive Income | |||
Net income | $ 2,298 | $ 2,365 | $ 2,034 |
Foreign currency translation adjustments: | |||
Foreign currency translation adjustments | (627) | 912 | (481) |
Gain on liquidation of foreign subsidiary | 31 | ||
Changes attributable to divestments, net of tax | 12 | 12 | 7 |
Foreign currency translation adjustments | (646) | 924 | (474) |
Available-for-sale securities: | |||
Net unrealized gains (losses) arising during the year | (4) | 1 | |
Reclassification adjustments for net losses included in net income | 1 | ||
Unrealized gains (losses) on available-for-sale securities | (3) | 1 | |
Pension and other postretirement plans: | |||
Prior service costs arising during the year | (7) | (16) | (40) |
Net actuarial gains (losses) arising during the year | (352) | (139) | 44 |
Amortization of prior service cost (credit) included in net income | (24) | 6 | 26 |
Amortization of net actuarial loss included in net income | 69 | 63 | 62 |
Net losses from pension settlements included in net income | 19 | 9 | 26 |
Changes attributable to divestments | 6 | ||
Pension and other postretirement plan adjustments | (295) | (71) | 118 |
Cash flow hedge derivatives: | |||
Net unrealized gains (losses) arising during the year | (49) | 38 | 16 |
Reclassification adjustments for net (gains) losses included in net income | 21 | (22) | (6) |
Changes attributable to divestments | (3) | ||
Unrealized gains (losses) of cash flow hedge derivatives | (28) | 13 | 10 |
Total other comprehensive income (loss), net of tax | (972) | 867 | (346) |
Total comprehensive income | 1,326 | 3,232 | 1,688 |
Comprehensive income attributable to noncontrolling interests, net of tax | (110) | (177) | (118) |
Total comprehensive income, net of tax, attributable to ABB | $ 1,216 | $ 3,055 | $ 1,570 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Cash and equivalents | $ 3,445 | $ 4,526 |
Marketable securities and short-term investments | 712 | 1,083 |
Receivables, net | 6,386 | 5,861 |
Contract assets | 1,082 | 1,141 |
Inventories, net | 4,284 | 3,737 |
Prepaid expenses | 176 | 159 |
Other current assets | 616 | 585 |
Current assets held for sale | 5,164 | 5,043 |
Total current assets | 21,865 | 22,135 |
Property, plant and equipment, net | 4,133 | 3,804 |
Goodwill | 10,764 | 9,536 |
Other intangible assets, net | 2,607 | 2,425 |
Prepaid pension and other employee benefits | 83 | 143 |
Investments in equity-accounted companies | 87 | 72 |
Deferred taxes | 1,006 | 1,212 |
Other non-current assets | 469 | 571 |
Non-current assets held for sale | 3,427 | 3,560 |
Total assets | 44,441 | 43,458 |
Accounts payable, trade | 4,424 | 3,736 |
Contract liabilities | 1,707 | 1,792 |
Short-term debt and current maturities of long-term debt | 2,031 | 726 |
Provisions for warranties | 948 | 909 |
Other provisions | 1,372 | 1,277 |
Other current liabilities | 3,780 | 3,509 |
Current liabilities held for sale | 4,185 | 4,520 |
Total current liabilities | 18,447 | 16,469 |
Long-term debt | 6,587 | 6,682 |
Pension and other employee benefits | 1,828 | 1,589 |
Deferred taxes | 927 | 1,050 |
Other non-current liabilities | 1,689 | 1,849 |
Non-current liabilities held for sale | 429 | 470 |
Total liabilities | 29,907 | 28,109 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, CHF 0.12 par value (2,168,148,264 issued shares at December 31, 2018 and 2017) | 188 | 188 |
Additional paid-in capital | 56 | 29 |
Retained earnings | 19,839 | 19,594 |
Accumulated other comprehensive loss | (5,311) | (4,345) |
Treasury stock, at cost ( 36,185,858 and 29,541,775 shares at December 31, 2018 and 2017, respectively) | (820) | (647) |
Total ABB stockholders' equity | 13,952 | 14,819 |
Noncontrolling interests | 582 | 530 |
Total stockholders' equity | 14,534 | 15,349 |
Total liabilities and stockholders' equity | $ 44,441 | $ 43,458 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - SFr / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Common stock, par value (in dollars per share) | SFr 0.12 | SFr 0.12 |
Common stock, shares issued (in shares) | 2,168,148,264 | 2,168,148,264 |
Treasury stock (in shares) | 36,185,858 | 29,541,775 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Operating activities: | |||
Net income | $ 2,298 | $ 2,365 | $ 2,034 |
Less: Income from discontinued operations, net of tax | (723) | (846) | (799) |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 916 | 836 | 870 |
Deferred taxes | (142) | (199) | (145) |
Net loss (gain) from derivatives and foreign exchange | 93 | 29 | (10) |
Net gain from sale of property, plant and equipment | (57) | (37) | (37) |
Net loss (gain) from sale of businesses | (57) | (252) | 10 |
Share-based payment arrangements | 50 | 49 | 45 |
Other | (76) | 4 | 111 |
Changes in operating assets and liabilities: | |||
Trade receivables, net | (144) | (178) | (118) |
Contract assets and liabilities | (18) | 6 | (38) |
Inventories, net | (336) | (66) | 185 |
Trade payables | 454 | 474 | 186 |
Accrued liabilities | 252 | 99 | 52 |
Provisions, net | 87 | (4) | 40 |
Income taxes payable and receivable | (102) | 202 | 115 |
Other assets and liabilities, net | (143) | 106 | 106 |
Net cash provided by operating activities continuing operations | 2,352 | 2,588 | 2,607 |
Net cash provided by operating activities discontinued operations | 572 | 1,211 | 1,236 |
Net cash provided by operating activities | 2,924 | 3,799 | 3,843 |
Investing activities: | |||
Purchases of investments | (322) | (666) | (4,299) |
Purchases of property, plant and equipment and intangible assets | (772) | (752) | (632) |
Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies | (2,664) | (2,011) | (26) |
Proceeds from sale of investments | 567 | 1,443 | 3,295 |
Proceeds from maturity of investments | 160 | 100 | 539 |
Proceeds from sales of property, plant and equipment | 72 | 61 | 59 |
Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and equity-accounted companies | 113 | 607 | (1) |
Net cash from settlement of foreign currency derivatives | (30) | 63 | (57) |
Other investing activities | (32) | 37 | 14 |
Net cash used in investing activities continuing operations | (2,908) | (1,118) | (1,108) |
Net cash used in investing activities discontinued operations | (177) | (332) | (197) |
Net cash used in investing activities | (3,085) | (1,450) | (1,305) |
Purchases of marketable securities (other than trading) and short-term investments | (2,664) | (2,011) | (26) |
Financing activities: | |||
Net changes in debt with maturities of 90 days or less | 221 | 204 | (144) |
Increase in debt | 1,914 | 920 | 911 |
Repayment of debt | (830) | (1,000) | (1,242) |
Delivery of shares | 42 | 163 | 192 |
Purchase of treasury stock | (250) | (251) | (1,299) |
Dividends paid | (1,717) | (1,635) | |
Reduction in nominal value of common shares paid to shareholders | (1,610) | ||
Dividends paid to noncontrolling shareholders | (86) | (83) | (89) |
Other financing activities | (35) | (6) | (27) |
Net cash used in financing activities continuing operations | (741) | (1,688) | (3,308) |
Net cash used in investing activities discontinued operations | (48) | (47) | (47) |
Net cash used in financing activities | (789) | (1,735) | (3,355) |
Effects of exchange rate changes on cash and equivalents | (131) | 268 | (104) |
Net change in cash and equivalents | (1,081) | 882 | (921) |
Cash and equivalents, beginning of period | 4,526 | 3,644 | 4,565 |
Cash and equivalents, end of period | 3,445 | 4,526 | 3,644 |
Supplementary disclosure of cash flow information: | |||
Interest paid | 243 | 205 | 213 |
Income taxes paid | $ 1,026 | $ 894 | $ 814 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Millions | Total ABB stockholders' equity | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Non-controlling interests | Total |
Balance at Dec. 31, 2015 | $ 14,481 | $ 1,440 | $ 4 | $ 20,476 | $ (4,858) | $ (2,581) | $ 507 | $ 14,988 |
Comprehensive income: | ||||||||
Net income | 1,899 | 1,899 | 135 | 2,034 | ||||
Foreign currency translation adjustments, net of tax | (457) | (457) | (17) | (474) | ||||
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax | 118 | 118 | 118 | |||||
Change in derivatives qualifying as cash flow hedges, net of tax | 10 | 10 | 10 | |||||
Total comprehensive income | 1,570 | 118 | 1,688 | |||||
Changes in noncontrolling interests | (1) | (1) | ||||||
Dividends to noncontrolling shareholders | (122) | (122) | ||||||
Share-based payment arrangements | 54 | 54 | 54 | |||||
Reduction in nominal value of common shares paid to shareholders | (1,626) | 15 | (402) | (1,626) | ||||
Reduction in nominal value of common shares paid to shareholders (in shares) | (1,239) | |||||||
Cancellation of treasury shares | (9) | (31) | (2,007) | 2,047 | ||||
Purchase of treasury stock | (1,280) | (1,280) | (1,280) | |||||
Delivery of shares | 192 | (22) | (41) | 255 | 192 | |||
Call options | 4 | 4 | 4 | |||||
Balance at Dec. 31, 2016 | 13,395 | 192 | 24 | 19,925 | (5,187) | (1,559) | 502 | 13,897 |
Comprehensive income: | ||||||||
Net income | 2,213 | 2,213 | 152 | 2,365 | ||||
Foreign currency translation adjustments, net of tax | 899 | 899 | 25 | 924 | ||||
Effect of change in fair value of available-for-sale securities, net of tax | 1 | 1 | 1 | |||||
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax | (71) | (71) | (71) | |||||
Change in derivatives qualifying as cash flow hedges, net of tax | 13 | 13 | 13 | |||||
Total comprehensive income | 3,055 | 177 | 3,232 | |||||
Changes in noncontrolling interests | 17 | 17 | (14) | 3 | ||||
Dividends to noncontrolling shareholders | (134) | (134) | ||||||
Dividends paid to shareholders | (1,622) | (1,622) | (1,622) | |||||
Share-based payment arrangements | 58 | 58 | 58 | |||||
Cancellation of treasury shares | (4) | (27) | (922) | 953 | ||||
Purchase of treasury stock | (251) | (251) | (251) | |||||
Delivery of shares | 163 | (46) | 209 | 163 | ||||
Call options | 4 | 4 | 4 | |||||
Balance at Dec. 31, 2017 | 14,819 | 188 | 29 | 19,594 | (4,345) | (647) | 530 | 15,349 |
Comprehensive income: | ||||||||
Net income | 2,173 | 2,173 | 125 | 2,298 | ||||
Foreign currency translation adjustments, net of tax | (631) | (631) | (15) | (646) | ||||
Effect of change in fair value of available-for-sale securities, net of tax | (3) | (3) | (3) | |||||
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax | (295) | (295) | (295) | |||||
Change in derivatives qualifying as cash flow hedges, net of tax | (28) | (28) | (28) | |||||
Total comprehensive income | 1,216 | 110 | 1,326 | |||||
Changes in noncontrolling interests | (4) | (4) | (19) | (23) | ||||
Noncontrolling interests recognized in connection with business combination | 107 | 107 | ||||||
Dividends to noncontrolling shareholders | (146) | (146) | ||||||
Dividends paid to shareholders | (1,736) | (1,736) | (1,736) | |||||
Share-based payment arrangements | 60 | 60 | 60 | |||||
Purchase of treasury stock | (249) | (249) | (249) | |||||
Delivery of shares | 42 | (35) | 77 | 42 | ||||
Call options | 5 | 5 | 5 | |||||
Balance at Dec. 31, 2018 | 13,952 | $ 188 | $ 56 | 19,839 | (5,311) | $ (820) | $ 582 | 14,534 |
Comprehensive income: | ||||||||
Cumulative effect of changes in accounting principles | Accounting Standards Update 2014-09 | $ (201) | $ (192) | $ (9) | $ (201) |
The Company
The Company | 12 Months Ended |
Dec. 31, 2018 | |
The Company | |
The Company | Note 1—The Company ABB Ltd and its subsidiaries (collectively, the Company) together form a pioneering technology leader in power grids, electrification products, industrial automation and robotics and motion, serving customers in utilities, industry and transport & infrastructure globally. |
Significant accounting policies
Significant accounting policies | 12 Months Ended |
Dec. 31, 2018 | |
Significant accounting policies | |
Significant accounting policies | Note 2—Significant accounting policies The following is a summary of significant accounting policies followed in the preparation of these Consolidated Financial Statements. Basis of presentation The Consolidated Financial Statements are prepared in accordance with United States of America (United States or U.S.) generally accepted accounting principles (U.S. GAAP) and are presented in United States dollars ($ or USD) unless otherwise stated. Due to rounding, numbers presented may not add to the totals provided. The par value of capital stock is denominated in Swiss francs. See Note 3 for a summary of changes in presentation and other reclassifications affecting these financial statements compared to the previous year. Scope of consolidation The Consolidated Financial Statements include the accounts of ABB Ltd and companies which are directly or indirectly controlled by ABB Ltd. Additionally, the Company consolidates variable interest entities if it has determined that it is the primary beneficiary. Intercompany accounts and transactions are eliminated. Investments in joint ventures and affiliated companies in which the Company has the ability to exercise significant influence over operating and financial policies (generally through direct or indirect ownership of 20 percent to 50 percent of the voting rights), are recorded in the Consolidated Financial Statements using the equity method of accounting. Discontinued operations The Company reports a disposal, or planned disposal, of a component or a group of components as a discontinued operation if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. A strategic shift could include a disposal of a major geographical area, a major line of business or other major parts of the Company. A component may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. Assets and liabilities of a component reported as a discontinued operation are presented separately as held for sale in the Company’s Consolidated Balance Sheets. Interest that is not directly attributable to or related to the Company’s continuing business or discontinued business is allocated to discontinued operations based on the ratio of net assets to be sold less debt that is required to be paid as a result of the planned disposal transaction to the sum of total net assets of the Company plus consolidated debt. General corporate overhead is not allocated to discontinued operations (see Note 3). Operating cycle A portion of the Company’s activities (primarily long-term system integration activities) has an operating cycle that exceeds one year. For classification of current assets and liabilities related to such activities, the Company elected to use the duration of the individual contracts as its operating cycle. Accordingly, there are accounts receivable, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. The most significant, difficult and subjective of such accounting assumptions and estimates include: · estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations, · assumptions used in the determination of corporate costs directly attributable to discontinued operations, · assumptions used in determining inventory obsolescence and net realizable value, · estimates used to record expected costs for employee severance in connection with restructuring programs, · assumptions and projections, principally related to future material, labor and project-related overhead costs, used in determining the percentage-of-completion on projects, as well as the amount of variable consideration the Company expects to be entitled to, · estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product warranties, self-insurance reserves, regulatory and other proceedings, · assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets, · estimates to determine valuation allowances for deferred tax assets and amounts recorded for uncertain tax positions, · growth rates, discount rates and other assumptions used to determine impairment of long-lived assets and in testing goodwill for impairment, and · assessment of the allowance for doubtful accounts. The actual results and outcomes may differ from the Company’s estimates and assumptions. Cash and equivalents Cash and equivalents include highly liquid investments with maturities of three months or less at the date of acquisition. Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries where the Company operates. Funds, other than regular dividends, fees or loan repayments, cannot be readily transferred abroad from these countries and are therefore deposited and used for working capital needs locally. These funds are included in cash and equivalents as they are not considered restricted. Marketable securities and short‑term investments Management determines the appropriate classification of held‑to‑maturity and available‑for‑sale debt securities at the time of purchase. Debt securities are classified as held‑to‑maturity when the Company has the positive intent and ability to hold the securities to maturity. Held‑to‑maturity debt securities are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under the effective interest method. Such accretion or amortization is included in “Interest and dividend income”. Marketable debt securities not classified as held‑to‑maturity are classified as available‑for‑sale and reported at fair value. Unrealized gains and losses on available‑for‑sale debt securities are excluded from the determination of earnings and are instead recognized in the “Accumulated other comprehensive loss” component of stockholders’ equity, net of tax, until realized. Realized gains and losses on available‑for‑sale debt securities are computed based upon the historical cost of these securities, using the specific identification method. Marketable debt securities are classified as either “Cash and equivalents” or “Marketable securities and short‑term investments” according to their maturity at the time of acquisition. Marketable equity securities are generally classified as “Marketable securities and short‑term investments”, however any marketable securities held as a long‑term investment rather than as an investment of excess liquidity, are classified as “Other non‑current assets”. Equity securities are measured at fair value with fair value changes reported in net income. Fair value changes for equity securities are reported in “Interest and other finance expense”. The Company performs a periodic review of its debt securities to determine whether an other‑than‑temporary impairment has occurred. Generally, when an individual security has been in an unrealized loss position for an extended period of time, the Company evaluates whether an impairment has occurred. The evaluation is based on specific facts and circumstances at the time of assessment, which include general market conditions, and the duration and extent to which the fair value is below cost. If the fair value of a debt security is less than its amortized cost, then an other‑than‑temporary impairment for the difference is recognized if (i) the Company has the intent to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost base or (iii) a credit loss exists insofar as the Company does not expect to recover the entire recognized amortized cost of the security. Such impairment charges are generally recognized in “Interest and other finance expense”. If the impairment is due to factors other than credit losses, and the Company does not intend to sell the security and it is not more likely than not that it will be required to sell the security before recovery of the security’s amortized cost, such impairment charges are recorded in “Accumulated other comprehensive loss”. In addition, equity securities without readily determinable fair value are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying amount. The impairment charge is recorded in “Interest and other finance expense”. Accounts receivable and allowance for doubtful accounts Accounts receivable are recorded at the invoiced amount. The Company has a group‑wide policy on the management of credit risk. The policy includes a credit assessment methodology to assess the creditworthiness of customers and assign to those customers a risk category. Third‑party agencies’ ratings are considered, if available. For customers where agency ratings are not available, the customer’s most recent financial statements, payment history and other relevant information are considered in the assignment to a risk category. Customers are assessed at least annually or more frequently when information on significant changes in the customers’ financial position becomes known. In addition to the assignment to a risk category, a credit limit per customer is set. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines the allowance based on historical write‑off experience and customer specific data. If an amount has not been settled within its contractual payment term then it is considered past due. The Company reviews the allowance for doubtful accounts regularly and past due balances are reviewed for collectability. Account balances are charged off against the related allowance when the Company believes that the amount will not be recovered. The Company, in its normal course of business, transfers receivables to third parties, generally without recourse. The transfer is accounted for as a sale when the Company has surrendered control over the receivables. Control is deemed to have been surrendered when (i) the transferred receivables have been put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership, (ii) the third‑party transferees have the right to pledge or exchange the transferred receivables, and (iii) the Company has relinquished effective control over the transferred receivables and does not retain the ability or obligation to repurchase or redeem the transferred receivables. At the time of sale, the sold receivables are removed from the Consolidated Balance Sheets and the related cash inflows are classified as operating activities in the Consolidated Statements of Cash Flows. Costs associated with the sale of receivables, including the related gains and losses from the sales, are included in “Interest and other finance expense”. Transfers of receivables that do not meet the requirements for treatment as sales are accounted for as secured borrowings and the related cash flows are classified as financing activities in the Consolidated Statements of Cash Flows. Concentrations of credit risk The Company sells a broad range of products, systems, services and software to a wide range of industrial, commercial and utility customers as well as various government agencies and quasi‑governmental agencies throughout the world. Concentrations of credit risk with respect to accounts receivable are limited, as the Company’s customer base is comprised of a large number of individual customers. Ongoing credit evaluations of customers’ financial positions are performed to determine whether the use of credit support instruments such as guarantees, letters of credit or credit insurance are necessary; collateral is not generally required. The Company maintains reserves for potential credit losses as discussed above in “Accounts receivable and allowance for doubtful accounts”. Such losses, in the aggregate, are in line with the Company’s expectations. It is the Company’s policy to invest cash in deposits with banks throughout the world with certain minimum credit ratings and in high quality, low risk, liquid investments. The Company actively manages its credit risk by routinely reviewing the creditworthiness of the banks and the investments held. The Company has not incurred significant credit losses related to such investments. The Company’s exposure to credit risk on derivative financial instruments is the risk that the counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment and periodic review of credit limits for individual counterparties. In addition, the Company has entered into close‑out netting agreements with most derivative counterparties. Close‑out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre‑defined trigger events. In the Consolidated Financial Statements derivative transactions are presented on a gross basis. Revenue recognition A customer contract exists if collectability under the contract is considered probable, the contract has commercial substance, contains payment terms, as well as the rights and commitments of both parties, and has been approved. The Company offers arrangements with multiple performance obligations to meet its customers’ needs. These arrangements may involve the delivery of multiple products and/or performance of services (such as installation and training) and the delivery and/or performance may occur at different points in time or over different periods of time. Goods and services under such arrangements are evaluated to determine whether they form distinct performance obligations and should be accounted for as separate revenue transactions. The Company allocates the sales price to each distinct performance obligation based on the price of each item sold in separate transactions at the inception of the arrangement. The Company generally recognizes revenues for the sale of non-customized products including switchgear, circuit breakers, modular substation packages, control products, motors, generators, drives, robots, turbochargers, measurement and analytical instrumentation, and other goods which are manufactured on a standardized basis at a point in time. Revenues are recognized at the point in time that the customer obtains control of the good which is when it has taken title to the products and assumed the risks and rewards of ownership of the products specified in the purchase order or sales agreement. Generally, the transfer of title and risks and rewards of ownership are governed by the contractually defined shipping terms. The Company uses various International Commercial shipping terms (as promulgated by the International Chamber of Commerce) in its sales of products to third party customers, such as Ex Works (EXW), Free Carrier (FCA) and Delivered Duty Paid (DDP). Billing terms for these point in time contracts vary but generally coincide with delivery to the customer. Payment is generally due upon receipt of the invoice, payable within 90 days or less. The Company generally recognizes revenues for the sale of customized products, including integrated automation and electrification systems and solutions, on an over time basis using the percentage - of-completion method of accounting. These systems are generally accounted for as a single performance obligation as the Company is required to integrate equipment and services into one deliverable for the customer. Revenues are recognized as the systems are customized during the manufacturing or integration process and as control is transferred to the customer as evidenced by the Company’s right to payment for work performed or by the customer’s ownership of the work in process. The Company principally uses the cost - to - cost method to measure progress towards completion on contracts. Under this method, progress of contracts is measured by actual costs incurred in relation to the Company’s best estimate of total estimated costs based on the Company’s history of manufacturing or constructing similar assets for customers. Estimated costs are reviewed and updated routinely for contracts in progress to reflect changes in quantity or pricing of the inputs. The cumulative effect of any change in estimate is recorded in the period when the change in estimate is determined. Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools and depreciation costs. The nature of the Company’s contracts for the sale of customized products gives rise to several types of variable consideration, including claims, unpriced change orders, liquidated damages and penalties. These amounts are estimated based upon the most likely amount of consideration to which the customer or the Company will be entitled. The estimated amounts are included in the sales price to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. All estimates of variable consideration are reassessed periodically. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Billing terms for these over-time contracts vary but are generally based on achieving specified milestones. The differences between the timing of revenues recognized and customer billings result in changes to contract assets and contract liabilities. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Contractual retention amounts billed to customers are generally due upon expiration of the contractual warranty period. Service revenues reflect revenues earned from the Company’s activities in providing services to customers primarily subsequent to the sale and delivery of a product or complete system. Such revenues consist of maintenance type contracts, repair services, equipment upgrades, field service activities that include personnel and accompanying spare parts, training, and installation and commissioning of products as a stand alone service or as part of a service contract. The Company generally recognizes revenues from service transactions as services are performed or at the point in time that the customer obtains control of the spare parts. For long-term service contracts including monitoring and maintenance services, revenues are recognized on a straight line basis over the term of the contract consistent with the nature, timing and extent of the services or, if the performance pattern is other than straight line, as the services are provided based on costs incurred relative to total expected costs. In limited circumstances the Company sells extended warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Revenues for these warranties are recorded over the length of the warranty period based on their stand-alone selling price. Billing terms for service contracts vary but are generally based on the occurrence of a service event. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Revenues are reported net of customer rebates, early settlement discounts, and similar incentives. Rebates are estimated based on sales terms, historical experience and trend analysis. The most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales, use, value added and some excise taxes, are excluded from revenues. The Company does not adjust the contract price for the effects of a financing component if the Company expects, at contract inception, that the time between control transfer and cash receipt is less than 12 months. Sales commissions are expensed immediately when the amortization period for the costs to obtain the contract is less than a year. Contract loss provisions Losses on contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues. Shipping and handling costs Shipping and handling costs are recorded as a component of cost of sales. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first‑in, first‑out method, the weighted‑average cost method, or the specific identification method. Inventoried costs are stated at acquisition cost or actual production cost, including direct material and labor and applicable manufacturing overheads. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for decreases in sales prices, obsolescence or similar reductions in value. Impairment of long‑lived assets Long‑lived assets that are held and used are assessed for impairment when events or circumstances indicate that the carrying amount of the asset may not be recoverable. If the asset’s net carrying value exceeds the asset’s net undiscounted cash flows expected to be generated over its remaining useful life including net proceeds expected from disposition of the asset, if any, the carrying amount of the asset is reduced to its estimated fair value. The estimated fair value is determined using a market, income and/or cost approach. Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and is depreciated using the straight‑line method. The estimated useful lives of the assets are generally as follows: · factories and office buildings: 30 to 40 years, · other facilities: 15 years, · machinery and equipment: 3 to 15 years, · furniture and office equipment: 3 to 8 years, and · leasehold improvements are depreciated over their estimated useful life or, for operating leases, over the lease term, if shorter. Goodwill and other intangible assets Goodwill is reviewed for impairment annually as of October 1, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill is evaluated for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. For the annual impairment review performed in 2018, the reporting units were the same as the operating segments for Electrification Products and Robotics and Motion, while for the Industrial Automation operating segment the reporting units were determined to be one level below the operating segment. When evaluating goodwill for impairment, the Company uses either a qualitative or quantitative assessment method for each reporting unit. The qualitative assessment involves determining, based on an evaluation of qualitative factors, if it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on this qualitative assessment, it is determined to be more likely than not that the reporting unit’s fair value is less than its carrying value, a quantitative impairment test (described below) is performed, otherwise no further analysis is required. If the Company elects not to perform the qualitative assessment for a reporting unit, then a quantitative impairment test is performed. The quantitative impairment test calculates the fair value of a reporting unit (based on the income approach whereby the fair value of a reporting unit is calculated based on the present value of future cash flows) and compares it to the reporting unit’s carrying value. If the carrying value of the net assets of a reporting unit exceeds the fair value of the reporting unit then the Company records an impairment charge equal to the difference, provided that the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. The cost of acquired intangible assets with a finite life is amortized using a method of amortization that reflects the pattern of intangible assets’ expected contributions to future cash flows. If that pattern cannot be reliably determined, the straight‑line method is used. The amortization periods range from 3 to 5 years for software and from 5 to 20 years for customer‑, technology‑ and marketing‑related intangibles. Intangible assets with a finite life are tested for impairment upon the occurrence of certain triggering events. Capitalized software costs Software for internal use Costs incurred in the application development stage until the software is substantially complete are capitalized and are amortized on a straight‑line basis over the estimated useful life of the software, typically ranging from 3 to 5 years. Derivative financial instruments and hedging activities The Company uses derivative financial instruments to manage currency, commodity, interest rate and equity exposures, arising from its global operating, financing and investing activities (see Note 6). The Company recognizes all derivatives, other than certain derivatives indexed to the Company’s own stock, at fair value in the Consolidated Balance Sheets. Derivatives that are not designated as hedging instruments are reported at fair value with derivative gains and losses reported through earnings and classified consistent with the nature of the underlying transaction. If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in fair value of the hedged item attributable to the risk being hedged through earnings (in the case of a fair value hedge) or recognized in “Accumulated other comprehensive loss” until the hedged item is recognized in earnings (in the case of a cash flow hedge). The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings consistent with the classification of the hedged item. Where derivative financial instruments have been designated as cash flow hedges of forecasted transactions and such forecasted transactions are no longer probable of occurring, hedge accounting is discontinued and any derivative gain or loss previously included in “Accumulated other comprehensive loss” is reclassified into earnings consistent with the nature of the original forecasted transaction. Gains or losses from derivatives designated as hedging instruments in a fair value hedge are reported through earnings and classified consistent with the nature of the underlying hedged transaction. Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accounted for as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value reported in earnings consistent with the nature of the commercial contract to which they relate. Derivatives are classified in the Consolidated Statements of Cash Flows in the same section as the underlying item. Cash flows from the settlement of undesignated derivatives used to manage the risks of different underlying items on a net basis, are classified within “Net cash provided by operating activities”, as the underlying items are primarily operational in nature. Other cash flows on the settlement of derivatives are recorded within “Net cash used in investing activities”. Leases The Company leases primarily real estate, vehicles and machinery. Rental expense for operating leases is recorded on a straight‑line basis over the life of the lease term. Lease transactions where substantially all risks and rewards incident to ownership are transferred from the lessor to the lessee are accounted for as capital leases. All other leases are accounted for as operating leases. Amounts due under capital leases are recorded as a liability. The interest in assets acquired under capital leases is recorded as property, plant and equipment. Depreciation and amortization of assets recorded under capital leases is included in depreciation and amortization expense. Translation of foreign currencies and foreign exchange transactions The functional currency for most of the Company’s subsidiaries is the applicable local currency. The translation from the applicable functional currencies into the Company’s reporting currency is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for income statement accounts using average exchange rates prevailing during the year. The resulting translation adjustments are excluded from the determination of earnings and are recognized in “Accumulated other comprehensive loss” until the subsidiary is sold, substantially liquidated or evaluated for impairment in anticipation of disposal. Foreign currency exchange gains and losses, such as those resulting from foreign currency denominated receivables or payables, are included in the determination of earnings, except as they relate to intercompany loans that are equity‑like in nature with no reasonable expectation of repayment, which are recognized in “Accumulated other comprehensive loss”. Exchange gains and losses recognized in earnings are included in “Total revenues”, “Total cost of sales”, “Selling, general and administrative expenses” or “Interest and other finance expense” consistent with the nature of the underlying item. Income taxes The Company uses the asset and liability method to account for deferred taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company records a deferred tax asset when it determines that it is more likely than not that the deduction will be sustained based upon the deduction’s technical merit. Deferred tax assets and liabilities that can be offset against each other are reported on a net basis. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. Deferred taxes are provided on unredeemed retained earnings of the Company’s subsidiaries. However, deferred taxes are not provided on such unredeemed retained earnings to the extent it is expected that the earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. The Company operates in numerous tax jurisdictions and, as a result, is regularly subject to audit by tax authorities. The Company provides for tax contingencies whenever it is deemed more likely than not that a tax asset has been impaired or a tax liability has been incurred. Contingency provisions are recorded based on the technical merits of the Company’s filing position, considering the applicable tax laws and Organisation for Economic Co‑operation and Development (OECD) guidelines and are based on its evaluations of the facts and circumstances as of the end of each reporting period. The Company applies a two‑step approach to recognize and measure uncertainty in income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate settlement. Uncertain tax positions that could be settled against existing loss carryforwards or income tax credits are reported net. Expenses r |
Changes in presentation of fina
Changes in presentation of financial statements | 12 Months Ended |
Dec. 31, 2018 | |
Changes in presentation of financial statements | |
Changes in presentation of financial statements | Note 3—Changes in presentation of financial statements Discontinued operations In December 2018, the Company announced an agreement to divest 80.1 percent of its Power Grids business to Hitachi Ltd. (Hitachi) valuing the business at $11 billion. The business also includes certain real estate properties which were previously reported within Corporate and Other as the Company primarily manages real estate assets centrally as corporate assets. As a result, this business, along with the related real estate assets previously included in Corporate and Other, have been reported as discontinued operations. The divestment is expected to be completed in the first half of 2020, following the receipt of customary regulatory approvals as well as the completion of certain legal entity reorganizations expected to be completed before the sale. Assets and liabilities in the discontinued operation have maintained their existing classification as current or non‑current as the sale is not expected to be completed for more than 12 months. As this planned divestment represents a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations for this business have been presented as discontinued operations and the assets and liabilities are reflected as held-for-sale for all periods presented. Financial information and disclosures previously reported in 2017 and 2016 have been retroactively recast to give effect to the discontinued operations presentation. In addition, amounts relating to stranded corporate costs have been separately disclosed as a component of Corporate and Other (see Note 23). Stranded costs represent overhead and other management costs which were previously included in the measure of segment profit (Operational EBITA) for the former Power Grids operating segment but are not directly attributable to the discontinued operation and thus do not qualify to be recorded as part of income from discontinued operations. Operating results of the discontinued operations are summarized as follows: ($ millions) 2018 2017 2016 Total revenues 9,698 10,028 Total cost of sales (7,378) (7,501) (7,597) Gross profit 2,320 2,527 Expenses (1,326) (1,376) (1,278) Income from operations 994 1,152 Net interest and other finance expense (55) (42) (58) Non-operational pension (cost) credit 12 9 — Income from discontinued operations before taxes 951 1,119 Provision for taxes (228) (273) (251) Income from discontinued operations, net of tax 723 846 Of the total Income from discontinued operations before taxes in the table above, $874 million, $1,034 million and $966 million in 2018, 2017 and 2016, respectively, are attributable to the Company, while the remainder is attributable to noncontrolling interests. Income from discontinued operations before taxes excludes the stranded costs previously allocated to the Power Grids operating segment. As a result, $297 million, $286 million and $252 million, for 2018, 2017 and 2016, respectively, of allocated overhead and other management costs which were previously included in the measure of segment profit for the Power Grids operating segment are now reported as part of Corporate and Other. In addition, in the table above, Net interest and other finance expense in 2018, 2017 and 2016 includes $43 million, $33 million and $36 million, respectively, of interest expense which has been recorded on an allocated basis in accordance with the Company’s accounting policy election. In 2018, Income from discontinued operations before taxes includes $18 million for costs incurred to execute the transaction. Included in the reported Total revenues of the Company for 2018, 2017 and 2016 are revenues for sales from the Company’s operating segments to the Power Grids business of $243 million, $263 million and $300 million, respectively, which represent intercompany transactions that, prior to Power Grids being classified as a discontinued operation, were eliminated in the Company’s Consolidated Financial Statements (See Note 23). The major components of assets and liabilities held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets are summarized as follows: December 31, ($ in millions) 2018 2017 Receivables, net 2,377 2,406 Contract assets 1,236 1,008 Inventories, net 1,457 1,518 Other current assets 94 111 Current assets held for sale 5,164 5,043 Property, plant and equipment, net 1,477 1,559 Goodwill 1,620 1,663 Other non-current assets 330 338 Non-current assets held for sale 3,427 3,560 Accounts payable, trade 1,732 1,683 Contract liabilities 998 1,116 Other current liabilities 1,455 1,721 Current liabilities held for sale 4,185 4,520 Pension and other employee benefits 268 293 Other non-current liabilities 161 177 Non-current liabilities held for sale 429 470 Reclassifications and other changes Changes in presentation and disclosure relating to the adoption of new accounting pronouncements Revenue from contracts with customers In connection with the adoption of the new accounting pronouncement, Revenue from contracts with customers (see Note 2 for a description of the adoption of the policy), the Company has provided certain additional disaggregated revenue disclosures in Note 23, including the initial disclosure of amounts for 2017 and 2016. While comparative information has not been restated due to the adoption of this standard, the separate presentation of Contract assets and Contract liabilities in the Consolidated Balance Sheets resulted in a reclassification of certain previously presented amounts. The following table presents the changes in prior period amounts which have been reclassified in the Consolidated Balance Sheets to conform to the presentation requirements of the new standard and all amounts presented give effect to the discontinued operations as described above: December 31, 2017 ($ in millions) Previous Adjusted Previous Adjusted Consolidated Balance Sheet Current assets Current liabilities Receivables, net (1) 7,002 5,861 Contract liabilities (2)(3)(4) — 1,792 Contract assets (1) — 1,141 Billings in excess of sales (2) 744 — Inventories, net (3) 3,591 3,737 Advances from customers (2)(3) 1,047 — Other current liabilities (4) 3,510 3,509 Total assets 43,262 43,458 Total liabilities 27,913 28,109 (1) $1,141 million of unbilled receivables previously included in Receivables have been reclassified to Contract assets. (2) Amounts previously presented as Billings in excess of sales and Advances from customers have been reclassified to Contract liabilities. (3) $146 million of advances from customers, previously recorded net within Inventories, have been reclassified to Advances from customers that are now recorded within Contract liabilities. This accounting change also increased the amounts previously reported at December 31, 2017 and 2016, for the respective Total assets for the operating segments. (4) Certain amounts recorded as deferred revenues, totaling $1 million, have been reclassified from Other current liabilities to Contract liabilities. In addition, new disclosures have been provided in Note 8 relating to Contract assets and Contract liabilities. Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost As described in Note 2, the Company now presents the total Non-operational pension cost/credit as a total outside of income from operations. The components of Non-operational pension cost/credit are summarized in Note 17. The amounts disclosed for 2017 and 2016 were previously included as a component of income from operations. Changes affecting operating segments Effective January 1, 2018, management responsibility and oversight of certain remaining engineering, procurement and construction (EPC) businesses, previously included principally in the Robotics and Motion operating segment (EPC-RM) and the former Power Grids business (EPC-PG), were transferred to a new non-core operating business within Corporate and Other. As a result, the following amounts, which were previously reported in their respective operating segments, have been included in Corporate and Other in 2017 and 2016: 2017 2016 ($ millions) EPC-RM EPC-PG EPC-RM EPC-PG Third-party revenues 5 526 18 897 Operational EBITA (82) (55) (9) (13) Total assets 18 680 13 853 Depreciation and amortization — 2 — 6 Capital expenditure — — — 3 In addition, during 2018, the Company changed the allocation of Cash and cash equivalents to the operating segments such that all amounts are attributed to Corporate and Other (see Note 23). As a result, at December 31, 2017 and 2016, $1,932 million and $2,098 million, respectively, of Cash and cash equivalents was reallocated from the Company’s operating segments (including the former Power Grids segment) to Corporate and Other. Previously, these amounts were primarily reported in the total assets for the Electrification Products operating segment and the former Power Grids segment. Total assets at December 31, 2017 and 2016 for the reportable segments and Corporate and Other have been adjusted to reflect this classification. Separate disclosure of Swiss and International employee benefit plans and other In 2018, the Company commenced separate disclosure of Swiss and International (outside Switzerland) benefit plans and has provided a comparable presentation for 2017 and 2016 information. Certain pension plan assets previously disclosed within the fair value hierarchy at December 31, 2017, are now presented using the NAV practical expedient and not subject to leveling (see Note 17). |
Acquisitions and business dives
Acquisitions and business divestments | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions and business divestments | |
Acquisitions and business divestments | Note 4—Acquisitions and business divestments Acquisitions Acquisitions were as follows: ($ in millions, except number of acquired businesses) 2018 2017 2016 Purchase price for acquisitions (net of cash acquired) (1) 2,638 1,992 13 Aggregate excess of purchase price over fair value of net assets acquired (2) 1,472 1,267 12 Number of acquired businesses 3 4 1 (1) Excluding changes in cost- and equity-accounted companies. (2) Recorded as goodwill (see Note 11). In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over fair value of net assets acquired” amounts for 2018, relate primarily to the acquisition of GE Industrial Solutions (GEIS), and for 2017, relate primarily to the acquisition of Bernecker + Rainer Industrie-Elektronik GmbH (B&R). In 2016, acquisitions were not significant. Acquisitions of controlling interests have been accounted for under the acquisition method and have been included in the Company’s Consolidated Financial Statements since the date of acquisition. On June 30, 2018, the Company acquired through numerous share and asset purchases substantially all the assets, liabilities and business activities of GEIS, General Electric’s global electrification solutions business. GEIS, headquartered in Atlanta, United States, provides technologies that distribute and control electricity and support the commercial, data center, health care, mining, renewable energy, oil and gas, water and telecommunications sectors. The resulting cash outflows for the Company amounted to $2,622 million (net of cash acquired of $192 million). The acquisition strengthens the Company’s global position in electrification and expands its access to the North American market through strong customer relationships, a large installed base and extensive distribution networks. Consequently, the goodwill acquired represents expected operating synergies and cost savings as well as intangible assets that are not separable such as employee know-how and expertise. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, the purchase price allocation for acquisitions is preliminary for up to 12 months after the acquisition date and is subject to refinement as more detailed analyses are completed and additional information about the fair values of the acquired assets and liabilities becomes available. Given the timing and complexity of the acquisition of GEIS, the purchase price allocation in the Company’s Consolidated Financial Information has not yet been finalized, primarily relating to amounts allocated to net working capital, pension obligations, current and deferred income taxes as well as intangible assets. At December 31, 2018, the Company is still gathering, analyzing and evaluating relevant information, including certain inputs required for the valuation of intangibles. As a result, amounts recorded in the preliminary purchase price allocation may change in 2019. The final purchase price adjustments as well as the final fair value determinations could result in material adjustments to the values presented in the preliminary purchase price allocation table below. On July 6, 2017, the Company acquired the shares of B&R, a worldwide provider of product- and software-based, open-architecture solutions for machine and factory automation. This acquisition closes a gap in the Company’s industrial automation portfolio and consequently the goodwill acquired represents the future benefits associated with product portfolio expansion. The aggregate allocation of the purchase consideration for business acquisitions in 2018 and 2017, was as follows: 2018 2017 Preliminary allocated amounts (1) Weighted- Weighted- average Allocated average ($ in millions) GEIS Other Total useful life amounts (1) useful life Technology 87 — 87 7 years 412 7 years Customer Relationships 214 — 214 14 years 264 20 years Trade names 122 — 122 13 years 61 10 years Supply agreement 34 — 34 13 years — Intangible assets 457 — 457 737 Property, plant and equipment 379 9 388 131 Debt acquired — — — (50) Deferred tax liabilities (110) (1) (111) (249) Inventories 435 3 438 176 Other assets and liabilities, net (2) 126 (25) 101 (20) Goodwill (3) 1,442 30 1,472 1,267 Noncontrolling interest (107) — (107) — Total consideration (net of cash acquired) (4) 2,622 16 2,638 1,992 (1) Excludes measurement period adjustments related to prior year acquisitions. (2) Gross receivables from the GEIS acquisition totaled $658 million; the fair value of which was $624 million after adjusting for contractual cash flows not expected to be collected. (3) The Company expects that goodwill recorded in certain jurisdictions will be tax deductible. The amount is subject to the finalization of the purchase price allocation in 2019. (4) Primarily relates to the acquisition of GEIS in 2018 and B&R in 2017. Cash acquired in the GEIS acquisition totaled $192 million. The Company’s Consolidated Income Statement for 2018, includes total revenues of $1,317 million and net income of $1 million in respect of GEIS since the date of acquisition. The unaudited pro forma financial information in the table below summarizes the combined pro forma results of the Company and GEIS for 2018 and 2017, as if GEIS had been acquired on January 1, 2017. ($ in millions) 2018 2017 Total revenues 28,936 27,881 Income from continuing operations, net of tax 1,622 1,631 The pro forma results are for information purposes only and do not include any anticipated cost synergies or other effects of the planned integration of GEIS. Accordingly, such pro forma amounts are not necessarily indicative of the results that would have occurred had the acquisition been completed on the date indicated, nor are they indicative of the future operating results of the combined company. The unaudited pro forma results above include certain adjustments related to the GEIS acquisition. The table below summarizes the adjustments necessary to present the pro forma financial information of the combined entity as if GEIS had been acquired on January 1, 2017. ($ in millions) 2018 2017 Impact on cost of sales from additional amortization of intangible assets (10) (20) Impact on cost of sales from fair valuing acquired inventory 26 (26) Impact on cost of sales from additional depreciation of property, plant and equipment (4) (8) Impact on selling, general and administrative expenses from additional amortization of intangible assets (5) (12) Impact on selling, general and administrative expenses from acquisition-related costs 44 20 Impact on interest expense from financing costs (15) (62) Taxation adjustments (5) 33 Total pro forma adjustments 31 (75) Business divestments In 2017, the Company received proceeds (net of transaction costs and cash disposed) of $605 million, relating to divestments of consolidated businesses and recorded net gains of $252 million in “Other income (expense), net” on the sale of such businesses. These are primarily due to the divestment of the Company’s high-voltage cables and cable accessories businesses (the Cables business) in March 2017 and the divestment of the Oil & Gas EPC business in December 2017. The assets and liabilities of the Cables business were classified as held for sale in the Company’s Consolidated Balance Sheets at December 31, 2016. The Company has retained certain obligations of the Cables business and thus the Company remains directly or indirectly liable for these liabilities which existed at the date of the divestment. Subsequent to the divestment, the Company recorded a loss of $94 million in 2017 for changes in the amounts recorded for these obligations. In addition, the Company has provided certain performance guarantees to third parties which guarantee the performance of the buyer under existing contracts with customers as well as for certain capital expenditures of the divested business (see Note 15). In 2018 and 2016, there were no significant amounts recognized from divestments of consolidated businesses. |
Cash and equivalents, marketabl
Cash and equivalents, marketable securities and short-term investments | 12 Months Ended |
Dec. 31, 2018 | |
Cash and equivalents, marketable securities and short-term investments | |
Cash and equivalents, marketable securities and short-term investments | Note 5—Cash and equivalents, marketable securities and short-term investments Current assets Cash and equivalents and marketable securities and short-term investments consisted of the following: December 31, 2018 Marketable securities Gross Gross and unrealized unrealized Cash and short-term ($ in millions) Cost basis gains losses Fair value equivalents investments Changes in fair value recorded in net income Cash 1,983 1,983 1,983 Time deposits 1,463 1,463 1,462 1 Other short-term investments 206 206 206 Equity securities (1) 206 (3) 203 203 3,858 — (3) 3,855 3,445 410 Changes in fair value recorded in other comprehensive income Debt securities available-for-sale: —U.S. government obligations 217 (3) 214 214 —Corporate 90 (2) 88 88 307 — (5) 302 — 302 Total 4,165 — (8) 4,157 3,445 712 December 31, 2017 Marketable securities Gross Gross and unrealized unrealized Cash and short-term ($ in millions) Cost basis gains losses Fair value equivalents investments Changes in fair value recorded in net income Cash 1,963 1,963 1,963 Time deposits 2,834 2,834 2,563 271 Other short-term investments 305 — 305 305 5,102 — — 5,102 4,526 576 Changes in fair value recorded in other comprehensive income Equity securities 152 13 165 165 Debt securities available-for-sale: —U.S. government obligations 127 (2) 125 125 —Other government obligations 2 — 2 2 —Corporate 215 1 (1) 215 215 496 14 (3) 507 — 507 Total 5,598 14 (3) 5,609 4,526 1,083 (1) See “New accounting pronouncements - Applicable for current period” in Note 2 for changes applicable in 2018. Included in Other short-term investments at December 31, 2018 and 2017, are receivables of $206 million and $305 million, respectively, representing reverse repurchase agreements. These collateralized lendings, made to a financial institution, have maturity dates of less than one year. Contractual maturities Contractual maturities of debt securities consisted of the following: December 31, 2018 Available-for-sale ($ in millions) Cost basis Fair value Less than one year 80 80 One to five years 166 163 Six to ten years 60 58 Due after ten years 1 1 Total 307 302 At December 31, 2018 and 2017, the Company pledged $68 million and $66 million, respectively, of available-for-sale marketable securities as collateral for issued letters of credit and other security arrangements. |
Derivative financial instrument
Derivative financial instruments | 12 Months Ended |
Dec. 31, 2018 | |
Derivative financial instruments | |
Derivative financial instruments | Note 6—Derivative financial instruments The Company is exposed to certain currency, commodity, interest rate and equity risks arising from its global operating, financing and investing activities. The Company uses derivative instruments to reduce and manage the economic impact of these exposures. Currency risk Due to the global nature of the Company’s operations, many of its subsidiaries are exposed to currency risk in their operating activities from entering into transactions in currencies other than their functional currency. To manage such currency risks, the Company’s policies require its subsidiaries to hedge their foreign currency exposures from binding sales and purchase contracts denominated in foreign currencies. For forecasted foreign currency denominated sales of standard products and the related foreign currency denominated purchases, the Company’s policy is to hedge up to a maximum of 100 percent of the forecasted foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted exposures greater than 12 months are not hedged. Forward foreign exchange contracts are the main instrument used to protect the Company against the volatility of future cash flows (caused by changes in exchange rates) of contracted and forecasted sales and purchases denominated in foreign currencies. In addition, within its treasury operations, the Company primarily uses foreign exchange swaps and forward foreign exchange contracts to manage the currency and timing mismatches arising in its liquidity management activities. Commodity risk Various commodity products are used in the Company’s manufacturing activities. Consequently it is exposed to volatility in future cash flows arising from changes in commodity prices. To manage the price risk of commodities, the Company’s policies require that its subsidiaries hedge the commodity price risk exposures from binding contracts, as well as at least 50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure over the next 12 months or longer (up to a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks of commodities. Interest rate risk The Company has issued bonds at fixed rates. Interest rate swaps are used to manage the interest rate risk associated with certain debt and generally such swaps are designated as fair value hedges. In addition, from time to time, the Company uses instruments such as interest rate swaps, interest rate futures, bond futures or forward rate agreements to manage interest rate risk arising from the Company’s balance sheet structure but does not designate such instruments as hedges. Equity risk The Company is exposed to fluctuations in the fair value of its warrant appreciation rights (WARs) issued under its MIP. A WAR gives its holder the right to receive cash equal to the market price of an equivalent listed warrant on the date of exercise. To eliminate such risk, the Company has purchased cash-settled call options, indexed to the shares of the Company, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. Volume of derivative activity In general, while the Company’s primary objective in its use of derivatives is to minimize exposures arising from its business, certain derivatives are designated and qualify for hedge accounting treatment while others either are not designated or do not qualify for hedge accounting. Foreign exchange and interest rate derivatives The gross notional amounts of outstanding foreign exchange and interest rate derivatives (whether designated as hedges or not) were as follows: Type of derivative Total notional amounts at December 31, ($ in millions) 2018 2017 2016 Foreign exchange contracts 13,612 16,261 14,144 Embedded foreign exchange derivatives 733 899 1,125 Interest rate contracts 3,300 5,706 3,021 Derivative commodity contracts The Company uses derivatives to hedge its direct or indirect exposure to the movement in the prices of commodities which are primarily copper, silver and aluminum. The following table shows the notional amounts of outstanding commodity derivatives (whether designated as hedges or not), on a net basis, to reflect the Company’s requirements in the various commodities: Total notional amounts at December 31, Type of derivative Unit 2018 2017 2016 Copper swaps metric tonnes 46,143 28,976 17,667 Silver swaps ounces 2,861,294 1,966,729 1,586,395 Aluminum swaps metric tonnes 9,491 1,869 27 Equity derivatives At December 31, 2018, 2017 and 2016, the Company held 41 million, 37 million and 47 million cash-settled call options indexed to ABB Ltd shares (conversion ratio 5:1) with a total fair value of $6 million, $42 million and $23 million, respectively. Cash flow hedges As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to manage its commodity risks and cash-settled call options to hedge its WAR liabilities. Where such instruments are designated and qualify as cash flow hedges, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. Any ineffectiveness in the hedge relationship, or hedge component excluded from the assessment of effectiveness, is recognized in earnings during the current period. At December 31, 2018, 2017 and 2016, “Accumulated other comprehensive loss” included net unrealized losses of $16 million, net unrealized gains of $12 million and net unrealized losses of $1 million, respectively, net of tax, on derivatives designated as cash flow hedges. Of the amount at December 31, 2018, net losses of $6 million are expected to be reclassified to earnings in 2019. At December 31, 2018, the longest maturity of a derivative classified as a cash flow hedge was 61 months. In 2018, 2017 and 2016, the amounts of gains or losses, net of tax, reclassified into earnings due to the discontinuance of cash flow hedge accounting and the amount of ineffectiveness in cash flow hedge relationships directly recognized in earnings were not significant. The pre-tax effects of derivative instruments, designated and qualifying as cash flow hedges, on “Accumulated other comprehensive loss” (OCI) and the Consolidated Income Statements were as follows: Gains (losses) recognized Gains (losses) reclassified in OCI on derivatives from OCI into income (effective portion) (effective portion) ($ in millions) 2018 2017 2016 2018 2017 2016 Type of derivative Location Foreign exchange contracts (6) 3 (7) Total revenues — 2 1 Total cost of sales — 2 9 Commodity contracts (9) 9 3 Total cost of sales — 6 (2) Cash-settled call options (36) 22 15 SG&A expenses (1) (22) 15 9 Total (51) 34 11 (22) 25 17 (1) SG&A expenses represent “Selling, general and administrative expenses”. The amounts in respect of gains (losses) recognized in income for hedge ineffectiveness and amounts excluded from effectiveness testing were not significant in 2018, 2017 and 2016. Net derivative losses of $24 million and net derivative gains of $23 million and $14 million, net of tax, were reclassified from “Accumulated other comprehensive loss” to earnings during 2018, 2017 and 2016, respectively. Fair value hedges To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in fair value of the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”. Hedge ineffectiveness of instruments designated as fair value hedges in 2018, 2017 and 2016, was not significant. The effect of Interest rate contracts, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows: ($ in millions) 2018 2017 2016 Gains (losses) recognized in Interest and other finance expense: - on derivatives designated as fair value hedges (4) (23) (28) - on hedged item 5 27 30 Derivatives not designated in hedge relationships Derivative instruments that are not designated as hedges or do not qualify as either cash flow or fair value hedges are economic hedges used for risk management purposes. Gains and losses from changes in the fair values of such derivatives are recognized in the same line in the income statement as the economically hedged transaction. Furthermore, under certain circumstances, the Company is required to split and account separately for foreign currency derivatives that are embedded within certain binding sales or purchase contracts denominated in a currency other than the functional currency of the subsidiary and the counterparty. The gains (losses) recognized in the Consolidated Income Statements on derivatives not designated in hedging relationships were as follows: ($ in millions) Gains (losses) recognized in income Type of derivative not designated as a hedge Location 2018 2017 2016 Foreign exchange contracts Total revenues (121) 92 (90) Total cost of sales 46 (41) (28) SG&A expenses (1) 10 (18) 8 Non-order related research and development (1) — (1) Interest and other finance expense 40 22 (35) Embedded foreign exchange contracts Total revenues 58 7 (5) Total cost of sales (4) (2) (4) SG&A expenses (1) 2 5 (2) Commodity contracts Total cost of sales (33) 31 31 Other Interest and other finance expense 3 (2) (7) Total — 94 (133) (1) SG&A expenses represent “Selling, general and administrative expenses”. The fair values of derivatives included in the Consolidated Balance Sheets were as follows: December 31, 2018 Derivative assets Derivative liabilities Non-current Non-current Current in in “Other Current in in “Other “Other current non-current “Other current non-current ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts — — 1 4 Commodity contracts — — 2 — Interest rate contracts — 35 — 1 Cash-settled call options 3 3 — — Total 3 38 3 5 Derivatives not designated as hedging instruments: Foreign exchange contracts 117 14 160 30 Commodity contracts 8 1 21 1 Embedded foreign exchange derivatives 15 10 8 1 Total 140 25 189 32 Total fair value 143 63 192 37 December 31, 2017 Derivative assets Derivative liabilities Non-current Non-current Current in in “Other Current in in “Other “Other current non-current “Other current non-current ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts 1 — — 1 Commodity contracts 5 — — — Interest rate contracts — 41 — 4 Cash-settled call options 25 16 — — Total 31 57 — 5 Derivatives not designated as hedging instruments: Foreign exchange contracts 134 24 183 62 Commodity contracts 31 1 7 — Cross-currency interest rate swaps — — 2 — Cash-settled call options — 1 — — Embedded foreign exchange derivatives 15 10 15 3 Total 180 36 207 65 Total fair value 211 93 207 70 Close-out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre-defined trigger events. Although the Company is party to close-out netting agreements with most derivative counterparties, the fair values in the tables above and in the Consolidated Balance Sheets at December 31, 2018 and 2017, have been presented on a gross basis. The Company's netting agreements and other similar arrangements allow net settlements under certain conditions. At December 31, 2018 and 2017, information related to these offsetting arrangements was as follows: ($ in millions) December 31, 2018 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net asset similar arrangement assets case of default received received exposure Derivatives 181 (121) — — 60 Reverse repurchase agreements 206 — — (206) — Total 387 (121) — (206) 60 ($ in millions) December 31, 2018 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 220 (121) — — 99 Total 220 (121) — — 99 ($ in millions) December 31, 2017 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net asset similar arrangement assets case of default received received exposure Derivatives 279 (167) — — 112 Reverse repurchase agreements 305 — — (305) — Total 584 (167) — (305) 112 ($ in millions) December 31, 2017 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 259 (167) — — 92 Total 259 (167) — — 92 |
Fair values
Fair values | 12 Months Ended |
Dec. 31, 2018 | |
Fair values | |
Fair values | Note 7—Fair values Recurring fair value measures The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows: December 31, 2018 Total ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 203 — 203 Debt securities—U.S. government obligations 214 — — 214 Debt securities—Corporate — 88 — 88 Derivative assets—current in “Other current assets” — 143 — 143 Derivative assets—non-current in “Other non-current assets” — 63 — 63 Total 214 497 — 711 Liabilities Derivative liabilities—current in “Other current liabilities” — 192 — 192 Derivative liabilities—non-current in “Other non-current liabilities” — 37 — 37 Total — 229 — 229 December 31, 2017 Total ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 165 — 165 Debt securities—U.S. government obligations 125 — — 125 Debt securities—Other government obligations — 2 — 2 Debt securities—Corporate — 215 — 215 Receivable in "Other non-current assets": Receivable under securities lending arrangement 79 — — 79 Derivative assets—current in “Other current assets” — 211 — 211 Derivative assets—non-current in “Other non-current assets” — 93 — 93 Total 204 686 — 890 Liabilities Derivative liabilities—current in “Other current liabilities” — 207 — 207 Derivative liabilities—non-current in “Other non-current liabilities” — 70 — 70 Total — 277 — 277 During 2018, 2017 and 2016 there have been no reclassifications for any financial assets or liabilities between Level 1 and Level 2. The Company uses the following methods and assumptions in estimating fair values of financial assets and liabilities measured at fair value on a recurring basis: · Securities in “Marketable securities and short‑term investments” and “Other non-current assets”: If quoted market prices in active markets for identical assets are available, these are considered Level 1 inputs; however, when markets are not active, these inputs are considered Level 2. If such quoted market prices are not available, fair value is determined using market prices for similar assets or present value techniques, applying an appropriate risk‑free interest rate adjusted for non-performance risk. The inputs used in present value techniques are observable and fall into the Level 2 category. The fair value of the receivable under the securities lending arrangement has been determined based on the fair value of the security lent. · Derivatives: The fair values of derivative instruments are determined using quoted prices of identical instruments from an active market, if available (Level 1 inputs). If quoted prices are not available, price quotes for similar instruments, appropriately adjusted, or present value techniques, based on available market data, or option pricing models are used. Cash‑settled call options hedging the Company’s WAR liability are valued based on bid prices of the equivalent listed warrant. The fair values obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input unless significant unobservable inputs are used. Non-recurring fair value measures There were no significant non‑recurring fair value measurements during 2018 and 2017. Disclosure about financial instruments carried on a cost basis The fair values of financial instruments carried on a cost basis were as follows: December 31, 2018 Carrying Total ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,983 1,983 — — 1,983 Time deposits 1,462 — 1,462 — 1,462 Marketable securities and short-term investments (excluding securities): Time deposits 1 — 1 — 1 Receivables under reverse repurchase agreements 206 — 206 — 206 Other non-current assets: Loans granted 30 — 31 — 31 Restricted cash and cash deposits 39 39 — — 39 Liabilities Short-term debt and current maturities of long-term debt (excluding capital lease obligations) 2,008 1,480 528 — 2,008 Long-term debt (excluding capital lease obligations) 6,457 5,839 707 — 6,546 December 31, 2017 Carrying Total ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,963 1,963 — — 1,963 Time deposits 2,563 — 2,563 — 2,563 Marketable securities and short-term investments (excluding securities): Time deposits 271 — 271 — 271 Receivables under reverse repurchase agreements 305 — 305 — 305 Other non-current assets: Loans granted 29 — 30 — 30 Restricted cash and cash deposits 35 35 — — 35 Liabilities Short-term debt and current maturities of long-term debt (excluding capital lease obligations) 694 400 294 — 694 Long-term debt (excluding capital lease obligations) 6,567 6,046 773 — 6,819 The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis: · Cash and equivalents (excluding securities with original maturities up to 3 months), and Marketable securities and short‑term investments (excluding securities): The carrying amounts approximate the fair values as the items are short‑term in nature. · Other non-current assets: Includes (i) loans granted whose fair values are based on the carrying amount adjusted using a present value technique to reflect a premium or discount based on current market interest rates (Level 2 inputs), (ii) restricted cash whose fair values approximate the carrying amounts (Level 1 inputs). · Short‑term debt and current maturities of long‑term debt (excluding capital lease obligations): Short-term debt includes commercial paper, bank borrowings and overdrafts. The carrying amounts of short‑term debt and current maturities of long‑term debt, excluding capital lease obligations, approximate their fair values. · Long‑term debt (excluding capital lease obligations): Fair values of bonds are determined using quoted market prices (Level 1 inputs), if available. For bonds without available quoted market prices and other long-term debt, the fair values are determined using a discounted cash flow methodology based upon borrowing rates of similar debt instruments and reflecting appropriate adjustments for non-performance risk (Level 2 inputs). |
Receivables, net and Contract a
Receivables, net and Contract assets and liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Receivables, net and Contract assets and liabilities | |
Receivables, net and Contract assets and liabilities | Note 8—Receivables, net and Contract assets and liabilities “Receivables, net” consisted of the following: December 31, ($ in millions) 2018 2017 Trade receivables 5,970 5,553 Other receivables 635 510 Allowance (219) (202) Total 6,386 5,861 “Trade receivables” in the table above includes contractual retention amounts billed to customers of $176 million and $168 million at December 31, 2018 and 2017, respectively. Management expects that the substantial majority of related contracts will be completed and the substantial majority of the billed amounts retained by the customer will be collected. Of the retention amounts outstanding at December 31, 2018, 62 percent and 28 percent are expected to be collected in 2019 and 2020, respectively. “Other receivables” in the table above consists of value added tax, claims, rental deposits and other non-trade receivables. The reconciliation of changes in the allowance for doubtful accounts is as follows: ($ in millions) 2018 2017 2016 Balance at January 1, 202 202 160 Additions 126 61 116 Deductions (93) (74) (64) Exchange rate differences (16) 13 (10) Balance at December 31, 219 202 202 The following table provides information about Contract assets and Contract liabilities: ($ in millions) 2018 2017 2016 Contract assets 1,082 1,141 1,222 Contract liabilities 1,707 1,792 1,690 Contract assets primarily relate to the Company’s right to receive consideration for work completed but for which no invoice has been issued at the reporting date. Contract assets are transferred to receivables when rights to receive payment become unconditional. Management expects that the majority of the amounts will be collected within one year of the respective balance sheet date. Contract liabilities primarily relate to up-front advances received on orders from customers as well as amounts invoiced to customers in excess of revenues recognized predominantly on long-term projects. Contract liabilities are reduced as work is performed and as revenues are recognized. The significant changes in the Contract assets and Contract liabilities balances were as follows: 2018 2017 Contract Contract Contract Contract ($ in millions) assets liabilities assets liabilities Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2018/2017 (879) (1,212) Additions to Contract liabilities - excluding amounts recognized as revenue during the period 518 868 Receivables recognized that were included in the Contract assets balance at Jan 1, 2018/2017 (633) (584) At December 31, 2018, the Company had unsatisfied performance obligations totaling $13,084 million and, of this amount, the Company expects to fulfill approximately 76 percent of the obligations in 2019, approximately 14 percent of the obligations in 2020 and the balance thereafter. |
Inventories, net
Inventories, net | 12 Months Ended |
Dec. 31, 2018 | |
Inventories, net | |
Inventories, net | Note 9—Inventories, net “ Inventories, net” consisted of the following: December 31, ($ in millions) 2018 2017 Raw materials 1,823 1,412 Work in process 837 840 Finished goods 1,525 1,379 Advances to suppliers 99 106 Total 4,284 3,737 |
Property, plant and equipment,
Property, plant and equipment, net | 12 Months Ended |
Dec. 31, 2018 | |
Property, plant and equipment, net | |
Property, plant and equipment, net | Note 10—Property, plant and equipment, net “Property, plant and equipment, net” consisted of the following: December 31, ($ in millions) 2018 2017 Land and buildings 3,573 3,268 Machinery and equipment 5,624 5,572 Construction in progress 464 511 9,661 9,351 Accumulated depreciation (5,528) (5,547) Total 4,133 3,804 Assets under capital leases included in “Property, plant and equipment, net” were as follows: December 31, ($ in millions) 2018 2017 Land and buildings 171 127 Machinery and equipment 69 81 240 208 Accumulated depreciation (122) (105) Total 118 103 In 2018, 2017 and 2016 depreciation, including depreciation of assets under capital leases, was $578 million, $549 million and $566 million, respectively. In 2018, 2017 and 2016 there were no significant impairments of property, plant or equipment. |
Goodwill and other intangible a
Goodwill and other intangible assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and other intangible assets | |
Goodwill and other intangible assets | Note 11—Goodwill and other intangible assets The changes in “Goodwill” below have been recast to reflect the reorganization in 2018 of the Company’s operating segments as outlined in Note 23: Electrification Industrial Robotics Corporate ($ in millions) Products Automation and Motion and Other Total Cost at January 1, 2017 2,805 1,592 3,536 38 7,971 Accumulated impairment charges — — — (18) (18) Balance at January 1, 2017 2,805 1,592 3,536 20 7,953 Goodwill acquired during the year — 1,263 4 — 1,267 Goodwill allocated to disposals — (1) — (1) (2) Exchange rate differences and other 164 85 67 2 318 Balance at December 31, 2017 2,969 2,939 3,607 21 9,536 Goodwill acquired during the year 1,442 — 30 — 1,472 Goodwill allocated to disposals (31) — — — (31) Exchange rate differences and other (104) (75) (34) — (213) Balance at December 31, 2018 4,276 2,864 3,603 21 10,764 In 2018, goodwill acquired primarily relates to GEIS, acquired in June, 2018, which has been allocated to the Electrification Products operating segment. In 2017, goodwill acquired primarily relates to B&R, acquired in July, 2017, which has been allocated to the Industrial Automation operating segment. Intangible assets other than goodwill consisted of the following: December 31, 2018 2017 Gross Net Gross Net carrying Accumulated carrying carrying Accumulated carrying ($ in millions) amount amortization amount amount amortization amount Capitalized software for internal use 779 (586) 193 704 (572) 132 Capitalized software for sale 30 (30) — 31 (31) — Intangibles other than software: Customer-related 2,609 (909) 1,700 2,452 (782) 1,670 Technology-related 1,131 (701) 430 1,082 (636) 446 Marketing-related 483 (240) 243 366 (199) 167 Other 67 (26) 41 33 (23) 10 Total 5,099 (2,492) 2,607 4,668 (2,243) 2,425 Additions to intangible assets other than goodwill consisted of the following: ($ in millions) 2018 2017 Capitalized software for internal use 139 69 Intangibles other than software: Customer-related 214 264 Technology-related 87 412 Marketing-related 122 61 Other 34 — Total 596 806 Included in the additions of $596 million and $806 million in 2018 and 2017, respectively, were the following intangible assets other than goodwill related to business combinations: 2018 2017 Amount Weighted-average Amount Weighted-average ($ in millions) acquired useful life acquired useful life Capitalized software for internal use 2 years Intangibles other than software: Customer-related 14 years 264 20 years Technology-related 7 years 412 7 years Marketing-related 13 years 61 10 years Other 13 years — Total 737 Amortization expense of intangible assets other than goodwill consisted of the following: ($ in millions) 2018 2017 2016 Capitalized software for internal use 59 50 50 Intangibles other than software 279 237 254 Total 338 287 304 In 2018, 2017 and 2016, impairment charges on intangible assets other than goodwill were not significant. At December 31, 2018, future amortization expense of intangible assets other than goodwill is estimated to be: ($ in millions) 2019 342 2020 321 2021 285 2022 253 2023 234 Thereafter 1,172 Total 2,607 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt | |
Debt | Note 12—Debt The Company’s total debt at December 31, 2018 and 2017, amounted to $8,618 million and $7,408 million, respectively. Short-term debt and current maturities of long-term debt The Company’s “Short‑term debt and current maturities of long‑term debt” consisted of the following: December 31, ($ in millions) 2018 2017 Short-term debt (weighted-average interest rate of 2.3% and 2.7%, respectively) 561 317 Current maturities of long-term debt (weighted-average nominal interest rate of 2.7% and 2.0%, respectively) 1,470 409 Total 2,031 726 Short‑term debt primarily represents short‑term loans from various banks and issued commercial paper. At December 31, 2018, the Company had in place two commercial paper programs: a $2 billion Euro-commercial paper program for the issuance of commercial paper in a variety of currencies, and a $2 billion commercial paper program for the private placement of U.S. dollar denominated commercial paper in the United States. At December 31, 2018 and 2017, $292 million and $259 million, respectively, was outstanding under the $2 billion program in the United States. At December 31, 2018, $172 million was outstanding under the Euro-commercial $2 billion program. No amount was outstanding under this program at December 31, 2017. In addition, the Company has a $2 billion multicurrency revolving credit facility, maturing in 2021, for general corporate purposes. Interest costs on drawings under the facility are LIBOR or EURIBOR (depending on the currency of the drawings) plus a margin of 0.20 percent, while commitment fees (payable on the unused portion of the facility) amount to 35 percent of the margin, which represents commitment fees of 0.07 percent per annum. Utilization fees, payable on drawings, amount to 0.075 percent per annum on drawings up to one-third of the facility, 0.15 percent per annum on drawings in excess of one‑third but less than or equal to two‑thirds of the facility, or 0.30 percent per annum on drawings over two‑thirds of the facility. No amount was drawn at December 31, 2018 and 2017. The facility contains cross‑default clauses whereby an event of default would occur if the Company were to default on indebtedness as defined in the facility, at or above a specified threshold. Long‑term debt The Company raises long term debt in various currencies, maturities and on various interest rate terms. For certain of its debt obligations, the Company utilizes derivative instruments to modify its interest rate exposure. In particular, the Company uses interest rate swaps to effectively convert certain fixed‑rate long‑term debt into floating rate obligations. The carrying value of debt, designated as being hedged by fair value hedges, is adjusted for changes in the fair value of the risk component of the debt being hedged. The following table summarizes the Company’s long‑term debt considering the effect of interest rate swaps. Consequently, a fixed‑rate debt subject to a fixed‑to‑floating interest rate swap is included as a floating rate debt in the table below: December 31, 2018 2017 Nominal Effective Nominal Effective ($ in millions, except % data) Balance rate rate Balance rate rate Floating rate 3,106 1.7 % 1.1 % 3,213 1.7 % 0.6 % Fixed rate 4,951 3.6 % 3.6 % 3,878 3.5 % 3.5 % 8,057 7,091 Current portion of long-term debt (1,470) 2.7 % 2.7 % (409) 2.0 % 2.0 % Total 6,587 6,682 At December 31, 2018, the principal amounts of long-term debt repayable (excluding capital lease obligations) at maturity were as follows: ($ in millions) 2019 1,448 2020 326 2021 1,269 2022 1,250 2023 1,252 Thereafter 2,366 Total 7,911 Details of the Company’s outstanding bonds were as follows: December 31, 2018 2017 Nominal Carrying Nominal Carrying outstanding value (1) outstanding value (1) (in millions) (in millions) Bonds: 1.50% CHF Bonds, due 2018 CHF 350 $ 358 2.625% EUR Instruments, due 2019 EUR 1,250 $ 1,431 EUR 1,250 $ 1,493 2.8% USD Notes, due 2020 USD 300 $ 299 4.0% USD Notes, due 2021 USD 650 $ 646 USD 650 $ 644 2.25% CHF Bonds, due 2021 CHF 350 $ 373 CHF 350 $ 378 5.625% USD Notes, due 2021 USD 250 $ 265 USD 250 $ 270 2.875% USD Notes, due 2022 USD 1,250 $ 1,242 USD 1,250 $ 1,256 3.375% USD Notes, due 2023 USD 450 $ 448 0.625% EUR Instruments, due 2023 EUR 700 $ 807 EUR 700 $ 834 0.75% EUR Instruments, due 2024 EUR 750 $ 862 EUR 750 $ 889 3.8% USD Notes, due 2028 USD 750 $ 746 4.375% USD Notes, due 2042 USD 750 $ 723 USD 750 $ 723 Total $ 7,842 $ 6,845 (1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate. During 2018, the Company repaid at maturity the 1.50% CHF Bonds, due 2018. The 1.50% CHF Bonds, due 2018, paid interest annually in arrears at a fixed annual rate of 1.5 percent. The 2.625% EUR Instruments, due 2019, pay interest annually in arrears at a fixed rate of 2.625 percent per annum. The 4.0% USD Notes, due 2021, pay interest semi-annually in arrears, at a fixed annual rate of 4.0 percent. The Company may redeem these notes prior to maturity, in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The 2.25% CHF Bonds, due 2021, pay interest annually in arrears, at a fixed annual rate of 2.25 percent. The Company has the option to redeem the bonds prior to maturity, in whole, at par plus accrued interest, if 85 percent of the aggregate principal amount of the bonds has been redeemed or purchased and cancelled. The Company entered into interest rate swaps to hedge its interest obligations on these bonds. After considering the impact of such swaps, these bonds effectively became floating rate Swiss franc obligations and consequently have been shown as floating rate debt in the table of long-term debt above. The 5.625% USD Notes, due 2021, pay interest semi-annually in arrears at a fixed annual rate of 5.625 percent. The Company has the option to redeem the notes prior to maturity at the greater of (i) 100 percent of the principal amount of the notes to be redeemed, and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The 2.875% USD Notes, due 2022, pay interest semi-annually in arrears at a fixed annual rate of 2.875 percent. The 4.375% USD Notes, due 2042, pay interest semi-annually in arrears at a fixed annual rate of 4.375 percent. The Company may redeem both of these notes (which were issued together in May 2012) prior to maturity, in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance (USA) Inc., a 100 percent owned finance subsidiary, and were fully and unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10 of Regulation S-X, the separate financial statements of ABB Finance (USA) Inc. are not provided. The Company has entered into interest rate swaps for an aggregate nominal amount of $1,050 million to partially hedge its interest obligations on the 2.875% USD Notes, due 2022. After considering the impact of such swaps, $1,050 million of the outstanding principal is shown as floating rate debt in the table of long-term debt above. The 0.625% EUR Instruments, due 2023, were issued in May 2016, with total net issuance proceeds of EUR 697 million (equivalent to approximately $807 million on date of issuance). These Instruments pay interest annually in arrears at a fixed rate of 0.625 percent per annum. The Company may redeem these notes three months prior to maturity (Par call date), in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The Company may redeem these instruments in whole or in part, after the Par call date at 100 percent of the principal amount of the notes to be redeemed. In 2017, the Company entered into interest rate swaps to hedge its interest on these bonds. After considering the impact of such swaps, these notes effectively became floating rate euro obligations and consequently have been shown as floating rate debt, in the table of long-term debt above. The 0.75% EUR Instruments, due 2024, were issued in May 2017, with total net issuance proceeds of EUR 745 million (equivalent to approximately $824 million on date of issuance). These Instruments pay interest annually in arrears at a fixed rate of 0.75 percent per annum and have the same early redemption terms as the 0.625% EUR Instruments above. The Company entered into interest rate swaps to hedge its interest on these bonds. After considering the impact of such swaps, these bonds effectively became floating rate euro obligations and consequently have been shown as floating rate debt in the table of long-term debt above. In April 2018, the Company issued the following notes (i) $300 million of 2.8% USD Notes, due 2020, (ii) $450 million of 3.375% USD Notes, due 2023, and (iii) $750 million of 3.8% USD Notes, due 2028. Each of the respective notes pays interest semi-annually in arrears. The aggregate net proceeds of these bond issues, after underwriting discount and other fees, amounted to $1,494 million. The Company may redeem the notes at any time prior to their maturity date in the case of the 2020 Notes, up to one month prior to their maturity date in the case of the 2023 Notes, and up to three months prior to their maturity date in the case of the 2028 Notes, in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the Notes terms, plus interest accrued at the redemption date. On or after March 3, 2023 (one month prior to their maturity date) in the case of the 2023 Notes and on or after January 3, 2028 (three months prior to their maturity date) in the case of the 2028 Notes, the Company may also redeem the notes of the applicable series, in whole or in part, at any time at a redemption price equal to 100 percent of the principal amount of the notes to be redeemed plus unpaid accrued interest to, but excluding, the redemption date. These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance (USA) Inc., a 100 percent owned finance subsidiary, and were fully and unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10 of Regulation S-X, the separate financial statements of ABB Finance (USA) Inc. are not provided. The Company’s various debt instruments contain cross-default clauses which would allow the bondholders to demand repayment if the Company were to default on any borrowing at or above a specified threshold. Furthermore, all such bonds constitute unsecured obligations of the Company and rank pari passu with other debt obligations. In addition to the bonds described above, included in long-term debt at December 31, 2018 and 2017, are capital lease obligations, bank borrowings of subsidiaries and other long-term debt, none of which is individually significant. In February 2019, the Company issued the following notes: (i) CHF 280 million of 0.3% CHF Notes, due 2024 and (ii) CHF 170 million of 1.0% CHF Notes, due 2029. Each of the respective notes pays interest annually in arrears. The Company recorded aggregate net proceeds, after underwriting discount and other fees, of CHF 449 million (equivalent to approximately $449 million on date of issuance). On March 26, 2019, the Company repaid at maturity its EUR 1,250 million 2.625% Instruments, equivalent to $1,414 million at date of payment. In addition, at March 27, 2019, the amount outstanding under the $2 billion program in the United States had increased to $825 million from $292 million at December 31, 2018, and the amount outstanding under the $2 billion Euro-commercial paper program had increased to $509 million from $172 million at December 31, 2018. |
Other provisions, other current
Other provisions, other current liabilities and other non-current liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Other provisions, other current liabilities and other non-current liabilities | |
Other provisions, other current liabilities and other non-current liabilities | Note 13—Other provisions, other current liabilities and other non-current liabilities “Other provisions” consisted of the following: December 31, ($ in millions) 2018 2017 Contract-related provisions 590 443 Restructuring and restructuring-related provisions 277 334 Provisions for contractual penalties and compliance and litigation matters 209 209 Provision for insurance-related reserves 166 153 Other 130 138 Total 1,372 1,277 “Other current liabilities” consisted of the following: December 31, ($ in millions) 2018 2017 Employee-related liabilities 1,506 1,439 Accrued expenses 546 389 Non-trade payables 477 454 Accrued customer rebates 299 230 Other tax liabilities 277 274 Income taxes payable 260 313 Derivative liabilities (see Note 6) 192 207 Accrued interest 73 61 Deferred income 36 33 Pension and other employee benefits 34 40 Other 80 69 Total 3,780 3,509 “Other non-current liabilities” consisted of the following: December 31, ($ in millions) 2018 2017 Income tax related liabilities 1,111 1,197 Provisions for contractual penalties and compliance and litigation matters 132 137 Non-current deposit liabilities 91 95 Employee-related liabilities 74 70 Environmental provisions 56 53 Derivative liabilities (see Note 6) 37 70 Deferred income 12 11 Other 176 216 Total 1,689 1,849 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2018 | |
Leases | |
Leases | Note 14—Leases The Company’s lease obligations primarily relate to real estate, vehicles and machinery. Rent expense was $364 million, $385 million and $390 million in 2018, 2017 and 2016, respectively. Sublease income received by the Company on leased assets was $7 million, $11 million and $13 million in 2018, 2017 and 2016, respectively. At December 31, 2018, future net minimum lease payments for operating leases, having initial or remaining non‑cancelable lease terms in excess of one year, consisted of the following: ($ in millions) 2019 329 2020 254 2021 191 2022 132 2023 105 Thereafter 267 1,278 Sublease income (13) Total 1,265 At December 31, 2018, the future net minimum lease payments for capital leases and the present value of the net minimum lease payments consisted of the following: ($ in millions) 2019 34 2020 27 2021 24 2022 24 2023 19 Thereafter 111 Total minimum lease payments 239 Less amount representing estimated executory costs included in total minimum lease payments (1) Net minimum lease payments 238 Less amount representing interest (87) Present value of minimum lease payments 151 Minimum lease payments have not been reduced by minimum sublease rentals due in the future under non‑cancelable subleases. Such minimum sublease rentals were not significant. The present value of minimum lease payments is included in “Short‑term debt and current maturities of long‑term debt” or “Long‑term debt” in the Consolidated Balance Sheets. |
Commitments and contingencies
Commitments and contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and contingencies | |
Commitments and contingencies | Note 15—Commitments and contingencies Contingencies—Regulatory, Compliance and Legal Regulatory In April 2014, the European Commission announced its decision regarding its investigation of anticompetitive practices in the cables industry and granted the Company full immunity from fines under its leniency program. In February 2019, the Brazilian Antitrust Authority (CADE) announced its decision regarding its investigation of anticompetitive practices in certain power businesses of the Company, including flexible alternating current transmission systems (FACTS) and power transformers, and granted the Company full immunity from fines under its leniency program. As a result of an internal investigation, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) in the United States as well as to the Serious Fraud Office (SFO) in the United Kingdom concerning certain of its past dealings with Unaoil and its subsidiaries, including alleged improper payments made by these entities to third parties. The SFO has commenced an investigation into this matter. The Company is cooperating fully with the authorities. At this time, it is not possible for the Company to make an informed judgment about the outcome of these matters. Based on findings during an internal investigation, the Company self-reported to the SEC and the DoJ, to various authorities in South Africa and other countries as well as to certain multilateral financial institutions potential suspect payments and other compliance concerns in connection with some of the Company’s dealings with Eskom and related persons. Many of those parties have expressed an interest in, or commenced an investigation into, these matters and the Company is cooperating fully with them. At this time, it is not possible for the Company to make an informed judgment about the outcome of these matters. General The Company is aware of proceedings, or the threat of proceedings, against it and others in respect of private claims by customers and other third parties with regard to certain actual or alleged anticompetitive practices. Also, the Company is subject to other claims and legal proceedings, as well as investigations carried out by various law enforcement authorities. With respect to the above-mentioned claims, regulatory matters, and any related proceedings, the Company will bear the related costs, including costs necessary to resolve them. Liabilities recognized At December 31, 2018 and 2017, the Company had aggregate liabilities of $221 million and $229 million, respectively, included in “Other provisions” and “Other non-current liabilities”, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was significant. As it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not possible, based on information currently available to management, to estimate the maximum potential liability on other matters, there could be material adverse outcomes beyond the amounts accrued. Guarantees General The following table provides quantitative data regarding the Company’s third-party guarantees. The maximum potential payments represent a “worst-case scenario”, and do not reflect management’s expected outcomes. December 31, 2018 2017 Maximum potential ($ in millions) payments (1) Performance guarantees 1,584 1,775 Financial guarantees 10 17 Indemnification guarantees 64 72 Total 1,658 1,864 (1) Maximum potential payments include amounts in both continuing and discontinued operations The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company’s best estimate of future payments, which it may incur as part of fulfilling its guarantee obligations. In respect of the above guarantees, the carrying amounts of liabilities at December 31, 2018 and 2017, were not significant. The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various maturities up to 2027, mainly consist of performance guarantees whereby (i) the Company guarantees the performance of a third party’s product or service according to the terms of a contract and (ii) as member of a consortium/joint venture that includes third parties, the Company guarantees not only its own performance but also the work of third parties. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. The original maturity dates for the majority of these performance guarantees range from one to eight years. In conjunction with the divestment of the high-voltage cable and cables accessories businesses, the Company has entered into various performance guarantees with other parties with respect to certain liabilities of the divested business. At December 31, 2018 and 2017, the maximum potential payable under these guarantees amounts to $771 million and $929 million, respectively, and these guarantees have various maturities ranging from one to ten years. Commercial commitments In addition, in the normal course of bidding for and executing certain projects, the Company has entered into standby letters of credit, bid/performance bonds and surety bonds (collectively “performance bonds”) with various financial institutions. Customers can draw on such performance bonds in the event that the Company does not fulfill its contractual obligations. The Company would then have an obligation to reimburse the financial institution for amounts paid under the performance bonds. At December 31, 2018 and 2017, the total outstanding performance bonds aggregated to $7.4 billion and $7.7 billion, respectively, of which $4.3 billion and $4.7 billion, respectively, relate to discontinued operations. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in 2018, 2017 and 2016. Product and order-related contingencies The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the “Provisions for warranties”, including guarantees of product performance, was as follows: ($ in millions) 2018 2017 2016 Balance at January 1, 909 815 763 Net change in warranties due to acquisitions and divestments 41 30 — Claims paid in cash or in kind (307) (243) (248) Net increase in provision for changes in estimates, warranties issued 341 234 327 Exchange rate differences (36) 73 (27) Balance at December 31, 948 909 815 During 2018, the Company recorded changes in the estimated amount for a product warranty relating to a divested business which is included within Corporate and Other. The relevant product had an unexpected level of product failure which requires higher than expected costs to remediate. As a result, warranty expenses of $92 million were recorded in “Cost of sales of products” in 2018. As these costs relate to a divested business, in accordance with the definition of the Company’s primary measure of segment performance, Operational EBITA (see Note 23), the costs have been excluded from this measure. During 2016, the Company determined that the provision for product warranties in its solar business, acquired in 2013 as part of the purchase of Power-One, was no longer sufficient to cover expected warranty costs in the remaining warranty period. Due to higher than originally expected product failure rates for certain solar inverters designed and manufactured by Power-One, a substantial portion of which relates to products which were delivered to customers prior to the acquisition date, the previously estimated product warranty provision was increased by a total of $36 million, $23 million and $151 million, during 2018, 2017 and 2016, respectively. The corresponding increases were included in “Cost of sales of products”. As $16 million, $8 million and $131 million, in 2018, 2017 and 2016, respectively, relates to products which were sold prior to the acquisition date these costs have been excluded from the Company’s measure of segment profit, Operational EBITA (see Note 23). The warranty liability has been recorded based on the information currently available and is subject to change in the future. Related party transactions The Company conducts business with certain companies where members of the Company’s Board of Directors or Executive Committee act, or in recent years have acted, as directors or senior executives. The Company’s Board of Directors has determined that the Company’s business relationships with those companies do not constitute material business relationships. This determination was made in accordance with the Company’s related party transaction policy which was prepared based on the Swiss Code of Best Practice and the independence criteria set forth in the corporate governance rules of the New York Stock Exchange. |
Income taxes
Income taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income taxes | |
Income taxes | Note 16—Income taxes “Provision for taxes” consisted of the following: ($ in millions) 2018 2017 2016 Current taxes 686 782 671 Deferred taxes (142) (199) (145) Tax expense from continuing operations 544 583 526 Tax expense from discontinued operations 228 273 251 Income tax expense from continuing operations is reconciled below from the Company’s weighted-average global tax rate (rather than from the Swiss domestic statutory tax rate) as the parent company of the ABB Group, ABB Ltd, is domiciled in Switzerland and income generated in jurisdictions outside of Switzerland (hereafter “foreign jurisdictions”) which has already been subject to corporate income tax in those foreign jurisdictions is, to a large extent, tax exempt in Switzerland. There is no requirement in Switzerland for any parent company of a group to file a tax return of the consolidated group determining domestic and foreign pre-tax income. As the Company’s consolidated income from continuing operations is predominantly earned outside of Switzerland, corporate income tax in foreign jurisdictions largely determines the weighted-average global tax rate of the Company. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code. The SEC staff issued Staff Accounting Bulletin No. 118, which has allowed the Company to record provisional amounts in income tax expense from continuing operations in the 2017 financial statements. The estimated impact included a benefit of $30 million due to changes in tax rates, valuation allowance on foreign tax credits and undistributed earnings of subsidiaries, offset by $26 million charge for one-time transition tax. The amounts were finalized in 2018 and no material change to the estimated figures was recorded. The reconciliation of “Tax expense from continuing operations” at the weighted-average tax rate to the effective tax rate is as follows: ($ in millions, except % data) 2018 2017 2016 Income from continuing operations before taxes 2,119 2,102 1,761 Weighted-average global tax rate 22.2 % 23.6 % 19.9 % Income taxes at weighted-average tax rate 470 497 350 Items taxed at rates other than the weighted-average tax rate (43) (114) 9 Changes in valuation allowance, net 41 763 (8) Effects of changes in tax laws and (enacted) tax rates 1 (747) 42 Non-deductible expenses, excluding goodwill 86 58 79 Other, net (11) 126 54 Tax expense from continuing operations 544 583 526 Effective tax rate for the year 25.7 % 27.7 % 29.9 % In 2018 and 2017, the benefit reported in “Items taxed at rates other than the weighted-average tax rate” included positive impacts of $17 million and $72 million, respectively, relating to non-taxable amounts for net gains from sale of businesses. In 2018, the “Changes in valuation allowance, net” included adjustments in valuation allowance recorded in certain jurisdictions where the company updated its assessment that it was more likely than not that such deferred tax assets would be realized. The amount included an increase of $40 million relating to certain operations in Central Europe. In 2017, the relevant tax rate applicable to one of the Company’s subsidiaries increased and in connection with this change, the company benefited from an increase of $721 million in deferred tax assets relating to certain long-term assets. The respective effect is reported in “Effects of changes in tax laws and (enacted) tax rates”. After evaluating the recoverability of this deferred tax asset, the Company recorded a valuation allowance of $668 million as the Company determined that it was more likely than not that such deferred tax assets would not be realized. This is reported in the table above in “Changes in valuation allowance, net”. In 2016, “Changes in valuation allowance, net” included reductions in valuation allowances recorded in certain jurisdictions where the Company determined that it was more likely than not that such deferred tax assets (recognized for net operating losses and temporary differences in those jurisdictions) would be realized, as well as increases in the valuation allowance in certain other jurisdictions. In 2018, 2017 and 2016, “Non-deductible expenses” of $86 million, $58 million and $79 million, respectively, included expenses in relation to items that were deducted for financial accounting purposes, but were not tax deductible, such as interest expense, local taxes on productive activities, disallowed meals and entertainment expenses and other similar items. In 2018, “Other, net” in the table above included a net benefit of $22 million while in 2017 and 2016, “Other, net” included net charges of $148 million and $53 million, respectively, related to the interpretation of tax law and double tax treaty agreements by competent tax authorities. Deferred income tax assets and liabilities from continued operations consisted of the following: December 31, ($ in millions) 2018 2017 Deferred tax assets: Unused tax losses and credits 600 521 Provisions and other accrued liabilities 769 761 Pension 476 458 Inventories 253 263 Property, plant and equipment and other non-current assets 1,039 1,146 Other 114 93 Total gross deferred tax asset 3,251 3,242 Valuation allowance (1,535) (1,303) Total gross deferred tax asset, net of valuation allowance 1,716 1,939 Deferred tax liabilities: Property, plant and equipment (202) (210) Intangibles and other assets (770) (724) Pension and other liabilities (153) (217) Inventories (67) (69) Unremitted earnings (445) (557) Total gross deferred tax liability (1,637) (1,777) Net deferred tax asset (liability) 79 162 Included in: “Deferred taxes”—non-current assets 1,006 1,212 “Deferred taxes”—non-current liabilities (927) (1,050) Net deferred tax asset (liability) 79 162 Certain entities have deferred tax assets related to net operating loss carry-forwards and other items. As recognition of these assets in certain entities did not meet the more likely than not criterion, valuation allowances have been recorded and amount to $1,535 million and $1,303 million, at December 31, 2018 and 2017, respectively. “Unused tax losses and credits” at December 31, 2018 and 2017, in the table above, included $145 million and $148 million, respectively, for which the Company has established a full valuation allowance as, due to limitations imposed by the relevant tax law, the Company determined that, more likely than not, such deferred tax assets would not be realized. The valuation allowance at December 31, 2018, 2017 and 2016 was $1,535 million, $1,303 million and $539 million, respectively. At December 31, 2018 and 2017, deferred tax liabilities totaling $445 million and $557 million, respectively, have been provided for primarily in respect of withholding taxes, dividend distribution taxes or additional corporate income taxes (hereafter “withholding taxes”) on unremitted earnings which will be payable in foreign jurisdictions on the repatriation of earnings to Switzerland. Income which has been generated outside of Switzerland and has already been subject to corporate income tax in such foreign jurisdictions is, to a large extent, tax exempt in Switzerland. Therefore, generally no or only limited Swiss income tax has to be provided for on the repatriated earnings of foreign subsidiaries. Certain countries levy withholding taxes on dividend distributions. Such taxes cannot always be fully reclaimed by the shareholder, although they have to be declared and withheld by the subsidiary. In 2018 and 2017, certain taxes arose in certain foreign jurisdictions for which the technical merits do not allow utilization of benefits. At both December 31, 2018 and 2017, foreign subsidiary retained earnings subject to withholding taxes upon distribution of approximately $100 million were considered as permanently reinvested, as these funds are used for financing current operations as well as business growth through working capital and capital expenditure in those countries and, consequently, no deferred tax liability was recorded. At December 31, 2018, net operating loss carry-forwards of $2,153 million and tax credits of $120 million were available to reduce future taxes of certain subsidiaries. Of these amounts, $1,413 million of loss carry-forwards and $95 million of tax credits will expire in varying amounts through 2038, while the remainder will not expire. The largest amount of these carry-forwards related to the Company’s Europe operations. Unrecognized tax benefits consisted of the following: Penalties and interest related to Unrecognized unrecognized ($ in millions) tax benefits tax benefits Total Classification as unrecognized tax items on January 1, 2016 744 145 889 Increase relating to prior year tax positions 88 74 162 Decrease relating to prior year tax positions (21) (20) (41) Increase relating to current year tax positions 167 13 180 Decrease due to settlements with tax authorities (96) (21) (117) Decrease as a result of the applicable statute of limitations (95) (13) (108) Exchange rate differences (27) (6) (33) Balance at December 31, 2016, which would, if recognized, affect the effective tax rate 760 172 932 Increase relating to prior year tax positions 115 103 218 Decrease relating to prior year tax positions (76) (37) (113) Increase relating to current year tax positions 223 — 223 Decrease due to settlements with tax authorities (23) (2) (25) Decrease as a result of the applicable statute of limitations (75) (12) (87) Exchange rate differences 101 18 119 Balance at December 31, 2017, which would, if recognized, affect the effective tax rate 1,025 242 1,267 Net change due to acquisitions and divestments 8 — 8 Increase relating to prior year tax positions 35 37 72 Decrease relating to prior year tax positions (99) 14 (85) Increase relating to current year tax positions 126 5 131 Decrease due to settlements with tax authorities (44) (17) (61) Decrease as a result of the applicable statute of limitations (66) (31) (97) Exchange rate differences (24) (11) (35) Balance at December 31, 2018, which would, if recognized, affect the effective tax rate 961 239 1,200 In 2018, 2017 and 2016, the “Increase relating to current year tax positions” included a total of $111 million, $193 million and $132 million, respectively, in taxes related to the interpretation of tax law and double tax treaty agreements by competent tax authorities. At December 31, 2018, the Company expected the resolution, within the next twelve months, of unrecognized tax benefits related to pending court cases amounting to $52 million for taxes, penalties and interest. Otherwise, the Company had not identified any other significant changes which were considered reasonably possible to occur within the next twelve months. At December 31, 2018, the earliest significant open tax years that remained subject to examination were the following: Region Year Europe The Americas Asia, Middle East and Africa |
Employee benefits
Employee benefits | 12 Months Ended |
Dec. 31, 2018 | |
Employee benefits | |
Employee benefits | Note 17—Employee benefits The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations and practices. The Company’s most significant defined benefit pension plans are in Switzerland as well as in Germany, the United Kingdom, the U.S., Sweden and Finland. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death, disability, retirement, or termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit plans including postretirement health care benefits and other employee-related benefits for active employees including long-service award plans. The measurement date used for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local government and tax requirements. The Company recognizes in its Consolidated Balance Sheets the funded status of its defined benefit pension plans, postretirement plans, and other employee-related benefits measured as the difference between the fair value of the plan assets and the benefit obligation. Unless otherwise indicated, the following tables include amounts relating to both continuing and discontinued operations. Obligations and funded status of the plans The change in benefit obligation, change in fair value of plan assets, and funded status recognized in the Consolidated Balance Sheets were as follows: Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2018 2017 2018 2017 Benefit obligations at January 1, 4,055 3,708 7,892 7,188 132 147 Service cost 92 106 122 122 1 1 Interest cost 30 41 198 208 4 5 Contributions by plan participants 69 70 16 12 — — Benefit payments (239) (245) (318) (345) (11) (11) Benefit obligations of businesses acquired (divested) 10 56 60 8 8 — Actuarial (gain) loss 6 127 (92) 101 (12) (11) Plan amendments and other (4) 23 (119) (45) — (1) Exchange rate differences (26) 169 (330) 643 (2) 2 Benefit obligation at December 31, 3,993 4,055 7,429 7,892 120 132 Fair value of plan assets at January 1, 4,020 3,682 6,514 5,811 — — Actual return on plan assets (41) 207 (184) 437 — — Contributions by employer 89 90 152 139 11 11 Contributions by plan participants 69 70 16 12 — — Benefit payments (239) (245) (318) (345) (11) (11) Plan assets of businesses acquired (divested) 7 52 39 — — — Plan amendments and other — (3) (94) (47) — — Exchange rate differences (26) 167 (259) 507 — — Fair value of plan assets at December 31, 3,879 4,020 5,866 6,514 — — Funded status - underfunded (114) (35) (1,563) (1,378) (120) (132) The amounts recognized in “Accumulated other comprehensive loss” and “Noncontrolling interests” were: December 31, 2018 2017 2016 2018 2017 2016 Defined pension Other postretirement ($ in millions) benefits benefits Net actuarial (loss) gain (2,628) (2,321) (2,237) 30 20 10 Prior service credit 74 99 108 23 27 31 Amount recognized in OCI (1) and NCI (2) (2,554) (2,222) (2,129) 53 47 41 Taxes associated with amount recognized in OCI and NCI 535 503 487 — — — Amount recognized in OCI and NCI, net of tax (3) (2,019) (1,719) (1,642) 53 47 41 (1) OCI represents “Accumulated other comprehensive loss”. (2) NCI represents “Noncontrolling interests”. (3) NCI, net of tax, amounted to $(1) million, $0 million, and $0 million at December 31, 2018, 2017 and 2016. In addition, the following amounts were recognized in the Company’s Consolidated Balance Sheets: December 31, 2018 2017 2018 2017 2018 2017 Defined pension Other postretirement benefits benefits ($ in millions) Switzerland International International Overfunded plans 24 60 59 62 — — Underfunded plans — current — — (19) (18) (11) (12) Underfunded plans — non-current (138) (95) (1,603) (1,422) (109) (120) Funded status - underfunded (114) (35) (1,563) (1,378) (120) (132) Amounts reported as assets and liabilities held for sale (93) (133) (120) (106) — — December 31, ($ in millions) 2018 2017 Non-current assets Overfunded pension plans 83 122 Other employee-related benefits 1 22 Pension and other employee benefits 84 144 Amounts reported as Non-current assets held for sale 1 1 December 31, ($ in millions) 2018 2017 Current liabilities Underfunded pension plans (19) (18) Underfunded other postretirement benefit plans (11) (12) Other employee-related benefits (10) (17) Pension and other employee benefits (40) (47) Amounts reported as Current liabilities held for sale (4) (7) December 31, ($ in millions) 2018 2017 Non-current liabilities Underfunded pension plans (1,741) (1,517) Underfunded other postretirement benefit plans (109) (120) Other employee-related benefits (246) (245) Pension and other employee benefits (2,096) (1,882) Amounts reported as Non-current liabilities held for sale (266) (291) The accumulated benefit obligation (ABO) for all defined benefit pension plans was $11,249 million and $11,683 million at December 31, 2018 and 2017, respectively. The projected benefit obligation (PBO), ABO and fair value of plan assets, for pension plans with a PBO in excess of fair value of plan assets or ABO in excess of fair value of plan assets, was: PBO exceeds fair value of plan assets ABO exceeds fair value of plan assets ($ in millions) Switzerland International Switzerland International December 31, 2018 2017 2018 2017 2018 2017 2018 2017 PBO 3,482 3,557 6,897 7,477 3,482 3,557 6,872 5,864 ABO 3,482 3,557 6,743 7,235 3,482 3,557 6,724 5,725 Fair value of plan assets 3,344 3,461 5,275 6,038 3,344 3,461 5,254 4,453 All of the Company’s other postretirement benefit plans are unfunded. Components of net periodic benefit cost Net periodic benefit cost consisted of the following: Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Operational pension cost: Service cost 92 106 133 122 122 116 1 1 1 Operational pension cost 92 106 133 122 122 116 1 1 1 Non-operational pension cost (credit): Interest cost 30 41 46 198 208 234 4 5 6 Expected return on plan assets (117) (112) (130) (305) (295) (272) — — — Amortization of prior service cost (credit) (15) 10 36 1 1 4 (5) (5) (12) Amortization of net actuarial loss — — — 92 91 85 (1) (1) — Curtailments, settlements and special termination benefits — — — 23 16 41 — (1) — Non-operational pension cost (credit) (102) (61) (48) 9 21 92 (2) (2) (6) Net periodic benefit cost (10) 45 85 131 143 208 (1) (1) (5) The components of net periodic benefit cost other than the service cost component are included in the line “Non-operational pension (cost) credit” in the income statement. Net periodic benefit cost includes $45 million, $55 million and $67 million in 2018, 2017 and 2016, respectively, related to discontinued operations. Assumptions The following weighted-average assumptions were used to determine benefit obligations: December 31, 2018 2017 2018 2017 2018 2017 Defined pension Other postretirement benefits benefits (in %) Switzerland International International Discount rate 0.8 0.8 2.8 2.6 3.9 3.2 Rate of compensation increase — — 2.4 2.5 0.2 — Rate of pension increase — — 1.4 1.5 — — Cash balance interest credit rate 1.0 1.0 1.6 1.7 — — For the Company’s significant benefit plans, the discount rate used at each measurement date is set based on a high-quality corporate bond yield curve – derived based on bond universe information sourced from reputable third-party index and data providers and rating agencies – reflecting the timing, amount and currency of the future expected benefit payments for the respective plan. Consistent discount rates are used across all plans in each currency zone, based on the duration of the applicable plan(s) in that zone. For plans in the other countries, the discount rate is based on high quality corporate or government bond yields applicable in the respective currency, as appropriate at each measurement date with a duration broadly consistent with the respective plan’s obligations. At the end of 2018, the Company changed the approach used to calculate the service and interest components of net periodic benefit cost for its significant benefit plans to provide a more precise measurement of service and interest costs. This change compared to the previous approach is expected to result in a net decrease in the service and interest components for benefit cost in 2019. The Company calculates the service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Going forward, the Company has elected to utilize an approach that discounts the individual expected cash flows using the applicable spot rates derived from the yield curve over the projected cash flow period. This change does not affect the measurement of our total benefit obligations. The Company has accounted for this change as a change in accounting estimate and, accordingly, has accounted for it prospectively. The following weighted-average assumptions were used to determine the “Net periodic benefit cost”: Defined pension Other postretirement benefits benefits Switzerland International International (in %) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Discount rate 0.8 1.1 1.2 2.6 2.9 3.4 3.2 3.3 3.6 Expected long-term rate of return on plan assets 3.0 3.0 3.5 4.9 5.0 4.8 — — — Rate of compensation increase — — — 2.5 2.5 2.4 — — — Cash balance interest credit rate 1.0 1.0 1.3 1.7 1.7 1.6 — — — The “Expected long-term rate of return on plan assets” is derived for each benefit plan by considering the expected future long-term return assumption for each individual asset class. A single long-term return assumption is then derived for each plan based upon the plan’s target asset allocation. The Company maintains other postretirement benefit plans, which are generally contributory with participants’ contributions adjusted annually. The assumptions used were: December 31, 2018 2017 Health care cost trend rate assumed for next year 6.7 % 7.1 % Rate to which the trend rate is assumed to decline (the ultimate trend rate) 5.0 % 5.0 % Year that the rate reaches the ultimate trend rate Plan assets The Company has pension plans in various countries with the majority of the Company’s pension liabilities deriving from a limited number of these countries. The pension plans are typically funded by regular contributions from employees and the Company. These plans are typically administered by boards of trustees (which include Company representatives) whose primary responsibilities include ensuring that the plans meet their liabilities through contributions and investment returns. The boards of trustees have the responsibility for making key investment strategy decisions within a risk-controlled framework. The pension plan assets are invested in diversified portfolios that are managed by third-party asset managers, in accordance with local statutory regulations, pension plan rules and the respective plans’ investment guidelines, as approved by the boards of trustees. Plan assets are generally segregated from those of the Company and invested with the aim of meeting the respective plans’ projected future pension liabilities. Plan assets are measured at fair value at the balance sheet date. The boards of trustees manage the assets of the pension plans in a risk-controlled manner and assess the risks embedded in the pension plans through asset/liability management studies. Asset/liability management studies typically take place every three years. However, the risks of the plans are monitored on an ongoing basis. The board of trustees’ investment goal is to maximize the long-term returns of plan assets within specified risk parameters, while considering the future liabilities and liquidity needs of the individual plans. Risk measures taken into account include the funding ratio of the plan, the likelihood of extraordinary cash contributions being required, the risk embedded in each individual asset class, and the plan asset portfolio as a whole. The Company’s global pension asset allocation is the result of the asset allocations of the individual plans, which are set by the respective boards of trustees. The target asset allocation of the Company’s plans on a weighted-average basis is as follows: Target (in %) Switzerland International Asset class Equity 19 22 Fixed income 54 61 Real estate 22 7 Other 5 10 100 100 The actual asset allocations of the plans are in line with the target asset allocations. Equity securities primarily includes investments in large-cap and mid-cap publicly traded companies. Fixed income assets primarily include corporate bonds of companies from diverse industries and government bonds. Both fixed income and equity assets are invested either via funds or directly in segregated investment mandates, and include an allocation to emerging markets. Real estate consists primarily of investments in real estate in Switzerland held in the Swiss plans. The “Other” asset class includes investments in private equity, hedge funds, commodities, and cash and reflects a variety of investment strategies. Based on the above global asset allocation and the fair values of the plan assets, the expected long-term return on assets at December 31, 2018, is 4.1 percent. The Company and the local boards of trustees regularly review the investment performance of the asset classes and individual asset managers. Due to the diversified nature of the investments, the Company is of the opinion that no significant concentration of risks exists in its pension fund assets. At December 31, 2018 and 2017, plan assets include ABB Ltd’s shares (as well as an insignificant amount of the Company’s debt instruments) with a total value of $8 million and $11 million, respectively. The fair values of the Company’s pension plan assets by asset class are presented below. For further information on the fair value hierarchy and an overview of the Company’s valuation techniques applied, see the “Fair value measures” section of Note 2. December 31, 2018 Not subject Total ($ in millions) Level 1 Level 2 to leveling (1) fair value Asset class Equity Equity securities 209 — — 209 Mutual funds/commingled funds — 1,433 39 1,472 Emerging market mutual funds/commingled funds — 363 — 363 Fixed income Government and corporate securities 524 997 — 1,521 Government and corporate—mutual funds/commingled funds — 3,496 — 3,496 Emerging market bonds—mutual funds/commingled funds — 729 — 729 Real estate — — 1,381 1,381 Insurance contracts — 121 — 121 Cash and short-term investments 202 86 — 288 Private equity — — 139 139 Hedge funds — — 2 2 Commodities — 24 — 24 Total 935 7,249 1,561 9,745 December 31, 2017 Not subject Total ($ in millions) Level 1 Level 2 to leveling (1) fair value Asset class Equity Equity securities 274 — — 274 Mutual funds/commingled funds — 1,726 46 1,772 Emerging market mutual funds/commingled funds — 507 — 507 Fixed income Government and corporate securities 564 1,092 — 1,656 Government and corporate—mutual funds/commingled funds — 3,622 — 3,622 Emerging market bonds—mutual funds/commingled funds — 708 — 708 Real estate — 9 1,355 1,364 Insurance contracts — 113 — 113 Cash and short-term investments 162 140 — 302 Private equity — — 128 128 Hedge funds — — 15 15 Commodities — 73 — 73 Total 1,000 7,990 1,544 10,534 (1) Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling. The Company applies accounting guidance related to the presentation of certain investments using the net asset value (NAV) practical expedient. This accounting guidance exempts investments using this practical expedient from categorization within the fair value hierarchy. Contributions Employer contributions were as follows: Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2018 2017 2018 2017 Total contributions to defined benefit pension and other postretirement benefit plans 89 90 152 139 11 11 Of which, discretionary contributions to defined benefit pension plans — — 25 15 — — In 2018, 2017 and 2016, total contributions included non-cash contributions totaling $31 million, $31 million and $52 million, respectively, of available-for-sale debt securities to certain of the Company’s pension plans. The Company expects to contribute approximately $202 million, including $8 million in discretionary contributions, to its defined benefit pension plans in 2019. Of these discretionary contributions $6 million are expected to be non-cash contributions. The Company expects to contribute approximately $11 million to its other postretirement benefit plans in 2019. The Company also contributes to a number of defined contribution plans. The aggregate expense for these plans was $245 million, $233 million and $210 million in 2018, 2017 and 2016, respectively. Contributions to multi-employer plans were not significant in 2018, 2017 and 2016. Defined contribution expense includes $59 million, $61 million and $58 million in 2018, 2017 and 2016, respectively, related to discontinued operations. Estimated future benefit payments The expected future cash flows to be paid by the Company’s plans in respect of pension and other postretirement benefit plans at December 31, 2018, are as follows: Defined pension Other postretirement benefits benefits ($ in millions) Switzerland International International 2019 357 338 11 2020 271 348 11 2021 233 345 11 2022 228 350 10 2023 213 350 10 Years 2024 - 2028 941 1,840 42 |
Share-based payment arrangement
Share-based payment arrangements | 12 Months Ended |
Dec. 31, 2018 | |
Share-based payment arrangements | |
Share-based payment arrangements | Note 18—Share-based payment arrangements The Company has three principal share‑based payment plans, as more fully described in the respective sections below. Compensation cost for equity‑settled awards is recorded in “Total cost of sales” and in “Selling, general and administrative expenses” and totaled $50 million, $49 million and $45 million in 2018, 2017 and 2016, respectively. Compensation cost for cash‑settled awards is recorded in “Selling, general and administrative expenses” and is disclosed in the “WARs”, “LTIP” and “Other share‑based payments” sections of this note. The total tax benefit recognized in 2018, 2017 and 2016 was not significant. At December 31, 2018, the Company had the ability to issue up to 94 million new shares out of contingent capital in connection with share‑based payment arrangements. In addition, 36 million shares held by the Company as treasury stock at December 31, 2018, could be used to settle share‑based payment arrangements. As the primary trading market for the shares of ABB Ltd is the SIX Swiss Exchange (on which the shares are traded in Swiss francs) and substantially all the share-based payment arrangements with employees are based on the Swiss franc share or have strike prices set in Swiss francs, certain data disclosed below related to the instruments granted under share‑based payment arrangements are presented in Swiss francs. MIP Under the MIP, the Company offers options and cash‑settled WARs to key employees for no consideration. The options granted under the MIP allow participants to purchase shares of ABB Ltd at predetermined prices. Participants may sell the options rather than exercise the right to purchase shares. Equivalent warrants are listed by a third‑party bank on the SIX Swiss Exchange, which facilitates pricing and transferability of options granted under this plan. The options entitle the holder to request that the third‑party bank purchase such options at the market price of equivalent listed warrants related to that MIP launch. If the participant elects to sell the options, the options will thereafter be held by a third party and, consequently, the Company’s obligation to deliver shares will be toward this third party. Each WAR gives the participant the right to receive, in cash, the market price of an equivalent listed warrant on the date of exercise of the WAR.Participants may exercise or sell options and exercise WARs after the vesting period, which is three years from the date of grant. All options and WARs expire six years from the date of grant. Options The fair value of each option is estimated on the date of grant using a lattice model that uses the assumptions noted in the table below. Expected volatilities are based on implied volatilities from equivalent listed warrants on ABB Ltd shares. The expected term of the options granted is the contractual six‑year life of each option, based on the fact that after the vesting period, a participant can elect to sell the option rather than exercise the right to purchase shares, thereby also realizing the time value of the options. The risk‑free rate is based on a six‑year Swiss franc interest rate, reflecting the six‑year contractual life of the options. In estimating forfeitures, the Company has used the data from previous comparable MIP launches. 2018 2017 2016 Expected volatility 17 % 19 % 19 % Dividend yield 3.1 % 4.7 % 4.9 % Expected term years 6 years 6 years Risk-free interest rate (0.1) % (0.1) % (0.5) % Presented below is a summary of the activity related to options under the MIP: Weighted- Weighted- Aggregate average average intrinsic exercise remaining value Number of Number of price contractual (in millions options shares (in Swiss term of Swiss (in millions) (in millions) (1) francs) (2) (in years) francs) (3) Outstanding at January 1, 2018 390.6 78.1 21.06 Granted 71.3 14.3 23.50 Exercised (4) (10.3) (2.1) 16.66 Forfeited (6.7) (1.3) 21.86 Outstanding at December 31, 2018 444.9 89.0 21.54 — Vested and expected to vest at December 31, 2018 439.4 87.9 21.52 — Exercisable at December 31, 2018 250.5 50.1 20.76 — (1) Information presented reflects the number of ABB Ltd shares that can be received upon exercise, as options have a conversion ratio of 5:1. (2) Information presented reflects the exercise price per ABB Ltd share. (3) Options outstanding at December 31, 2018, did not have any intrinsic value as the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange was below the various exercise prices per share. (4) The cash received upon exercise amounted to approximately $35 million. The shares were delivered out of treasury stock. At December 31, 2018, there was $50 million of total unrecognized compensation cost related to non-vested options granted under the MIP. That cost is expected to be recognized over a weighted-average period of 2.1 years. The weighted-average grant-date fair value (per option) of options granted during 2018, 2017 and 2016 was 0.46 Swiss francs, 0.47 Swiss francs and 0.47 Swiss francs, respectively. In 2018, 2017 and 2016 the aggregate intrinsic value (on the date of exercise) of options exercised was $13 million, $38 million and $27 million, respectively. Presented below is a summary, by launch, related to options outstanding at December 31, 2018: Weighted- average Number of Number of remaining options shares contractual Exercise price (in Swiss francs) (1) (in millions) (in millions) (2) term (in years) 21.50 81.0 16.2 21.00 72.3 14.5 19.50 78.1 15.6 21.50 74.2 14.8 22.50 68.7 13.7 23.50 70.7 14.1 Total number of options and shares 444.9 89.0 (1) Information presented reflects the exercise price per share of ABB Ltd. (2) Information presented reflects the number of shares of ABB Ltd that can be received upon exercise. WARs As each WAR gives the holder the right to receive cash equal to the market price of the equivalent listed warrant on date of exercise, the Company records a liability based upon the fair value of outstanding WARs at each period end, accreted on a straight‑line basis over the three‑year vesting period. In “Selling, general and administrative expenses”, the Company recorded an income of $14 million and an expense of $19 million in 2018 and 2017, respectively, as a result of changes in both the fair value and vested portion of the outstanding WARs. The amount recorded in 2016 was not significant. To hedge its exposure to fluctuations in the fair value of outstanding WARs, the Company purchased cash‑settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. The cash‑settled call options are recorded as derivatives measured at fair value (see Note 6), with subsequent changes in fair value recorded in earnings to the extent that they offset the change in fair value of the liability for the WARs. In 2018 and 2017, the Company recorded an expense of $18 million and an income of $15 million in “Selling, general and administrative expenses” related to the cash‑settled call options. The amount recorded in 2016 was not significant. The aggregate fair value of outstanding WARs was $6 million and $42 million at December 31, 2018 and 2017, respectively. The fair value of WARs was determined based upon the trading price of equivalent warrants listed on the SIX Swiss Exchange. Presented below is a summary of the activity related to WARs: Number of WARs (in millions) Outstanding at January 1, 2018 37.1 Granted 10.9 Exercised (6.3) Forfeited (0.5) Outstanding at December 31, 2018 41.2 Exercisable at December 31, 2018 14.4 The aggregate fair value at date of grant of WARs granted in 2018, 2017 and 2016 was not significant. In 2018, 2017 and 2016, share-based liabilities of $6 million, $10 million and $7 million, respectively, were paid upon exercise of WARs by participants. ESAP The employee share acquisition plan (ESAP) is an employee stock-option plan with a savings feature. Employees save over a twelve-month period, by way of regular payroll deductions. At the end of the savings period, employees choose whether to exercise their stock options using their savings plus interest, if any, to buy ABB Ltd shares (American Depositary Shares (ADS) in the case of employees in the United States and Canada—each ADS representing one registered share of the Company) at the exercise price set at the grant date, or have their savings returned with any interest. The savings are accumulated in bank accounts held by a third-party trustee on behalf of the participants and earn interest, where applicable. Employees can withdraw from the ESAP at any time during the savings period and will be entitled to a refund of their accumulated savings. The fair value of each option is estimated on the date of grant using the same option valuation model as described under the MIP, using the assumptions noted in the table below. The expected term of the option granted has been determined to be the contractual one-year life of each option, at the end of which the options vest and the participants are required to decide whether to exercise their options or have their savings returned with interest. The risk-free rate is based on one-year Swiss franc interest rates, reflecting the one-year contractual life of the options. In estimating forfeitures, the Company has used the data from previous ESAP launches. 2018 2017 2016 Expected volatility 19 % 17 % 20 % Dividend yield 4.1 % 3.1 % 3.7 % Expected term year 1 year 1 year Risk-free interest rate (0.6) % (0.6) % (0.7) % Presented below is a summary of activity under the ESAP: Weighted- Weighted- Aggregate average average intrinsic exercise remaining value Number of price contractual (in millions shares (in Swiss term of Swiss (in millions) (1) francs) (2) (in years) francs) (2)(3) Outstanding at January 1, 2018 2.9 26.26 Granted 3.6 20.38 Forfeited (0.2) 26.01 Not exercised (savings returned plus interest) (2.7) 26.26 Outstanding at December 31, 2018 3.6 20.38 — Vested and expected to vest at December 31, 2018 3.4 20.38 — Exercisable at December 31, 2018 — — — — (1) Includes shares represented by ADS. (2) Information presented for ADS is based on equivalent Swiss franc denominated awards. (3) Options outstanding at December 31, 2018, did not have any intrinsic value as the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange was below the exercise price per share. The exercise prices per ABB Ltd share and per ADS of 20.38 Swiss francs and $20.37, respectively, for the 2018 grant, 26.26 Swiss francs and $26.24, respectively, for the 2017 grant, and 20.12 Swiss francs and $20.52, respectively, for the 2016 grant were determined using the closing price of the ABB Ltd share on the SIX Swiss Exchange and ADS on the New York Stock Exchange on the respective grant dates. At December 31, 2018, the total unrecognized compensation cost related to non-vested options granted under the ESAP was not significant. The weighted-average grant-date fair value (per option) of options granted during 2018, 2017 and 2016 was 1.10 Swiss francs, 1.37 Swiss francs and 1.24 Swiss francs, respectively. The total intrinsic value (on the date of exercise) of options exercised in 2017 was $17 million, while in 2018 and 2016 it was not significant. LTIP The Company has a long-term incentive plan (LTIP) for members of its Executive Committee and selected other senior executives (Eligible Participants), as defined in the terms of the LTIP. The LTIP involves annual conditional grants of the Company’s stock to such Eligible Participants that are subject to certain conditions. The ultimate amount delivered under the LTIP is based on achieving certain results against targets, as set out below, over a three-year period from grant and the final amount is delivered to Eligible Participants at the end of this period. The 2018 LTIP launch is composed of a performance component, based on the Company’s earnings per share performance, and a market component, based on the Company’s relative total shareholder return. The 2017 LTIP launch is composed of two performance components: (i) a component which is based on the average percentage achievement of income from continuing operations, net of tax, versus budget and (ii) a component which is based on the Company's earnings per share performance. The 2016 LTIP launch is composed of two performance components: (i) a component which is based on the achievement of a net income threshold and (ii) a component which is based on the Company’s earnings per share performance. For the relative total shareholder return component of the 2018 LTIP launch, the actual number of shares that will be delivered at a future date is based on the Company’s total shareholder return performance relative to a peer group of companies over a three-year period starting with the year of grant. The actual number of shares that will ultimately be delivered will vary depending on the relative total shareholder return outcome achieved between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant). For the average percentage achievement of income versus budget component of the 2017 LTIP launch, the actual number of shares that will be delivered at a future date is dependent on the average percentage (of each year in a three-year period starting with the year of grant) of the Company’s income from continuing operations, net of tax, divided by the Company’s budgeted income from operations, net of tax. The actual number of shares that will ultimately be delivered will vary depending on the average percentage that is achieved between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 150 percent of the conditional grant). For shares to be delivered under the threshold net income component of the 2016 LTIP launch, the Company’s net income has to reach a certain level in 2018 as set by the Board of Directors at the launch of the LTIP. No shares will be delivered if this threshold is not achieved and 100 percent of the conditional grant will be delivered if this threshold is equaled or exceeded. For the earnings per share performance component of the 2018 LTIP launch, the actual number of shares that will be delivered at a future date is based on the Company’s average earnings per share over three financial years, beginning with the year of launch. For the earnings per share performance component of the 2017 and 2016 LTIP launches, the actual number of shares that will be delivered at a future date is dependent on the Company’s weighted cumulative earnings per share performance over three financial years, beginning with the year of launch. The cumulative earnings per share performance is weighted as follows: 33 percent of the first year’s result, 67 percent of the second year’s result and 100 percent of the third year’s result. Under all LTIP launches, the actual number of shares that will ultimately be delivered will vary depending on the earnings per share outcome as computed under each LTIP launch, interpolated between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant). Under each component of the 2018 LTIP, an Eligible Participant receives 65 percent of the shares that have vested in the form of shares and 35 percent of the value of the shares that have vested in cash, with the possibility to elect to also receive the 35 percent portion in shares rather than in cash. Under each component of the 2017 and 2016 LTIP launches, an Eligible Participant receives 70 percent of the shares that have vested in the form of shares and 30 percent of the value of the shares that have vested in cash, with the possibility to elect to also receive the 30 percent portion in shares rather than in cash. In addition, for certain awards to vest, the Eligible Participant has to fulfill a three-year service condition as defined in the terms and conditions of the LTIP. Presented below is a summary of activity under the LTIP: Weighted- average grant-date Number of Shares fair value Conditionally Granted per share (in millions) (Swiss francs) Nonvested at January 1, 2018 1.4 21.47 Granted 0.8 21.97 Vested (0.7) 21.78 Forfeited (0.2) 21.50 Nonvested at December 31, 2018 1.3 21.61 Equity-settled awards are recorded in the “Additional paid-in capital” component of stockholders’ equity, with compensation cost recorded in “Selling, general and administrative expenses” over the vesting period (which is from grant date to the end of the vesting period) based on the grant-date fair value of the shares. Cash-settled awards are recorded as a liability, remeasured at fair value at each reporting date for the percentage vested, with changes in the liability recorded in “Selling, general and administrative expenses”. At December 31, 2018, total unrecognized compensation cost related to equity-settled awards under the LTIP was not significant. The compensation cost recorded in 2018, 2017 and 2016 for cash-settled awards was not significant. The aggregate fair value, at the dates of grant, of shares granted in 2018, 2017 and 2016 was $19 million, $22 million and $22 million, respectively. The total grant-date fair value of shares that vested during 2018, 2017 and 2016 was $17 million, $22 million and $15 million, respectively. The weighted-average grant-date fair value (per share) of shares granted during 2018, 2017 and 2016 was 21.97 Swiss francs, 22.13 Swiss francs and 20.77 Swiss francs, respectively. For the relative total shareholder return component of the 2018 LTIP launch, the fair value of granted shares at grant date, for equity-settled awards, and at each reporting date, for cash-settled awards, is determined using a Monte Carlo simulation model. The main inputs to this model are the Company’s share price and dividend yield, the volatility of the Company’s and the peer group’s share price as well as the correlation between the peer companies. For the average percentage achievement of income versus budget component of the 2017 LTIP launch the fair value of granted shares is based on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date for cash-settled awards, as well as the probable outcome of the average percentage achievement of income versus budget that would result in the vesting of the highest number of shares, as computed using a Monte Carlo simulation model. The main inputs to this model are the Company's and external financial analysts' revenue growth rates and Operational EBITA margin expectations. For the net income threshold component of the 2016 LTIP launch, the fair value of the granted shares is based on the probability of reaching the threshold as well as on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date for cash-settled awards. For the earnings per share component of the LTIP launches, the fair value of granted shares is based on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date for cash-settled awards, as well as the probable outcome of the earnings per share achievement that would result in the vesting of the highest number of shares, as computed using a Monte Carlo simulation model. The main inputs to this model are the Company’s and external financial analysts’ revenue growth rates and Operational EBITA margin expectations. Other share-based payments The Company has other minor share-based payment arrangements with certain employees. The compensation cost related to these arrangements in 2018, 2017 and 2016 was not significant. |
Stockholders' equity
Stockholders' equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' equity | |
Stockholders' equity | Note 19—Stockholders’ equity At both December 31, 2018 and 2017, the Company had 2,672 million authorized shares, of which 2,168 million were registered and issued. At the Annual General Meeting of Shareholders (AGM) in March 2018, shareholders approved the proposal of the Board of Directors to distribute a total of 0.78 Swiss francs per share. The approved dividend distribution amounted to $1,736 million and was paid in April 2018. At the AGM in April 2017, shareholders approved the proposal of the Board of Directors to distribute a total of 0.76 Swiss francs per share. The approved dividend distribution amounted to $1,622 million and was paid in April 2017. At the AGM in April 2016, shareholders approved the proposal of the Board of Directors to distribute a total of 0.74 Swiss francs per share to shareholders by way of a nominal value reduction (reduction in the par value of each share) from 0.86 Swiss francs to 0.12 Swiss francs. In July 2016, the nominal value reduction was registered in the commercial register of the canton of Zurich, Switzerland, and was paid. The Company recorded a reduction in Capital stock and an increase in Additional paid-in capital of $1,239 million and $15 million, respectively, and a reduction in Retained earnings of $402 million in relation to the nominal value reduction. Between September 2014 and September 2016, the Company executed a share buyback program for the purchase of up to $4 billion of its own shares and on September 30, 2016, announced that it had completed this program. Over the period of the share buyback, the Company purchased a total of 146.6 million shares (for approximately $3 billion) for cancellation and 24.7 million shares (for approximately $0.5 billion) to support its employee share programs. The shares acquired for cancellation were purchased through a separate trading line on the SIX Swiss Exchange (on which only the Company could purchase shares), while shares acquired for delivery under employee share programs were acquired through the ordinary trading line. In 2016, under the announced share buyback program, the Company purchased 60.4 million shares for cancellation and 4.9 million shares to support its employee share programs. These transactions resulted in an increase in Treasury stock of $1,280 million. In the first quarter of 2018, the Company purchased on the open market an aggregate of 10 million of its own shares to be available for delivery under its employee share programs. These transactions resulted in an increase in Treasury stock of $249 million. In the second quarter of 2017, the Company purchased on the open market an aggregate of 10 million of its own shares to be available for delivery under its employee share programs. These transactions resulted in an increase in Treasury stock of $251 million. At the AGM in April 2017, shareholders approved the proposal of the Board of Directors to reduce the share capital of the Company by cancelling 46,595,000 treasury shares which were acquired under the $4 billion share buyback program. This cancellation was completed in July 2017, resulting in a decrease in Treasury stock of $953 million and a corresponding combined decrease in Capital stock, Additional paid-in capital and Retained earnings. At the AGM in April 2016, shareholders approved the proposal of the Board of Directors to reduce the share capital of the Company by cancelling 100,000,000 treasury shares which were acquired under the $4 billion share buyback program. This cancellation was completed in July 2016, resulting in a decrease in Treasury stock of $2,047 million and a corresponding combined decrease in Capital stock, Additional paid-in capital and Retained earnings. Upon and in connection with each launch of the Company’s MIP, the Company sold call options to a bank at fair value, giving the bank the right to acquire shares equivalent to the number of shares represented by the MIP WAR awards to participants. Under the terms of the agreement with the bank, the call options can only be exercised by the bank to the extent that MIP participants have exercised their WARs. At December 31, 2018, such call options representing 13.3 million shares and with strike prices ranging from 19.50 to 23.50 Swiss francs (weighted‑average strike price of 21.57 Swiss francs) were held by the bank. The call options expire in periods ranging from May 2019 to August 2024. However, only 5.1 million of these instruments, with strike prices ranging from 19.50 to 22.50 Swiss francs (weighted‑average strike price of 21.12 Swiss francs), could be exercised at December 31, 2018, under the terms of the agreement with the bank. In addition to the above, at December 31, 2018, the Company had further outstanding obligations to deliver: · up to 16.2 million shares relating to the options granted under the 2013 launch of the MIP, with a strike price of 21.50 Swiss francs, vested in May 2016 and expiring in May 2019, · up to 14.5 million shares relating to the options granted under the 2014 launch of the MIP, with a strike price of 21.00 Swiss francs, vested in August 2017 and expiring in August 2020, · up to 15.6 million shares relating to the options granted under the 2015 launch of the MIP, with a strike price of 19.50 Swiss francs, vested in August 2018 and expiring in August 2021, · up to 14.8 million shares relating to the options granted under the 2016 launch of the MIP, with a strike price of 21.50 Swiss francs, vesting in August 2019 and expiring in August 2022, · up to 13.7 million shares relating to the options granted under the 2017 launch of the MIP, with a strike price of 22.50 Swiss francs, vesting in August 2020 and expiring in August 2023, · up to 14.1 million shares relating to the options granted under the 2018 launch of the MIP, with a strike price of 23.50 Swiss francs, vesting in August 2021 and expiring in August 2024, · up to 3.6 million shares relating to the ESAP, vesting and expiring in October 2019, · up to 4.5 million shares to Eligible Participants under the 2018, 2017 and 2016 launches of the LTIP, vesting and expiring in April 2021, June 2020 and June 2019, respectively, and · less than 1 million shares in connection with certain other share‑based payment arrangements with employees. See Note 18 for a description of the above share‑based payment arrangements. In 2018, 2017 and 2016, the Company delivered 2.4 million, 6.3 million and 8.9 million shares, respectively, out of treasury stock, for options exercised in relation to the MIP. In addition, in 2017 and 2016 the Company delivered 2.8 million and 2.6 million shares from treasury stock under the ESAP. No shares were delivered in 2018 under the ESAP. Amounts available to be distributed as dividends to the stockholders of ABB Ltd are based on the requirements of Swiss law and ABB Ltd’s Articles of Incorporation, and are determined based on amounts presented in the unconsolidated financial statements of ABB Ltd, prepared in accordance with Swiss law. At December 31, 2018, the total unconsolidated stockholders’ equity of ABB Ltd was 8,511 million Swiss francs ($8,652 million), including 260 million Swiss francs ($264 million) representing share capital, 9,045 million Swiss francs ($9,195 million) representing reserves and 794 million Swiss francs ($807 million) representing a reduction of equity for own shares (treasury stock). Of the reserves, 794 million Swiss francs ($807 million) relating to own shares and 52 million Swiss francs ($53 million) representing 20 percent of share capital, are restricted and not available for distribution. In February 2019, the Company announced that a proposal will be put to the 2019 AGM for approval by the shareholders to distribute 0.80 Swiss francs per share to shareholders. |
Earnings per share
Earnings per share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings per share | |
Earnings per share | Note 20—Earnings per share Basic earnings per share is calculated by dividing income by the weighted‑average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted‑average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options and outstanding options and shares granted subject to certain conditions under the Company’s share‑based payment arrangements. In 2018, 2017 and 2016, outstanding securities representing a maximum of 88 million, 31 million and 87 million shares, respectively, were excluded from the calculation of diluted earnings per share as their inclusion would have been antidilutive. Basic earnings per share: ($ in millions, except per share data in $) 2018 2017 2016 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 1,514 1,441 1,172 Income from discontinued operations, net of tax 659 772 727 Net income 2,173 2,213 1,899 Weighted-average number of shares outstanding (in millions) 2,132 2,138 2,151 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 0.71 0.67 0.54 Income from discontinued operations, net of tax 0.31 0.36 0.34 Net income 1.02 1.04 0.88 Diluted earnings per share: ($ in millions, except per share data in $) 2018 2017 2016 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 1,514 1,441 1,172 Income from discontinued operations, net of tax 659 772 727 Net income 2,173 2,213 1,899 Weighted-average number of shares outstanding (in millions) 2,132 2,138 2,151 Effect of dilutive securities: Call options and shares 7 10 3 Adjusted weighted-average number of shares outstanding (in millions) 2,139 2,148 2,154 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 0.71 0.67 0.54 Income from discontinued operations, net of tax 0.31 0.36 0.34 Net income 1.02 1.03 0.88 |
Other comprehensive income
Other comprehensive income | 12 Months Ended |
Dec. 31, 2018 | |
Other comprehensive income | |
Other comprehensive income | Note 21—Other comprehensive income The following table includes amounts recorded within “Total other comprehensive income (loss)” including the related income tax effects: 2018 2017 2016 Before Tax Net of Before Tax Net of Before Tax Net of ($ in millions) tax effect tax tax effect tax tax effect tax Foreign currency translation adjustments: Foreign currency translation adjustments (641) 14 (627) 911 1 912 (469) (12) (481) Gain on liquidation of foreign subsidiary (31) — (31) — — — — — — Changes attributable to divestments (1) 12 — 12 12 — 12 7 — 7 Net change during the year (660) 14 (646) 923 1 924 (462) (12) (474) Available-for-sale securities: Net unrealized gains (losses) arising during the year (5) 1 (4) 1 — 1 — — — Reclassification adjustments for net (gains) losses included in net income 1 — 1 — — — — — — Net change during the year (4) 1 (3) 1 — 1 — — — Pension and other postretirement plans: Prior service (costs) credits arising during the year (11) 4 (7) (20) 4 (16) (46) 6 (40) Net actuarial gains (losses) arising during the year (411) 59 (352) (184) 45 (139) 38 6 44 Amortization of prior service cost (credit) included in net income (19) (5) (24) 6 — 6 28 (2) 26 Amortization of net actuarial loss included in net income 91 (22) 69 90 (27) 63 85 (23) 62 Net losses from pension settlements included in net income 23 (4) 19 13 (4) 9 37 (11) 26 Changes attributable to divestments (1) — — — 8 (2) 6 — — — Net change during the year (327) 32 (295) (87) 16 (71) 142 (24) 118 Cash flow hedge derivatives: Net gains (losses) arising during the year (51) 2 (49) 45 (7) 38 21 (5) 16 Reclassification adjustments for net (gains) losses included in net income 20 1 21 (26) 4 (22) (7) 1 (6) Changes attributable to divestments (1) — — — (4) 1 (3) — — — Net change during the year (31) 3 (28) 15 (2) 13 14 (4) 10 Total other comprehensive income (loss) (1,022) 50 (972) 852 15 867 (306) (40) (346) (1) Changes attributable to divestments are included in the computation of the net gain or loss on sale of businesses (see Note 4). The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax: Unrealized Pension and Unrealized Foreign gains (losses) other post- gains (losses) Accumulated currency on available- retirement of cash other translation for-sale plan flow hedge comprehensive ($ in millions) adjustments securities adjustments derivatives loss Balance at January 1, 2016 (3,135) 7 (1,719) (11) (4,858) Other comprehensive (loss) income before reclassifications (481) — 4 16 (461) Amounts reclassified from OCI — — 114 (6) 108 Changes attributable to divestments 7 — — — 7 Total other comprehensive (loss) income (474) — 118 10 (346) Less: Amounts attributable to noncontrolling interests (17) — — — (17) Balance at December 31, 2016 (3,592) 7 (1,601) (1) (5,187) Other comprehensive (loss) income before reclassifications 912 1 (155) 38 796 Amounts reclassified from OCI — — 78 (22) 56 Changes attributable to divestments 12 — 6 (3) 15 Total other comprehensive (loss) income 924 1 (71) 13 867 Less: Amounts attributable to noncontrolling interests 25 — — — 25 Balance at December 31, 2017 (2,693) 8 (1,672) 12 (4,345) Cumulative effect of changes in accounting principles(1) — (9) — — (9) Other comprehensive (loss) income before reclassifications (627) (4) (359) (49) (1,039) Amounts reclassified from OCI (31) 1 64 21 55 Changes attributable to divestments 12 — — — 12 Total other comprehensive (loss) income (646) (3) (295) (28) (972) Less: Amounts attributable to noncontrolling interests (15) — — — (15) Balance at December 31, 2018 (3,324) (4) (1,967) (16) (5,311) (1) See “New accounting pronouncements, Applicable for the current period” section of Note 2 for more details. The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation adjustments and Pension and other postretirement plan adjustments: ($ in millions) Location of (gains) losses Details about OCI components reclassified from OCI 2018 2017 2016 Foreign currency translation adjustments: Gain on liquidation of foreign subsidiary Other income (expense), net (31) — — Pension and other postretirement plan adjustments: Amortization of prior service cost (credit) Non-operational pension (cost) credit (1) (19) 6 28 Amortization of net actuarial loss Non-operational pension (cost) credit (1) 91 90 85 Net losses from pension settlements Non-operational pension (cost) credit (1) 23 13 37 Total before tax 95 109 150 Tax Provision for taxes (31) (31) (36) Amounts reclassified from OCI 64 78 114 (1) Amounts include a total of $12 million, $9 million and $0 million in 2018, 2017 and 2016, respectively, reclassified from OCI to Income from discontinued operations (see Note 3). The amounts reclassified out of OCI in respect of Unrealized gains (losses) on available‑for‑sale securities and Unrealized gains (losses) of cash flow hedge derivatives were not significant in 2018, 2017 and 2016. |
Restructuring and related expen
Restructuring and related expenses | 12 Months Ended |
Dec. 31, 2018 | |
Restructuring and related expenses | |
Restructuring and related expenses | Note 22—Restructuring and related expenses White Collar Productivity program From September 2015 to December 2017, the Company executed a restructuring program to make the Company leaner, faster and more customer-focused. The program involved the rapid expansion and use of regional shared service centers as well as a streamlining of global operations and head office functions, with business units moving closer to their respective key markets. The program involved various restructuring initiatives across all operating segments and regions. As of December 31, 2017, the Company had incurred substantially all costs related to the White Collar Productivity program. Liabilities associated with the White Collar Productivity program are primarily included in “Other provisions”. The following table shows the activity from the beginning of the program to December 31, 2018: Contract settlement, Employee loss order ($ in millions) severance costs and other costs Total Liability at January 1, 2015 — — — Expenses 300 3 303 Cash payments (27) — (27) Liability at December 31, 2015 273 3 276 Expenses 182 3 185 Cash payments (91) (2) (93) Change in estimates (85) (1) (86) Exchange rate differences (17) (1) (18) Liability at December 31, 2016 262 2 264 Expenses 28 3 31 Cash payments (92) (4) (96) Change in estimates (118) — (118) Exchange rate differences 21 — 21 Liability at December 31, 2017 101 1 102 Cash payments (55) — (55) Change in estimates and exchange rate differences (13) — (13) Liability at December 31, 2018 33 1 34 The change in estimates during 2017 of $118 million is mainly due to higher than expected rates of attrition and internal redeployment. The reduction in the liability was recorded in income from operations, primarily as reductions in “Total cost of sales” of $53 million and in “Selling, general and administrative expenses” of $55 million. The change in estimates during 2016 of $86 million is due to significantly higher than expected rates of attrition and internal redeployment and a lower than expected severance cost per employee for the employee groups affected by the first phase of restructuring initiated in 2015. The reduction in the liability was recorded in income from operations, primarily as reductions in “Total cost of sales” of $38 million and in “Selling, general and administrative expenses” of $35 million. The following table outlines the net costs incurred in 2017 and 2016 and the cumulative net costs incurred up to December 31, 2017: Cumulative costs Net costs incurred in incurred up to ($ in millions) 2017 (1) 2016 (1) December 31, 2017(1) Electrification Products (17) 15 Industrial Automation (23) 34 Robotics and Motion (14) 26 Corporate and Other (32) 32 Total (86) 107 (1) Amounts in the table above have been recast to reflect the reorganization of the Company’s operating segments in 2018 as outlined in Note 23. The Company recorded the following expenses, net of changes in estimates, under this program: Cumulative costs incurred up to ($ in millions) 2017 2016 December 31, 2017 Employee severance costs (90) 97 Estimated contract settlement, loss order and other costs 3 2 Inventory and long-lived asset impairments 1 8 Total (86) 107 Expenses, net of changes in estimates, associated with this program are recorded in the following line items in the Consolidated Income Statements: ($ in millions) 2017 2016 Total cost of sales (47) 57 Selling, general and administrative expenses (35) 35 Non-order related research and development expenses (5) 1 Other income (expense), net 1 14 Total (86) 107 OS program In December 2018, the Company announced a two-year restructuring program with the objective to simplify its business model and structure through the implementation of a new organizational structure driven by its businesses. The program includes the planned elimination of the country and regional structures within the current matrix organization, including the elimination of the three regional Executive Committee roles. The operating businesses will each be responsible for both their customer-facing activities and business support functions, while the remaining Group-level corporate activities will primarily focus on Group strategy, portfolio and performance management, capital allocation and core technologies. The program is expected to be performed over two years and incur restructuring expenses of $350 million. The following table outlines the costs incurred in 2018, the cumulative costs incurred to date and the total amount of costs expected to be incurred under the program per operating segment: Cumulative costs Costs incurred incurred up to Total ($ in millions) in 2018 December 31, 2018 expected costs Electrification Products 32 32 40 Industrial Automation 21 21 60 Robotics and Motion 1 1 50 Corporate and Other 11 11 200 Total 65 65 350 In 2018, restructuring expenses recorded for this program relate to employee severance costs and are included in the following line items in the Consolidated Income Statements: ($ in millions) 2018 Total cost of sales 35 Selling, general and administrative expenses 23 Non-order related research and development expenses 3 Other income (expense), net 4 Total 65 At December 31, 2018, liabilities associated with the program amount to $65 million and are primarily included in “Other provisions”. Other restructuring-related activities In 2018, 2017 and 2016, the Company executed various other restructuring-related activities and incurred charges of $116 million, $181 million and $133 million, respectively. ($ in millions) 2018 2017 2016 Employee severance costs 74 130 66 Estimated contract settlement, loss order and other costs 29 32 32 Inventory and long-lived asset impairments 13 19 35 Total 116 181 133 Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements: ($ in millions) 2018 2017 2016 Total cost of sales 24 119 Selling, general and administrative expenses 52 10 Non-order related research and development expenses 2 — Other income (expense), net 38 52 Total 116 181 At December 31, 2018 and 2017, $245 million and $246 million, respectively, was recorded for other restructuring-related liabilities and is primarily included in “Other provisions”. |
Operating segment and geographi
Operating segment and geographic data | 12 Months Ended |
Dec. 31, 2018 | |
Operating segment and geographic data | |
Operating segment and geographic data | Note 23—Operating segment and geographic data The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates resources to and assesses the performance of each operating segment using the information outlined below. The Company is organized into operating segments based on products and services and the operating segments consist of Electrification Products, Industrial Automation and Robotics and Motion. The remaining operations of the Company are included in Corporate and Other. As the Power Grids business is reported as discontinued operations, it no longer is reported as an operating segment. In addition, certain real estate assets previously included in Corporate and Other are included in this planned business divestment and have also been reported in discontinued operations (see Note 3). Effective January 1, 2018, management responsibility and oversight of certain remaining engineering, procurement and construction (EPC) businesses, previously included in the Industrial Automation and Robotics and Motion operating segments as well as the former Power Grids business, were transferred to a new non-core operating business within Corporate and Other. During 2018, the Company also changed the presentation of Cash and cash equivalents within the reported total segment assets such that all amounts are now considered as part of Corporate and Other. The segment information for 2017 and 2016, and at December 31, 2017 and 2016, has been recast to reflect these changes. A description of the types of products and services provided by each reportable segment is as follows: · Electrification Products: manufactures and sells products and solutions which are designed to provide smarter and safer electrical flow from the substation to the socket. The portfolio of increasingly digital and connected solutions includes electric vehicle charging infrastructure, solar power solutions, modular substation packages, distribution automation products, switchboard and panelboards, switchgear, UPS solutions, circuit breakers, measuring and sensing devices, control products, wiring accessories, enclosures and cabling systems and intelligent home and building solutions, designed to integrate and automate lighting, heating, ventilation, security and data communication networks. · Industrial Automation: develops and sells integrated automation and electrification systems and solutions, such as process and discrete control solutions, advanced process control software and manufacturing execution systems, sensing, measurement and analytical instrumentation and solutions, electric ship propulsion systems, as well as solutions for modern machine and factory automation and large turbochargers. In addition, the division offers a comprehensive range of services ranging from repair to advanced services such as remote monitoring, preventive maintenance and cybersecurity services. · Robotics and Motion: manufactures and sells robotics, motors, generators, drives, wind converters, components and systems for railways and related services and digital solutions for a wide range of applications in industry, transportation and infrastructure, and utilities. · Corporate and Other: includes headquarters, central research and development, the Company’s real estate activities, Group Treasury Operations, historical operating activities of certain divested businesses and other non-core operating activities. The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations excluding: · amortization expense on intangibles arising upon acquisition (acquisition-related amortization), · restructuring and restructuring-related expenses, · changes in the amount recorded for obligations related to divested businesses occurring after the divestment date (changes in obligations related to divested businesses), · changes in estimates relating to opening balance sheets of acquired businesses (changes in pre-acquisition estimates), · gains and losses from sale of businesses, · acquisition- and divestment-related expenses and integration costs, · certain other non-operational items, as well as · foreign exchange/commodity timing differences in income from operations consisting of: (a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities). Certain other non-operational items generally includes: certain regulatory, compliance and legal costs, certain asset write downs/impairments as well as other items which are determined by management on a case-by-case basis. The CODM primarily reviews the results of each segment on a basis that is before the elimination of profits made on inventory sales between segments. Segment results below are presented before these eliminations, with a total deduction for intersegment profits to arrive at the Company’s consolidated Operational EBITA. Intersegment sales and transfers are accounted for as if the sales and transfers were to third parties, at current market prices. The following tables present segment revenues for 2018, 2017 and 2016. 2018 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,881 3,145 2,929 58 10,013 The Americas 3,650 1,544 2,788 21 8,003 Asia, Middle East and Africa 3,680 2,565 2,922 236 9,403 11,211 7,254 8,639 315 27,419 End Customer Markets Utilities 2,452 1,168 749 176 4,545 Industry 4,395 4,447 6,529 98 15,469 Transport and infrastructure 4,364 1,639 1,361 41 7,405 11,211 7,254 8,639 315 27,419 Product type Products 9,679 2,391 6,206 118 18,394 Systems 617 1,853 1,062 197 3,729 Services and software 915 3,010 1,371 — 5,296 11,211 7,254 8,639 315 27,419 Third-party revenues 11,211 7,254 8,639 315 27,419 Intersegment revenues (1) 475 140 508 (880) 243 Total Revenues 11,686 7,394 9,147 (565) 27,662 2017 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,514 2,773 2,613 132 9,032 The Americas 2,613 1,381 2,721 116 6,831 Asia, Middle East and Africa 3,464 2,570 2,543 493 9,070 9,591 6,724 7,877 741 24,933 End Customer Markets Utilities 2,597 1,270 633 575 5,075 Industry 4,022 3,796 5,991 155 13,964 Transport and infrastructure 2,972 1,658 1,253 11 5,894 9,591 6,724 7,877 741 24,933 Product type Products 8,322 1,796 5,661 169 15,948 Systems 614 2,089 959 565 4,227 Services and software 655 2,839 1,257 7 4,758 9,591 6,724 7,877 741 24,933 Third-party revenues 9,591 6,724 7,877 741 24,933 Intersegment revenues (1) 503 155 519 (914) 263 Total Revenues 10,094 6,879 8,396 (173) 25,196 2016 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,309 2,398 2,571 541 8,819 The Americas 2,571 1,420 2,588 182 6,761 Asia, Middle East and Africa 3,457 2,673 2,227 692 9,049 9,337 6,491 7,386 1,415 24,629 End Customer Markets Utilities 2,568 1,236 657 1,189 5,650 Industry 4,083 3,625 5,351 200 13,259 Transport and infrastructure 2,686 1,630 1,378 26 5,720 9,337 6,491 7,386 1,415 24,629 Product type Products 8,042 1,355 5,366 434 15,197 Systems 656 2,364 853 957 4,830 Services and software 639 2,772 1,167 24 4,602 9,337 6,491 7,386 1,415 24,629 Third-party revenues 9,337 6,491 7,386 1,415 24,629 Intersegment revenues (1) 583 163 502 (948) 300 Total Revenues 9,920 6,654 7,888 467 24,929 (1) Intersegment revenues include sales to the Power Grids business which is presented as discontinued operations and are not eliminated from Total revenues. Revenues by geography reflect the location of the customer. Approximately 22 percent, 20 percent and 19 percent of the Company’s total revenues in 2018, 2017 and 2016, respectively, came from customers in the United States. Approximately 15 percent, 15 percent and 14 percent of the Company’s total revenues in 2018, 2017 and 2016, respectively, were generated from customers in China. In 2018, 2017 and 2016 more than 98 percent of the Company’s total revenues were generated from customers outside Switzerland. The following tables present Operational EBITA, the reconciliations of consolidated Operational EBITA to Income from continuing operations before taxes, as well as Depreciation and amortization, and Capital expenditure for 2018, 2017 and 2016, as well as Total assets at December 31, 2018, 2017 and 2016. ($ in millions) 2018 2017 2016 Operational EBITA: Electrification Products 1,626 1,510 1,459 Industrial Automation 1,019 953 897 Robotics and Motion 1,447 1,260 1,232 Corporate and Other: — Non-Core and divested businesses (291) (163) (30) — Stranded corporate costs (297) (286) (252) — Corporate costs and other intersegment elimination (499) (457) (378) Consolidated Operational EBITA 3,005 2,817 2,928 Acquisition-related amortization (273) (229) (245) Restructuring and restructuring-related expenses (1) (172) (300) (442) Changes in obligations related to divested businesses (106) (94) — Changes in pre-acquisition estimates (8) (8) (131) Gains and losses on sale of businesses 57 252 (10) Acquisition- and divestment-related expenses and integration costs (204) (81) (9) Foreign exchange/commodity timing differences in income from operations: Unrealized gains and losses on derivatives where the underlying hedged transaction has not yet been realized (1) 56 (19) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized (23) 8 (1) Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) (9) (30) (8) Certain other non-operational items: Regulatory, compliance and legal costs (34) (102) (10) Asset write downs/impairments (25) — (16) Gain on liquidation of foreign subsidiary 31 — — Corporate re-branding and marketing costs — — (30) Losses and other (costs) recoveries on Korea fraud 8 (40) (73) Other non-operational items (20) (19) (5) Income from operations 2,226 2,230 1,929 Interest and dividend income 72 73 71 Interest and other finance expense (262) (234) (201) Non-operational pension cost 83 33 (38) Income from continuing operations before taxes 2,119 2,102 1,761 (1) Amounts in 2017 and 2016 also include the incremental implementation costs in relation to the White Collar Productivity program. Depreciation and Total assets (1), (2) amortization Capital expenditure (1) at December 31, ($ in millions) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Electrification Products 355 315 348 244 218 215 12,049 8,881 8,343 Industrial Automation 160 112 71 104 71 53 6,669 6,961 4,294 Robotics and Motion 208 216 249 123 118 112 8,397 8,416 7,870 Corporate and Other 193 193 202 301 345 252 17,326 19,200 18,884 Consolidated 916 836 870 772 752 632 44,441 43,458 39,391 (1) Capital expenditure and Total assets are after intersegment eliminations and therefore reflect third‑party activities only. (2) Assets held for sale of $8,591 million, $8,603 million and $8,504 million are included in Corporate and Other at December 31, 2018, 2017 and 2016, respectively (see Note 3). Other geographic information Geographic information for long‑lived assets was as follows: Long-lived assets at December 31, ($ in millions) 2018 2017 Europe 2,110 2,040 The Americas 1,168 934 Asia, Middle East and Africa 855 830 Total 4,133 3,804 Long-lived assets represent “Property, plant and equipment, net” and are shown by location of the assets. At December 31, 2018, approximately 22 percent, 11 percent and 11 percent of the Company’s long-lived assets were located in the U.S., Switzerland and China, respectively. At December 31, 2017, approximately 19 percent, 13 percent and 10 percent of the Company's long-lived assets were located in the U.S., Switzerland and China, respectively. 2019 Realignment of segments On December 17, 2018, the Company announced a planned reorganization of its operating segments into four customer-focused, entrepreneurial businesses. With effect from April 1, 2019: · the Electrification Products segment will be renamed the Electrification segment, · the Industrial Automation segment will remain unchanged except that it will now exclude the Machine and Factory Automation business, which will be transferred to the new Robotics & Discrete Automation segment, · the new Robotics & Discrete Automation segment will include the combined businesses of the Machine and Factory Automation business, previously included in the Industrial Automation segment, and the Robotics business from the former Robotics and Motion segment, and · the new Motion segment will contain the remaining businesses of the former Robotics and Motion segment. |
Significant accounting polici_2
Significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Significant accounting policies | |
Basis of presentation | Basis of presentation The Consolidated Financial Statements are prepared in accordance with United States of America (United States or U.S.) generally accepted accounting principles (U.S. GAAP) and are presented in United States dollars ($ or USD) unless otherwise stated. Due to rounding, numbers presented may not add to the totals provided. The par value of capital stock is denominated in Swiss francs. See Note 3 for a summary of changes in presentation and other reclassifications affecting these financial statements compared to the previous year. |
Scope of consolidation | Scope of consolidation The Consolidated Financial Statements include the accounts of ABB Ltd and companies which are directly or indirectly controlled by ABB Ltd. Additionally, the Company consolidates variable interest entities if it has determined that it is the primary beneficiary. Intercompany accounts and transactions are eliminated. Investments in joint ventures and affiliated companies in which the Company has the ability to exercise significant influence over operating and financial policies (generally through direct or indirect ownership of 20 percent to 50 percent of the voting rights), are recorded in the Consolidated Financial Statements using the equity method of accounting. |
Discontinued operations | Discontinued operations The Company reports a disposal, or planned disposal, of a component or a group of components as a discontinued operation if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. A strategic shift could include a disposal of a major geographical area, a major line of business or other major parts of the Company. A component may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. Assets and liabilities of a component reported as a discontinued operation are presented separately as held for sale in the Company’s Consolidated Balance Sheets. Interest that is not directly attributable to or related to the Company’s continuing business or discontinued business is allocated to discontinued operations based on the ratio of net assets to be sold less debt that is required to be paid as a result of the planned disposal transaction to the sum of total net assets of the Company plus consolidated debt. General corporate overhead is not allocated to discontinued operations (see Note 3). |
Operating cycle | Operating cycle A portion of the Company’s activities (primarily long-term system integration activities) has an operating cycle that exceeds one year. For classification of current assets and liabilities related to such activities, the Company elected to use the duration of the individual contracts as its operating cycle. Accordingly, there are accounts receivable, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. The most significant, difficult and subjective of such accounting assumptions and estimates include: · estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations, · assumptions used in the determination of corporate costs directly attributable to discontinued operations, · assumptions used in determining inventory obsolescence and net realizable value, · estimates used to record expected costs for employee severance in connection with restructuring programs, · assumptions and projections, principally related to future material, labor and project-related overhead costs, used in determining the percentage-of-completion on projects, as well as the amount of variable consideration the Company expects to be entitled to, · estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product warranties, self-insurance reserves, regulatory and other proceedings, · assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets, · estimates to determine valuation allowances for deferred tax assets and amounts recorded for uncertain tax positions, · growth rates, discount rates and other assumptions used to determine impairment of long-lived assets and in testing goodwill for impairment, and · assessment of the allowance for doubtful accounts. The actual results and outcomes may differ from the Company’s estimates and assumptions. |
Cash and equivalents | Cash and equivalents Cash and equivalents include highly liquid investments with maturities of three months or less at the date of acquisition. Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries where the Company operates. Funds, other than regular dividends, fees or loan repayments, cannot be readily transferred abroad from these countries and are therefore deposited and used for working capital needs locally. These funds are included in cash and equivalents as they are not considered restricted. |
Marketable securities and short-term investments | Marketable securities and short‑term investments Management determines the appropriate classification of held‑to‑maturity and available‑for‑sale debt securities at the time of purchase. Debt securities are classified as held‑to‑maturity when the Company has the positive intent and ability to hold the securities to maturity. Held‑to‑maturity debt securities are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under the effective interest method. Such accretion or amortization is included in “Interest and dividend income”. Marketable debt securities not classified as held‑to‑maturity are classified as available‑for‑sale and reported at fair value. Unrealized gains and losses on available‑for‑sale debt securities are excluded from the determination of earnings and are instead recognized in the “Accumulated other comprehensive loss” component of stockholders’ equity, net of tax, until realized. Realized gains and losses on available‑for‑sale debt securities are computed based upon the historical cost of these securities, using the specific identification method. Marketable debt securities are classified as either “Cash and equivalents” or “Marketable securities and short‑term investments” according to their maturity at the time of acquisition. Marketable equity securities are generally classified as “Marketable securities and short‑term investments”, however any marketable securities held as a long‑term investment rather than as an investment of excess liquidity, are classified as “Other non‑current assets”. Equity securities are measured at fair value with fair value changes reported in net income. Fair value changes for equity securities are reported in “Interest and other finance expense”. The Company performs a periodic review of its debt securities to determine whether an other‑than‑temporary impairment has occurred. Generally, when an individual security has been in an unrealized loss position for an extended period of time, the Company evaluates whether an impairment has occurred. The evaluation is based on specific facts and circumstances at the time of assessment, which include general market conditions, and the duration and extent to which the fair value is below cost. If the fair value of a debt security is less than its amortized cost, then an other‑than‑temporary impairment for the difference is recognized if (i) the Company has the intent to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost base or (iii) a credit loss exists insofar as the Company does not expect to recover the entire recognized amortized cost of the security. Such impairment charges are generally recognized in “Interest and other finance expense”. If the impairment is due to factors other than credit losses, and the Company does not intend to sell the security and it is not more likely than not that it will be required to sell the security before recovery of the security’s amortized cost, such impairment charges are recorded in “Accumulated other comprehensive loss”. In addition, equity securities without readily determinable fair value are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying amount. The impairment charge is recorded in “Interest and other finance expense”. |
Accounts receivable and allowance for doubtful accounts | Accounts receivable and allowance for doubtful accounts Accounts receivable are recorded at the invoiced amount. The Company has a group‑wide policy on the management of credit risk. The policy includes a credit assessment methodology to assess the creditworthiness of customers and assign to those customers a risk category. Third‑party agencies’ ratings are considered, if available. For customers where agency ratings are not available, the customer’s most recent financial statements, payment history and other relevant information are considered in the assignment to a risk category. Customers are assessed at least annually or more frequently when information on significant changes in the customers’ financial position becomes known. In addition to the assignment to a risk category, a credit limit per customer is set. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines the allowance based on historical write‑off experience and customer specific data. If an amount has not been settled within its contractual payment term then it is considered past due. The Company reviews the allowance for doubtful accounts regularly and past due balances are reviewed for collectability. Account balances are charged off against the related allowance when the Company believes that the amount will not be recovered. The Company, in its normal course of business, transfers receivables to third parties, generally without recourse. The transfer is accounted for as a sale when the Company has surrendered control over the receivables. Control is deemed to have been surrendered when (i) the transferred receivables have been put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership, (ii) the third‑party transferees have the right to pledge or exchange the transferred receivables, and (iii) the Company has relinquished effective control over the transferred receivables and does not retain the ability or obligation to repurchase or redeem the transferred receivables. At the time of sale, the sold receivables are removed from the Consolidated Balance Sheets and the related cash inflows are classified as operating activities in the Consolidated Statements of Cash Flows. Costs associated with the sale of receivables, including the related gains and losses from the sales, are included in “Interest and other finance expense”. Transfers of receivables that do not meet the requirements for treatment as sales are accounted for as secured borrowings and the related cash flows are classified as financing activities in the Consolidated Statements of Cash Flows. |
Concentrations of credit risk | Concentrations of credit risk The Company sells a broad range of products, systems, services and software to a wide range of industrial, commercial and utility customers as well as various government agencies and quasi‑governmental agencies throughout the world. Concentrations of credit risk with respect to accounts receivable are limited, as the Company’s customer base is comprised of a large number of individual customers. Ongoing credit evaluations of customers’ financial positions are performed to determine whether the use of credit support instruments such as guarantees, letters of credit or credit insurance are necessary; collateral is not generally required. The Company maintains reserves for potential credit losses as discussed above in “Accounts receivable and allowance for doubtful accounts”. Such losses, in the aggregate, are in line with the Company’s expectations. It is the Company’s policy to invest cash in deposits with banks throughout the world with certain minimum credit ratings and in high quality, low risk, liquid investments. The Company actively manages its credit risk by routinely reviewing the creditworthiness of the banks and the investments held. The Company has not incurred significant credit losses related to such investments. The Company’s exposure to credit risk on derivative financial instruments is the risk that the counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment and periodic review of credit limits for individual counterparties. In addition, the Company has entered into close‑out netting agreements with most derivative counterparties. Close‑out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre‑defined trigger events. In the Consolidated Financial Statements derivative transactions are presented on a gross basis. |
Revenue recognition | Revenue recognition A customer contract exists if collectability under the contract is considered probable, the contract has commercial substance, contains payment terms, as well as the rights and commitments of both parties, and has been approved. The Company offers arrangements with multiple performance obligations to meet its customers’ needs. These arrangements may involve the delivery of multiple products and/or performance of services (such as installation and training) and the delivery and/or performance may occur at different points in time or over different periods of time. Goods and services under such arrangements are evaluated to determine whether they form distinct performance obligations and should be accounted for as separate revenue transactions. The Company allocates the sales price to each distinct performance obligation based on the price of each item sold in separate transactions at the inception of the arrangement. The Company generally recognizes revenues for the sale of non-customized products including switchgear, circuit breakers, modular substation packages, control products, motors, generators, drives, robots, turbochargers, measurement and analytical instrumentation, and other goods which are manufactured on a standardized basis at a point in time. Revenues are recognized at the point in time that the customer obtains control of the good which is when it has taken title to the products and assumed the risks and rewards of ownership of the products specified in the purchase order or sales agreement. Generally, the transfer of title and risks and rewards of ownership are governed by the contractually defined shipping terms. The Company uses various International Commercial shipping terms (as promulgated by the International Chamber of Commerce) in its sales of products to third party customers, such as Ex Works (EXW), Free Carrier (FCA) and Delivered Duty Paid (DDP). Billing terms for these point in time contracts vary but generally coincide with delivery to the customer. Payment is generally due upon receipt of the invoice, payable within 90 days or less. The Company generally recognizes revenues for the sale of customized products, including integrated automation and electrification systems and solutions, on an over time basis using the percentage - of-completion method of accounting. These systems are generally accounted for as a single performance obligation as the Company is required to integrate equipment and services into one deliverable for the customer. Revenues are recognized as the systems are customized during the manufacturing or integration process and as control is transferred to the customer as evidenced by the Company’s right to payment for work performed or by the customer’s ownership of the work in process. The Company principally uses the cost - to - cost method to measure progress towards completion on contracts. Under this method, progress of contracts is measured by actual costs incurred in relation to the Company’s best estimate of total estimated costs based on the Company’s history of manufacturing or constructing similar assets for customers. Estimated costs are reviewed and updated routinely for contracts in progress to reflect changes in quantity or pricing of the inputs. The cumulative effect of any change in estimate is recorded in the period when the change in estimate is determined. Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools and depreciation costs. The nature of the Company’s contracts for the sale of customized products gives rise to several types of variable consideration, including claims, unpriced change orders, liquidated damages and penalties. These amounts are estimated based upon the most likely amount of consideration to which the customer or the Company will be entitled. The estimated amounts are included in the sales price to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. All estimates of variable consideration are reassessed periodically. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Billing terms for these over-time contracts vary but are generally based on achieving specified milestones. The differences between the timing of revenues recognized and customer billings result in changes to contract assets and contract liabilities. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Contractual retention amounts billed to customers are generally due upon expiration of the contractual warranty period. Service revenues reflect revenues earned from the Company’s activities in providing services to customers primarily subsequent to the sale and delivery of a product or complete system. Such revenues consist of maintenance type contracts, repair services, equipment upgrades, field service activities that include personnel and accompanying spare parts, training, and installation and commissioning of products as a stand alone service or as part of a service contract. The Company generally recognizes revenues from service transactions as services are performed or at the point in time that the customer obtains control of the spare parts. For long-term service contracts including monitoring and maintenance services, revenues are recognized on a straight line basis over the term of the contract consistent with the nature, timing and extent of the services or, if the performance pattern is other than straight line, as the services are provided based on costs incurred relative to total expected costs. In limited circumstances the Company sells extended warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Revenues for these warranties are recorded over the length of the warranty period based on their stand-alone selling price. Billing terms for service contracts vary but are generally based on the occurrence of a service event. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Revenues are reported net of customer rebates, early settlement discounts, and similar incentives. Rebates are estimated based on sales terms, historical experience and trend analysis. The most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales, use, value added and some excise taxes, are excluded from revenues. The Company does not adjust the contract price for the effects of a financing component if the Company expects, at contract inception, that the time between control transfer and cash receipt is less than 12 months. Sales commissions are expensed immediately when the amortization period for the costs to obtain the contract is less than a year. |
Contract loss provisions | Contract loss provisions Losses on contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues. |
Shipping and handling costs | Shipping and handling costs Shipping and handling costs are recorded as a component of cost of sales. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first‑in, first‑out method, the weighted‑average cost method, or the specific identification method. Inventoried costs are stated at acquisition cost or actual production cost, including direct material and labor and applicable manufacturing overheads. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for decreases in sales prices, obsolescence or similar reductions in value. |
Impairment of long-lived assets | Impairment of long‑lived assets Long‑lived assets that are held and used are assessed for impairment when events or circumstances indicate that the carrying amount of the asset may not be recoverable. If the asset’s net carrying value exceeds the asset’s net undiscounted cash flows expected to be generated over its remaining useful life including net proceeds expected from disposition of the asset, if any, the carrying amount of the asset is reduced to its estimated fair value. The estimated fair value is determined using a market, income and/or cost approach. |
Property, plant and equipment | Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and is depreciated using the straight‑line method. The estimated useful lives of the assets are generally as follows: · factories and office buildings: 30 to 40 years, · other facilities: 15 years, · machinery and equipment: 3 to 15 years, · furniture and office equipment: 3 to 8 years, and · leasehold improvements are depreciated over their estimated useful life or, for operating leases, over the lease term, if shorter. |
Goodwill and other intangible assets | Goodwill and other intangible assets Goodwill is reviewed for impairment annually as of October 1, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill is evaluated for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. For the annual impairment review performed in 2018, the reporting units were the same as the operating segments for Electrification Products and Robotics and Motion, while for the Industrial Automation operating segment the reporting units were determined to be one level below the operating segment. When evaluating goodwill for impairment, the Company uses either a qualitative or quantitative assessment method for each reporting unit. The qualitative assessment involves determining, based on an evaluation of qualitative factors, if it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on this qualitative assessment, it is determined to be more likely than not that the reporting unit’s fair value is less than its carrying value, a quantitative impairment test (described below) is performed, otherwise no further analysis is required. If the Company elects not to perform the qualitative assessment for a reporting unit, then a quantitative impairment test is performed. The quantitative impairment test calculates the fair value of a reporting unit (based on the income approach whereby the fair value of a reporting unit is calculated based on the present value of future cash flows) and compares it to the reporting unit’s carrying value. If the carrying value of the net assets of a reporting unit exceeds the fair value of the reporting unit then the Company records an impairment charge equal to the difference, provided that the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. The cost of acquired intangible assets with a finite life is amortized using a method of amortization that reflects the pattern of intangible assets’ expected contributions to future cash flows. If that pattern cannot be reliably determined, the straight‑line method is used. The amortization periods range from 3 to 5 years for software and from 5 to 20 years for customer‑, technology‑ and marketing‑related intangibles. Intangible assets with a finite life are tested for impairment upon the occurrence of certain triggering events. |
Capitalized software costs | Capitalized software costs Software for internal use Costs incurred in the application development stage until the software is substantially complete are capitalized and are amortized on a straight‑line basis over the estimated useful life of the software, typically ranging from 3 to 5 years. |
Derivative financial instruments and hedging activities | Derivative financial instruments and hedging activities The Company uses derivative financial instruments to manage currency, commodity, interest rate and equity exposures, arising from its global operating, financing and investing activities (see Note 6). The Company recognizes all derivatives, other than certain derivatives indexed to the Company’s own stock, at fair value in the Consolidated Balance Sheets. Derivatives that are not designated as hedging instruments are reported at fair value with derivative gains and losses reported through earnings and classified consistent with the nature of the underlying transaction. If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in fair value of the hedged item attributable to the risk being hedged through earnings (in the case of a fair value hedge) or recognized in “Accumulated other comprehensive loss” until the hedged item is recognized in earnings (in the case of a cash flow hedge). The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings consistent with the classification of the hedged item. Where derivative financial instruments have been designated as cash flow hedges of forecasted transactions and such forecasted transactions are no longer probable of occurring, hedge accounting is discontinued and any derivative gain or loss previously included in “Accumulated other comprehensive loss” is reclassified into earnings consistent with the nature of the original forecasted transaction. Gains or losses from derivatives designated as hedging instruments in a fair value hedge are reported through earnings and classified consistent with the nature of the underlying hedged transaction. Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accounted for as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value reported in earnings consistent with the nature of the commercial contract to which they relate. Derivatives are classified in the Consolidated Statements of Cash Flows in the same section as the underlying item. Cash flows from the settlement of undesignated derivatives used to manage the risks of different underlying items on a net basis, are classified within “Net cash provided by operating activities”, as the underlying items are primarily operational in nature. Other cash flows on the settlement of derivatives are recorded within “Net cash used in investing activities”. |
Leases | Leases The Company leases primarily real estate, vehicles and machinery. Rental expense for operating leases is recorded on a straight‑line basis over the life of the lease term. Lease transactions where substantially all risks and rewards incident to ownership are transferred from the lessor to the lessee are accounted for as capital leases. All other leases are accounted for as operating leases. Amounts due under capital leases are recorded as a liability. The interest in assets acquired under capital leases is recorded as property, plant and equipment. Depreciation and amortization of assets recorded under capital leases is included in depreciation and amortization expense. |
Translation of foreign currencies and foreign exchange transactions | Translation of foreign currencies and foreign exchange transactions The functional currency for most of the Company’s subsidiaries is the applicable local currency. The translation from the applicable functional currencies into the Company’s reporting currency is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for income statement accounts using average exchange rates prevailing during the year. The resulting translation adjustments are excluded from the determination of earnings and are recognized in “Accumulated other comprehensive loss” until the subsidiary is sold, substantially liquidated or evaluated for impairment in anticipation of disposal. Foreign currency exchange gains and losses, such as those resulting from foreign currency denominated receivables or payables, are included in the determination of earnings, except as they relate to intercompany loans that are equity‑like in nature with no reasonable expectation of repayment, which are recognized in “Accumulated other comprehensive loss”. Exchange gains and losses recognized in earnings are included in “Total revenues”, “Total cost of sales”, “Selling, general and administrative expenses” or “Interest and other finance expense” consistent with the nature of the underlying item. |
Income taxes | Income taxes The Company uses the asset and liability method to account for deferred taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company records a deferred tax asset when it determines that it is more likely than not that the deduction will be sustained based upon the deduction’s technical merit. Deferred tax assets and liabilities that can be offset against each other are reported on a net basis. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. Deferred taxes are provided on unredeemed retained earnings of the Company’s subsidiaries. However, deferred taxes are not provided on such unredeemed retained earnings to the extent it is expected that the earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. The Company operates in numerous tax jurisdictions and, as a result, is regularly subject to audit by tax authorities. The Company provides for tax contingencies whenever it is deemed more likely than not that a tax asset has been impaired or a tax liability has been incurred. Contingency provisions are recorded based on the technical merits of the Company’s filing position, considering the applicable tax laws and Organisation for Economic Co‑operation and Development (OECD) guidelines and are based on its evaluations of the facts and circumstances as of the end of each reporting period. The Company applies a two‑step approach to recognize and measure uncertainty in income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate settlement. Uncertain tax positions that could be settled against existing loss carryforwards or income tax credits are reported net. Expenses related to tax penalties are classified in the Consolidated Income Statements as “Provision for taxes”, while interest thereon is classified as “Interest and other finance expense”. |
Research and development | Research and development Research and development costs not related to specific customer orders are generally expensed as incurred. |
Earnings per share | Earnings per share Basic earnings per share is calculated by dividing income by the weighted‑average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted‑average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities include: outstanding written call options, outstanding options and shares granted subject to certain conditions under the Company’s share‑based payment arrangements. See further discussion related to earnings per share in Note 20 and of potentially dilutive securities in Note 18. |
Share-based payment arrangements | Share‑based payment arrangements The Company has various share‑based payment arrangements for its employees, which are described more fully in Note 18. Such arrangements are accounted for under the fair value method. For awards that are equity‑settled, total compensation is measured at grant date, based on the fair value of the award at that date, and recorded in earnings over the period the employees are required to render service. For awards that are cash‑settled, compensation is initially measured at grant date and subsequently remeasured at each reporting period, based on the fair value and vesting percentage of the award at each of those dates, with changes in the liability recorded in earnings. |
Fair value measures | Fair value measures The Company uses fair value measurement principles to record certain financial assets and liabilities on a recurring basis and, when necessary, to record certain non‑financial assets at fair value on a non‑recurring basis, as well as to determine fair value disclosures for certain financial instruments carried at amortized cost in the financial statements. Financial assets and liabilities recorded at fair value on a recurring basis include foreign currency, commodity and interest rate derivatives, as well as cash‑settled call options and available‑for‑sale securities. Non‑financial assets recorded at fair value on a non‑recurring basis include long‑lived assets that are reduced to their estimated fair value due to impairments. Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation techniques including the market approach (using observable market data for identical or similar assets and liabilities), the income approach (discounted cash flow models) and the cost approach (using costs a market participant would incur to develop a comparable asset). Inputs used to determine the fair value of assets and liabilities are defined by a three‑level hierarchy, depending on the nature of those inputs. The Company has categorized its financial assets and liabilities and non‑financial assets measured at fair value within this hierarchy based on whether the inputs to the valuation technique are observable or unobservable. An observable input is based on market data obtained from independent sources, while an unobservable input reflects the Company’s assumptions about market data. The levels of the fair value hierarchy are as follows: Level 1: Valuation inputs consist of quoted prices in an active market for identical assets or liabilities (observable quoted prices). Assets and liabilities valued using Level 1 inputs include exchange‑traded equity securities, listed derivatives which are actively traded such as commodity futures, interest rate futures and certain actively traded debt securities. Level 2: Valuation inputs consist of observable inputs (other than Level 1 inputs) such as actively quoted prices for similar assets, quoted prices in inactive markets and inputs other than quoted prices such as interest rate yield curves, credit spreads, or inputs derived from other observable data by interpolation, correlation, regression or other means. The adjustments applied to quoted prices or the inputs used in valuation models may be both observable and unobservable. In these cases, the fair value measurement is classified as Level 2 unless the unobservable portion of the adjustment or the unobservable input to the valuation model is significant, in which case the fair value measurement would be classified as Level 3. Assets and liabilities valued or disclosed using Level 2 inputs include investments in certain funds, reverse repurchase agreements, certain debt securities that are not actively traded, interest rate swaps, commodity swaps, cash‑settled call options, forward foreign exchange contracts, foreign exchange swaps and forward rate agreements, time deposits, as well as financing receivables and debt. Level 3: Valuation inputs are based on the Company’s assumptions of relevant market data (unobservable input). Investments in private equity, real estate and collective funds held within the Company’s pension plans, are generally valued using the net asset value (NAV) per share as a practical expedient for fair value provided certain criteria are met. The NAVs are determined based on the fair values of the underlying investments in the funds. These assets are not classified in the fair value hierarchy but are separately disclosed. Whenever quoted prices involve bid‑ask spreads, the Company ordinarily determines fair values based on mid‑market quotes. However, for the purpose of determining the fair value of cash‑settled call options serving as hedges of the Company’s management incentive plan (MIP), bid prices are used. When determining fair values based on quoted prices in an active market, the Company considers if the level of transaction activity for the financial instrument has significantly decreased, or would not be considered orderly. In such cases, the resulting changes in valuation techniques would be disclosed. If the market is considered disorderly or if quoted prices are not available, the Company is required to use another valuation technique, such as an income approach. Disclosures about the Company’s fair value measurements of assets and liabilities are included in Note 7. |
Contingencies | Contingencies The Company is subject to proceedings, litigation or threatened litigation and other claims and inquiries, related to environmental, labor, product, regulatory, tax (other than income tax) and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the provision required, if any, for these contingencies is made after analysis of each individual issue, often with assistance from both internal and external legal counsel and technical experts. The required amount of a provision for a contingency of any type may change in the future due to new developments in the particular matter, including changes in the approach to its resolution. The Company records a provision for its contingent obligations when it is probable that a loss will be incurred and the amount can be reasonably estimated. Any such provision is generally recognized on an undiscounted basis using the Company’s best estimate of the amount of loss incurred or at the lower end of an estimated range when a single best estimate is not determinable. In some cases, the Company may be able to recover a portion of the costs relating to these obligations from insurers or other third parties; however, the Company records such amounts only when it is probable that they will be collected. The Company provides for anticipated costs for warranties when it recognizes revenues on the related products or contracts. Warranty costs include calculated costs arising from imperfections in design, material and workmanship in the Company’s products. The Company makes individual assessments on contracts with risks resulting from order‑specific conditions or guarantees and assessments on an overall, statistical basis for similar products sold in larger quantities. The Company may have legal obligations to perform environmental clean‑up activities related to land and buildings as a result of the normal operations of its business. In some cases, the timing or the method of settlement, or both, are conditional upon a future event that may or may not be within the control of the Company, but the underlying obligation itself is unconditional and certain. The Company recognizes a provision for these obligations when it is probable that a liability for the clean‑up activity has been incurred and a reasonable estimate of its fair value can be made. In some cases, a portion of the costs expected to be incurred to settle these matters may be recoverable. An asset is recorded when it is probable that such amounts are recoverable. Provisions for environmental obligations are not discounted to their present value when the timing of payments cannot be reasonably estimated. |
Pensions and other postretirement benefits | Pensions and other postretirement benefits The Company has a number of defined benefit pension and other postretirement plans. The Company recognizes an asset for such a plan’s overfunded status or a liability for such a plan’s underfunded status in its Consolidated Balance Sheets. Additionally, the Company measures such a plan’s assets and obligations that determine its funded status as of the end of the year and recognizes the changes in the funded status in the year in which the changes occur. Those changes are reported in “Accumulated other comprehensive loss”. The Company uses actuarial valuations to determine its pension and postretirement benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates and expected return on plan assets. Current market conditions are considered in selecting these assumptions. The Company’s various pension plan assets are assigned to their respective levels in the fair value hierarchy in accordance with the valuation principles described in the “Fair value measures” section above. See Note 17 for further discussion of the Company’s employee benefit plans. |
Business combinations | Business combinations The Company accounts for assets acquired and liabilities assumed in business combinations using the acquisition method and records these at their respective fair values. Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in income. Identifiable intangibles consist of intellectual property such as trademarks and trade names, customer relationships, patented and unpatented technology, in‑process research and development, order backlog and capitalized software; these are amortized over their estimated useful lives. Such intangibles are subsequently subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable. See “Goodwill and other intangible assets” above. Acquisition‑related costs are recognized separately from the acquisition and expensed as incurred. Upon gaining control of an entity in which an equity method or cost basis investment was held by the Company, the carrying value of that investment is adjusted to fair value with the related gain or loss recorded in income. Deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax base of assets and liabilities as well as uncertain tax positions and valuation allowances on acquired deferred tax assets assumed in connection with a business combination are initially estimated as of the acquisition date based on facts and circumstances that existed at the acquisition date. These estimates are subject to change within the measurement period (a period of up to 12 months after the acquisition date during which the acquirer may adjust the provisional acquisition amounts) with any adjustments to the preliminary estimates being recorded to goodwill. Changes in deferred taxes, uncertain tax positions and valuation allowances on acquired deferred tax assets that occur after the measurement period are recognized in income. |
New accounting pronouncements | New accounting pronouncements Applicable for current period Revenue from contracts with customers As of January 1, 2018, the Company adopted a new accounting standard for recognizing revenues from contracts with customers. The new standard, which supersedes substantially all previously existing revenue recognition guidance, provides a single comprehensive model for recognizing revenues on the transfer of promised goods or services to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The adoption of this standard resulted in only insignificant differences between the identification of performance obligations and the current unit of accounting determination. Therefore, the cumulative effect on retained earnings of applying this standard on a modified retrospective basis was not material. However, total assets and total liabilities increased by $196 million, of which $50 million relate to held for sale, due to the reclassification of certain advances from customers, previously reported as a reduction in inventories, to liabilities. While comparative information has not been restated and continues to be measured and reported under the accounting standards in effect for those periods presented, other than the additional disclosure requirements, the impact of the adoption on the Company’s 2018 consolidated financial statements, was not significant. Income taxes – Intra-entity transfers of assets other than inventory In January 2018, the Company adopted an accounting standard update requiring it to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs instead of when the asset has been sold to an outside party. This update was applied on a modified retrospective basis and resulted in a net reduction in deferred tax assets of $201 million with a corresponding reduction in retained earnings. Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost In January 2018, the Company adopted an accounting standard update which changes how employers that sponsor defined benefit pension plans and other postretirement plans present the net periodic benefit cost in the income statement. Under this standard, the Company is required to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations. Under the amendment only the current service cost component is allowed to be capitalized as a cost of internally manufactured inventory or a self-constructed asset. This update was applied retrospectively for the presentation requirements, and prospectively for the capitalization of the current service cost component requirements. The Company has used the practical expedient, as the amount of other components of net periodic benefit cost capitalized in inventory for prior periods is not significant. For 2017 and 2016, the Company reclassified income of $42 million and expenses of $38 million, respectively, and presented it outside of income from operations relating to net periodic pension costs. Of these amounts, $9 million and $0 million, respectively, relate to discontinued operations. Recognition and measurement of financial assets and financial liabilities In January 2018, the Company adopted two accounting standard updates enhancing the reporting model for financial instruments, which include amendments to address aspects of recognition, measurement, presentation and disclosure. The Company is required to measure equity investments (except those accounted for under the equity method) at fair value with changes in fair value recognized in net income. The adoption of this update resulted in the reclassification of the net cumulative unrealized gains on available-for-sale equity securities of $9 million (net of tax) at December 31, 2017 from Total accumulated comprehensive loss to Retained earnings on January 1, 2018. Disclosure Framework — Changes to the disclosure requirements for defined benefit plans In December 2018, the Company early adopted an accounting standard update which modifies the disclosure requirements for defined benefit pension or other postretirement benefit plans. The update removes certain disclosures relating to (i) amounts expected to be recognized in net periodic benefit cost over the next twelve months, (ii) plan assets expected to be returned to the Company, (iii) a one-percentage-point change in assumed health care costs, and (iv) related parties, including insurance and annuity contracts. It clarifies the disclosure requirements for both the projected and accumulated benefit obligations, as well as requiring additional disclosures for cash balance plans and explanations for significant gains and losses related to changes in the benefit obligations. This update was applied on a retrospective basis and did not have a significant impact on the consolidated financial statements. Classification of certain cash receipts and cash payments in the statement of cash flows In January 2018, the Company adopted an accounting standard update which clarifies how certain cash receipts and cash payments, including debt prepayment or extinguishment costs, the settlement of zero coupon debt instruments, contingent consideration paid after a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization, should be presented and classified in the statement of cash flows. This update was applied retrospectively and did not have a significant impact on the consolidated financial statements. Statement of cash flows- Restricted cash In January 2018, the Company adopted an accounting standard update which clarifies the classification and presentation of changes in restricted cash on the statement of cash flows. It requires the inclusion of cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. This update did not have a significant impact on the consolidated financial statements. Clarifying the definition of a business In January 2018, the Company adopted an accounting standard update which narrows the definition of a business. It also provides a framework for determining whether a set of transferred assets and activities involves a business. This update was applied prospectively and did not have a significant impact on the consolidated financial statements. Clarifying the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets In January 2018, the Company adopted an accounting standard update which clarifies the scope of asset derecognition guidance, adds guidance for partial sales of nonfinancial assets and clarifies recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. This update was applied retrospectively and did not have a significant impact on the consolidated financial statements. Compensation — Stock compensation In January 2018, the Company adopted an accounting standard update which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this update, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This update was applied prospectively and did not have a significant impact on the consolidated financial statements. Applicable for future periods Leases In February 2016, an accounting standard update was issued that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than twelve months with several practical expedients. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement. It also requires additional disclosures about the Company’s leasing activities. The Company has elected to not recognize lease assets and lease liabilities for leases with terms of less than twelve months and to not separate lease and non-lease components for leases other than real estate. This update is effective for the Company for annual and interim periods beginning January 1, 2019, and is applicable on a modified retrospective basis with various optional practical expedients. In July 2018, a further accounting standard update was issued, allowing the Company the additional option of adopting the standard retrospectively with the cumulative-effect of initially applying the new standard recognized at the date of adoption in retained earnings. A further update was issued in December 2018 clarifying certain aspects of accounting for leases by lessors. The Company will elect to adopt the standard using the additional option outlined above and currently expects the update will increase total assets and total liabilities by approximately $1.4 billion of which approximately $0.2 billion relate to liabilities held for sale. The Company expects that the adoption of this update will only have an insignificant impact on its results of operations and cash flows. Measurement of credit losses on financial instruments In June 2016, an accounting standard update was issued which replaces the existing incurred loss impairment methodology for most financial assets with a new “current expected credit loss” model. The new model will result in the immediate recognition of the estimated credit losses expected to occur over the remaining life of financial assets such as trade and other receivables, held-to-maturity debt securities, loans and other instruments. Credit losses relating to available-for-sale debt securities will be measured in a manner similar to current GAAP, except that the losses will be recorded through an allowance for credit losses rather than as a direct write-down of the security. This update is effective for the Company for annual and interim periods beginning January 1, 2020. The Company is currently evaluating the impact of this update on its consolidated financial statements. Derivatives and hedging—Targeted improvements to accounting for hedging activities In August 2017, an accounting standard update was issued which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. This update is effective for the Company for annual and interim periods beginning January 1, 2019. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The Company will adopt this update as of January 1, 2019, and does not believe that this update will have a significant impact on its consolidated financial statements. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, an accounting standard update was issued which allows a reclassification of the stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 to retained earnings. This update is effective for the Company for annual and interim periods beginning January 1, 2019. The updated guidance is to be applied in the period of adoption or retrospectively to each period in which the effect of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income are recognized. The Company is currently evaluating the impact of this update on its consolidated financial statements. Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract In August 2018, an accounting standard update was issued which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update is effective for the Company for annual and interim periods beginning January 1, 2020, with early adoption in any interim period permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements. Disclosure Framework — Changes to the disclosure requirements for fair value measurement In August 2018, an accounting standard update was issued which modifies the disclosure requirements for fair value measurements. The update eliminates the requirements to disclose the amount of and reasons for transfers between Level 1 and 2 of the fair value hierarchy, the timing of transfers between levels and the Level 3 valuation process, while expanding the Level 3 disclosures to include the range and weighted average used to develop significant unobservable inputs and the changes in unrealized gains and losses on recurring fair value measurements. This update is effective for the Company for annual and interim periods beginning January 1, 2020, with early adoption permitted. The changes and modifications to the Level 3 disclosures are to be applied prospectively, while all other amendments are to be applied retrospectively. The Company is currently evaluating the impact of this update on its disclosures but does not expect that it will have a material effect on its consolidated financial statements. |
Changes in presentation of fi_2
Changes in presentation of financial statements (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Changes in presentation of financial statements | |
Operating results of discontinued operations | ($ millions) 2018 2017 2016 Total revenues 9,698 10,028 Total cost of sales (7,378) (7,501) (7,597) Gross profit 2,320 2,527 Expenses (1,326) (1,376) (1,278) Income from operations 994 1,152 Net interest and other finance expense (55) (42) (58) Non-operational pension (cost) credit 12 9 — Income from discontinued operations before taxes 951 1,119 Provision for taxes (228) (273) (251) Income from discontinued operations, net of tax 723 846 |
Major components of assets and liabilities held for sale of discontinued operations | December 31, ($ in millions) 2018 2017 Receivables, net 2,377 2,406 Contract assets 1,236 1,008 Inventories, net 1,457 1,518 Other current assets 94 111 Current assets held for sale 5,164 5,043 Property, plant and equipment, net 1,477 1,559 Goodwill 1,620 1,663 Other non-current assets 330 338 Non-current assets held for sale 3,427 3,560 Accounts payable, trade 1,732 1,683 Contract liabilities 998 1,116 Other current liabilities 1,455 1,721 Current liabilities held for sale 4,185 4,520 Pension and other employee benefits 268 293 Other non-current liabilities 161 177 Non-current liabilities held for sale 429 470 |
Schedule of changes in prior period amounts | December 31, 2017 ($ in millions) Previous Adjusted Previous Adjusted Consolidated Balance Sheet Current assets Current liabilities Receivables, net (1) 7,002 5,861 Contract liabilities (2)(3)(4) — 1,792 Contract assets (1) — 1,141 Billings in excess of sales (2) 744 — Inventories, net (3) 3,591 3,737 Advances from customers (2)(3) 1,047 — Other current liabilities (4) 3,510 3,509 Total assets 43,262 43,458 Total liabilities 27,913 28,109 (1) $1,141 million of unbilled receivables previously included in Receivables have been reclassified to Contract assets. (2) Amounts previously presented as Billings in excess of sales and Advances from customers have been reclassified to Contract liabilities. (3) $146 million of advances from customers, previously recorded net within Inventories, have been reclassified to Advances from customers that are now recorded within Contract liabilities. This accounting change also increased the amounts previously reported at December 31, 2017 and 2016, for the respective Total assets for the operating segments. (4) Certain amounts recorded as deferred revenues, totaling $1 million, have been reclassified from Other current liabilities to Contract liabilities. |
Schedule of changes affecting operating segments | 2017 2016 ($ millions) EPC-RM EPC-PG EPC-RM EPC-PG Third-party revenues 5 526 18 897 Operational EBITA (82) (55) (9) (13) Total assets 18 680 13 853 Depreciation and amortization — 2 — 6 Capital expenditure — — — 3 |
Acquisitions and business div_2
Acquisitions and business divestments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions and business divestments | |
Acquisitions | ($ in millions, except number of acquired businesses) 2018 2017 2016 Purchase price for acquisitions (net of cash acquired) (1) 2,638 1,992 13 Aggregate excess of purchase price over fair value of net assets acquired (2) 1,472 1,267 12 Number of acquired businesses 3 4 1 (1) Excluding changes in cost- and equity-accounted companies. (2) Recorded as goodwill (see Note 11). |
Allocation of the purchase consideration for business acquisition | 2018 2017 Preliminary allocated amounts (1) Weighted- Weighted- average Allocated average ($ in millions) GEIS Other Total useful life amounts (1) useful life Technology 87 — 87 7 years 412 7 years Customer Relationships 214 — 214 14 years 264 20 years Trade names 122 — 122 13 years 61 10 years Supply agreement 34 — 34 13 years — Intangible assets 457 — 457 737 Property, plant and equipment 379 9 388 131 Debt acquired — — — (50) Deferred tax liabilities (110) (1) (111) (249) Inventories 435 3 438 176 Other assets and liabilities, net (2) 126 (25) 101 (20) Goodwill (3) 1,442 30 1,472 1,267 Noncontrolling interest (107) — (107) — Total consideration (net of cash acquired) (4) 2,622 16 2,638 1,992 (1) Excludes measurement period adjustments related to prior year acquisitions. (2) Gross receivables from the GEIS acquisition totaled $658 million; the fair value of which was $624 million after adjusting for contractual cash flows not expected to be collected. (3) The Company expects that goodwill recorded in certain jurisdictions will be tax deductible. The amount is subject to the finalization of the purchase price allocation in 2019. (4) Primarily relates to the acquisition of GEIS in 2018 and B&R in 2017. Cash acquired in the GEIS acquisition totaled $192 million. |
Unaudited pro forma financial information | ($ in millions) 2018 2017 Total revenues 28,936 27,881 Income from continuing operations, net of tax 1,622 1,631 |
Adjustments included in pro forma results of related acquisition | ($ in millions) 2018 2017 Impact on cost of sales from additional amortization of intangible assets (10) (20) Impact on cost of sales from fair valuing acquired inventory 26 (26) Impact on cost of sales from additional depreciation of property, plant and equipment (4) (8) Impact on selling, general and administrative expenses from additional amortization of intangible assets (5) (12) Impact on selling, general and administrative expenses from acquisition-related costs 44 20 Impact on interest expense from financing costs (15) (62) Taxation adjustments (5) 33 Total pro forma adjustments 31 (75) |
Cash and equivalents, marketa_2
Cash and equivalents, marketable securities and short-term investments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Cash and equivalents, marketable securities and short-term investments | |
Cash, cash equivalents, and short-term investments | December 31, 2018 Marketable securities Gross Gross and unrealized unrealized Cash and short-term ($ in millions) Cost basis gains losses Fair value equivalents investments Changes in fair value recorded in net income Cash 1,983 1,983 1,983 Time deposits 1,463 1,463 1,462 1 Other short-term investments 206 206 206 Equity securities (1) 206 (3) 203 203 3,858 — (3) 3,855 3,445 410 Changes in fair value recorded in other comprehensive income Debt securities available-for-sale: —U.S. government obligations 217 (3) 214 214 —Corporate 90 (2) 88 88 307 — (5) 302 — 302 Total 4,165 — (8) 4,157 3,445 712 December 31, 2017 Marketable securities Gross Gross and unrealized unrealized Cash and short-term ($ in millions) Cost basis gains losses Fair value equivalents investments Changes in fair value recorded in net income Cash 1,963 1,963 1,963 Time deposits 2,834 2,834 2,563 271 Other short-term investments 305 — 305 305 5,102 — — 5,102 4,526 576 Changes in fair value recorded in other comprehensive income Equity securities 152 13 165 165 Debt securities available-for-sale: —U.S. government obligations 127 (2) 125 125 —Other government obligations 2 — 2 2 —Corporate 215 1 (1) 215 215 496 14 (3) 507 — 507 Total 5,598 14 (3) 5,609 4,526 1,083 (1) See “New accounting pronouncements - Applicable for current period” in Note 2 for changes applicable in 2018. |
Contractual maturities of debt securities classified as available-for-sale and held-to-maturity | December 31, 2018 Available-for-sale ($ in millions) Cost basis Fair value Less than one year 80 80 One to five years 166 163 Six to ten years 60 58 Due after ten years 1 1 Total 307 302 |
Derivative financial instrume_2
Derivative financial instruments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Derivative financial instruments | |
Notional amount of outstanding derivatives | Type of derivative Total notional amounts at December 31, ($ in millions) 2018 2017 2016 Foreign exchange contracts 13,612 16,261 14,144 Embedded foreign exchange derivatives 733 899 1,125 Interest rate contracts 3,300 5,706 3,021 Derivative commodity contracts The following table shows the notional amounts of outstanding commodity derivatives (whether designated as hedges or not), on a net basis, to reflect the Company’s requirements in the various commodities: Total notional amounts at December 31, Type of derivative Unit 2018 2017 2016 Copper swaps metric tonnes 46,143 28,976 17,667 Silver swaps ounces 2,861,294 1,966,729 1,586,395 Aluminum swaps metric tonnes 9,491 1,869 27 |
Gain (loss) on cash flow hedges | Gains (losses) recognized Gains (losses) reclassified in OCI on derivatives from OCI into income (effective portion) (effective portion) ($ in millions) 2018 2017 2016 2018 2017 2016 Type of derivative Location Foreign exchange contracts (6) 3 (7) Total revenues — 2 1 Total cost of sales — 2 9 Commodity contracts (9) 9 3 Total cost of sales — 6 (2) Cash-settled call options (36) 22 15 SG&A expenses (1) (22) 15 9 Total (51) 34 11 (22) 25 17 (1) SG&A expenses represent “Selling, general and administrative expenses”. |
Gain (loss) on fair value hedges | ($ in millions) 2018 2017 2016 Gains (losses) recognized in Interest and other finance expense: - on derivatives designated as fair value hedges (4) (23) (28) - on hedged item 5 27 30 |
Gain (loss) on derivatives not designated in hedge relationships | ($ in millions) Gains (losses) recognized in income Type of derivative not designated as a hedge Location 2018 2017 2016 Foreign exchange contracts Total revenues (121) 92 (90) Total cost of sales 46 (41) (28) SG&A expenses (1) 10 (18) 8 Non-order related research and development (1) — (1) Interest and other finance expense 40 22 (35) Embedded foreign exchange contracts Total revenues 58 7 (5) Total cost of sales (4) (2) (4) SG&A expenses (1) 2 5 (2) Commodity contracts Total cost of sales (33) 31 31 Other Interest and other finance expense 3 (2) (7) Total — 94 (133) (1) SG&A expenses represent “Selling, general and administrative expenses”. |
Fair value of derivatives | December 31, 2018 Derivative assets Derivative liabilities Non-current Non-current Current in in “Other Current in in “Other “Other current non-current “Other current non-current ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts — — 1 4 Commodity contracts — — 2 — Interest rate contracts — 35 — 1 Cash-settled call options 3 3 — — Total 3 38 3 5 Derivatives not designated as hedging instruments: Foreign exchange contracts 117 14 160 30 Commodity contracts 8 1 21 1 Embedded foreign exchange derivatives 15 10 8 1 Total 140 25 189 32 Total fair value 143 63 192 37 December 31, 2017 Derivative assets Derivative liabilities Non-current Non-current Current in in “Other Current in in “Other “Other current non-current “Other current non-current ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts 1 — — 1 Commodity contracts 5 — — — Interest rate contracts — 41 — 4 Cash-settled call options 25 16 — — Total 31 57 — 5 Derivatives not designated as hedging instruments: Foreign exchange contracts 134 24 183 62 Commodity contracts 31 1 7 — Cross-currency interest rate swaps — — 2 — Cash-settled call options — 1 — — Embedded foreign exchange derivatives 15 10 15 3 Total 180 36 207 65 Total fair value 211 93 207 70 |
Offsetting arrangements | ($ in millions) December 31, 2018 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net asset similar arrangement assets case of default received received exposure Derivatives 181 (121) — — 60 Reverse repurchase agreements 206 — — (206) — Total 387 (121) — (206) 60 ($ in millions) December 31, 2018 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 220 (121) — — 99 Total 220 (121) — — 99 ($ in millions) December 31, 2017 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net asset similar arrangement assets case of default received received exposure Derivatives 279 (167) — — 112 Reverse repurchase agreements 305 — — (305) — Total 584 (167) — (305) 112 ($ in millions) December 31, 2017 Gross amount of Derivative liabilities Type of agreement or recognized eligible for set-off in Cash collateral Non-cash collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 259 (167) — — 92 Total 259 (167) — — 92 |
Fair values (Tables)
Fair values (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair values | |
Fair value of financial assets and liabilities measured at fair value on a recurring basis | December 31, 2018 Total ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 203 — 203 Debt securities—U.S. government obligations 214 — — 214 Debt securities—Corporate — 88 — 88 Derivative assets—current in “Other current assets” — 143 — 143 Derivative assets—non-current in “Other non-current assets” — 63 — 63 Total 214 497 — 711 Liabilities Derivative liabilities—current in “Other current liabilities” — 192 — 192 Derivative liabilities—non-current in “Other non-current liabilities” — 37 — 37 Total — 229 — 229 December 31, 2017 Total ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 165 — 165 Debt securities—U.S. government obligations 125 — — 125 Debt securities—Other government obligations — 2 — 2 Debt securities—Corporate — 215 — 215 Receivable in "Other non-current assets": Receivable under securities lending arrangement 79 — — 79 Derivative assets—current in “Other current assets” — 211 — 211 Derivative assets—non-current in “Other non-current assets” — 93 — 93 Total 204 686 — 890 Liabilities Derivative liabilities—current in “Other current liabilities” — 207 — 207 Derivative liabilities—non-current in “Other non-current liabilities” — 70 — 70 Total — 277 — 277 |
Schedule of fair values of financial instruments carried on a cost basis | December 31, 2018 Carrying Total ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,983 1,983 — — 1,983 Time deposits 1,462 — 1,462 — 1,462 Marketable securities and short-term investments (excluding securities): Time deposits 1 — 1 — 1 Receivables under reverse repurchase agreements 206 — 206 — 206 Other non-current assets: Loans granted 30 — 31 — 31 Restricted cash and cash deposits 39 39 — — 39 Liabilities Short-term debt and current maturities of long-term debt (excluding capital lease obligations) 2,008 1,480 528 — 2,008 Long-term debt (excluding capital lease obligations) 6,457 5,839 707 — 6,546 December 31, 2017 Carrying Total ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,963 1,963 — — 1,963 Time deposits 2,563 — 2,563 — 2,563 Marketable securities and short-term investments (excluding securities): Time deposits 271 — 271 — 271 Receivables under reverse repurchase agreements 305 — 305 — 305 Other non-current assets: Loans granted 29 — 30 — 30 Restricted cash and cash deposits 35 35 — — 35 Liabilities Short-term debt and current maturities of long-term debt (excluding capital lease obligations) 694 400 294 — 694 Long-term debt (excluding capital lease obligations) 6,567 6,046 773 — 6,819 |
Receivables, net and Contract_2
Receivables, net and Contract assets and liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables, net and Contract assets and liabilities | |
Receivables, net | December 31, ($ in millions) 2018 2017 Trade receivables 5,970 5,553 Other receivables 635 510 Allowance (219) (202) Total 6,386 5,861 |
Reconciliation of changes in allowance for doubtful accounts | ($ in millions) 2018 2017 2016 Balance at January 1, 202 202 160 Additions 126 61 116 Deductions (93) (74) (64) Exchange rate differences (16) 13 (10) Balance at December 31, 219 202 202 |
Information about contract assets and contract liabilities | ($ in millions) 2018 2017 2016 Contract assets 1,082 1,141 1,222 Contract liabilities 1,707 1,792 1,690 |
Significant changes in contract assets and contract liabilities | 2018 2017 Contract Contract Contract Contract ($ in millions) assets liabilities assets liabilities Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2018/2017 (879) (1,212) Additions to Contract liabilities - excluding amounts recognized as revenue during the period 518 868 Receivables recognized that were included in the Contract assets balance at Jan 1, 2018/2017 (633) (584) |
Inventories, net (Tables)
Inventories, net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventories, net | |
Inventories, net | December 31, ($ in millions) 2018 2017 Raw materials 1,823 1,412 Work in process 837 840 Finished goods 1,525 1,379 Advances to suppliers 99 106 Total 4,284 3,737 |
Property, plant and equipment_2
Property, plant and equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, plant and equipment, net | |
Property, plant and equipment, net | December 31, ($ in millions) 2018 2017 Land and buildings 3,573 3,268 Machinery and equipment 5,624 5,572 Construction in progress 464 511 9,661 9,351 Accumulated depreciation (5,528) (5,547) Total 4,133 3,804 |
Schedule of assets under capital leases included in property, plant and equipment, net | December 31, ($ in millions) 2018 2017 Land and buildings 171 127 Machinery and equipment 69 81 240 208 Accumulated depreciation (122) (105) Total 118 103 |
Goodwill and other intangible_2
Goodwill and other intangible assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and other intangible assets | |
Changes in Goodwill | Electrification Industrial Robotics Corporate ($ in millions) Products Automation and Motion and Other Total Cost at January 1, 2017 2,805 1,592 3,536 38 7,971 Accumulated impairment charges — — — (18) (18) Balance at January 1, 2017 2,805 1,592 3,536 20 7,953 Goodwill acquired during the year — 1,263 4 — 1,267 Goodwill allocated to disposals — (1) — (1) (2) Exchange rate differences and other 164 85 67 2 318 Balance at December 31, 2017 2,969 2,939 3,607 21 9,536 Goodwill acquired during the year 1,442 — 30 — 1,472 Goodwill allocated to disposals (31) — — — (31) Exchange rate differences and other (104) (75) (34) — (213) Balance at December 31, 2018 4,276 2,864 3,603 21 10,764 |
Intangible assets other than goodwill | December 31, 2018 2017 Gross Net Gross Net carrying Accumulated carrying carrying Accumulated carrying ($ in millions) amount amortization amount amount amortization amount Capitalized software for internal use 779 (586) 193 704 (572) 132 Capitalized software for sale 30 (30) — 31 (31) — Intangibles other than software: Customer-related 2,609 (909) 1,700 2,452 (782) 1,670 Technology-related 1,131 (701) 430 1,082 (636) 446 Marketing-related 483 (240) 243 366 (199) 167 Other 67 (26) 41 33 (23) 10 Total 5,099 (2,492) 2,607 4,668 (2,243) 2,425 |
Schedule of additions to intangible assets other than goodwill | ($ in millions) 2018 2017 Capitalized software for internal use 139 69 Intangibles other than software: Customer-related 214 264 Technology-related 87 412 Marketing-related 122 61 Other 34 — Total 596 806 |
Schedule of additions to intangible assets other than goodwill related to business combinations | 2018 2017 Amount Weighted-average Amount Weighted-average ($ in millions) acquired useful life acquired useful life Capitalized software for internal use 2 years Intangibles other than software: Customer-related 14 years 264 20 years Technology-related 7 years 412 7 years Marketing-related 13 years 61 10 years Other 13 years — Total 737 |
Amortization expense of intangible assets other than goodwill | ($ in millions) 2018 2017 2016 Capitalized software for internal use 59 50 50 Intangibles other than software 279 237 254 Total 338 287 304 |
Future amortization expense of intangible assets other than goodwill | ($ in millions) 2019 342 2020 321 2021 285 2022 253 2023 234 Thereafter 1,172 Total 2,607 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt | |
Schedule of short-term debt | December 31, ($ in millions) 2018 2017 Short-term debt (weighted-average interest rate of 2.3% and 2.7%, respectively) 561 317 Current maturities of long-term debt (weighted-average nominal interest rate of 2.7% and 2.0%, respectively) 1,470 409 Total 2,031 726 |
Schedule of long-term debt | December 31, 2018 2017 Nominal Effective Nominal Effective ($ in millions, except % data) Balance rate rate Balance rate rate Floating rate 3,106 1.7 % 1.1 % 3,213 1.7 % 0.6 % Fixed rate 4,951 3.6 % 3.6 % 3,878 3.5 % 3.5 % 8,057 7,091 Current portion of long-term debt (1,470) 2.7 % 2.7 % (409) 2.0 % 2.0 % Total 6,587 6,682 |
Schedule of principal amounts of long-term debt repayable at maturity | ($ in millions) 2019 1,448 2020 326 2021 1,269 2022 1,250 2023 1,252 Thereafter 2,366 Total 7,911 |
Schedule of outstanding bonds | December 31, 2018 2017 Nominal Carrying Nominal Carrying outstanding value (1) outstanding value (1) (in millions) (in millions) Bonds: 1.50% CHF Bonds, due 2018 CHF 350 $ 358 2.625% EUR Instruments, due 2019 EUR 1,250 $ 1,431 EUR 1,250 $ 1,493 2.8% USD Notes, due 2020 USD 300 $ 299 4.0% USD Notes, due 2021 USD 650 $ 646 USD 650 $ 644 2.25% CHF Bonds, due 2021 CHF 350 $ 373 CHF 350 $ 378 5.625% USD Notes, due 2021 USD 250 $ 265 USD 250 $ 270 2.875% USD Notes, due 2022 USD 1,250 $ 1,242 USD 1,250 $ 1,256 3.375% USD Notes, due 2023 USD 450 $ 448 0.625% EUR Instruments, due 2023 EUR 700 $ 807 EUR 700 $ 834 0.75% EUR Instruments, due 2024 EUR 750 $ 862 EUR 750 $ 889 3.8% USD Notes, due 2028 USD 750 $ 746 4.375% USD Notes, due 2042 USD 750 $ 723 USD 750 $ 723 Total $ 7,842 $ 6,845 (1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate. |
Other provisions, other curre_2
Other provisions, other current liabilities and other non-current liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other provisions, other current liabilities and other non-current liabilities | |
Schedule of Other provisions | December 31, ($ in millions) 2018 2017 Contract-related provisions 590 443 Restructuring and restructuring-related provisions 277 334 Provisions for contractual penalties and compliance and litigation matters 209 209 Provision for insurance-related reserves 166 153 Other 130 138 Total 1,372 1,277 |
Schedule of Other current liabilities | December 31, ($ in millions) 2018 2017 Employee-related liabilities 1,506 1,439 Accrued expenses 546 389 Non-trade payables 477 454 Accrued customer rebates 299 230 Other tax liabilities 277 274 Income taxes payable 260 313 Derivative liabilities (see Note 6) 192 207 Accrued interest 73 61 Deferred income 36 33 Pension and other employee benefits 34 40 Other 80 69 Total 3,780 3,509 |
Schedule of Other non-current liabilities | December 31, ($ in millions) 2018 2017 Income tax related liabilities 1,111 1,197 Provisions for contractual penalties and compliance and litigation matters 132 137 Non-current deposit liabilities 91 95 Employee-related liabilities 74 70 Environmental provisions 56 53 Derivative liabilities (see Note 6) 37 70 Deferred income 12 11 Other 176 216 Total 1,689 1,849 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Leases | |
Future net minimum lease payments for operating leases | ($ in millions) 2019 329 2020 254 2021 191 2022 132 2023 105 Thereafter 267 1,278 Sublease income (13) Total 1,265 |
Future net minimum lease payments for capital leases and the present value of the net minimum lease payments | ($ in millions) 2019 34 2020 27 2021 24 2022 24 2023 19 Thereafter 111 Total minimum lease payments 239 Less amount representing estimated executory costs included in total minimum lease payments (1) Net minimum lease payments 238 Less amount representing interest (87) Present value of minimum lease payments 151 |
Commitments and contingencies (
Commitments and contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and contingencies | |
Best estimate of future payments for guarantee obligations | December 31, 2018 2017 Maximum potential ($ in millions) payments (1) Performance guarantees 1,584 1,775 Financial guarantees 10 17 Indemnification guarantees 64 72 Total 1,658 1,864 (1) Maximum potential payments include amounts in both continuing and discontinued operations |
Provisions for warranties | ($ in millions) 2018 2017 2016 Balance at January 1, 909 815 763 Net change in warranties due to acquisitions and divestments 41 30 — Claims paid in cash or in kind (307) (243) (248) Net increase in provision for changes in estimates, warranties issued 341 234 327 Exchange rate differences (36) 73 (27) Balance at December 31, 948 909 815 |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income taxes | |
Schedule of income tax expense | ($ in millions) 2018 2017 2016 Current taxes 686 782 671 Deferred taxes (142) (199) (145) Tax expense from continuing operations 544 583 526 Tax expense from discontinued operations 228 273 251 |
Effective tax rate for the year | ($ in millions, except % data) 2018 2017 2016 Income from continuing operations before taxes 2,119 2,102 1,761 Weighted-average global tax rate 22.2 % 23.6 % 19.9 % Income taxes at weighted-average tax rate 470 497 350 Items taxed at rates other than the weighted-average tax rate (43) (114) 9 Changes in valuation allowance, net 41 763 (8) Effects of changes in tax laws and (enacted) tax rates 1 (747) 42 Non-deductible expenses, excluding goodwill 86 58 79 Other, net (11) 126 54 Tax expense from continuing operations 544 583 526 Effective tax rate for the year 25.7 % 27.7 % 29.9 % |
Components of deferred income tax assets and liabilities from continued operations | December 31, ($ in millions) 2018 2017 Deferred tax assets: Unused tax losses and credits 600 521 Provisions and other accrued liabilities 769 761 Pension 476 458 Inventories 253 263 Property, plant and equipment and other non-current assets 1,039 1,146 Other 114 93 Total gross deferred tax asset 3,251 3,242 Valuation allowance (1,535) (1,303) Total gross deferred tax asset, net of valuation allowance 1,716 1,939 Deferred tax liabilities: Property, plant and equipment (202) (210) Intangibles and other assets (770) (724) Pension and other liabilities (153) (217) Inventories (67) (69) Unremitted earnings (445) (557) Total gross deferred tax liability (1,637) (1,777) Net deferred tax asset (liability) 79 162 Included in: “Deferred taxes”—non-current assets 1,006 1,212 “Deferred taxes”—non-current liabilities (927) (1,050) Net deferred tax asset (liability) 79 162 |
Unrecognized tax benefits | Penalties and interest related to Unrecognized unrecognized ($ in millions) tax benefits tax benefits Total Classification as unrecognized tax items on January 1, 2016 744 145 889 Increase relating to prior year tax positions 88 74 162 Decrease relating to prior year tax positions (21) (20) (41) Increase relating to current year tax positions 167 13 180 Decrease due to settlements with tax authorities (96) (21) (117) Decrease as a result of the applicable statute of limitations (95) (13) (108) Exchange rate differences (27) (6) (33) Balance at December 31, 2016, which would, if recognized, affect the effective tax rate 760 172 932 Increase relating to prior year tax positions 115 103 218 Decrease relating to prior year tax positions (76) (37) (113) Increase relating to current year tax positions 223 — 223 Decrease due to settlements with tax authorities (23) (2) (25) Decrease as a result of the applicable statute of limitations (75) (12) (87) Exchange rate differences 101 18 119 Balance at December 31, 2017, which would, if recognized, affect the effective tax rate 1,025 242 1,267 Net change due to acquisitions and divestments 8 — 8 Increase relating to prior year tax positions 35 37 72 Decrease relating to prior year tax positions (99) 14 (85) Increase relating to current year tax positions 126 5 131 Decrease due to settlements with tax authorities (44) (17) (61) Decrease as a result of the applicable statute of limitations (66) (31) (97) Exchange rate differences (24) (11) (35) Balance at December 31, 2018, which would, if recognized, affect the effective tax rate 961 239 1,200 |
Open tax years subject to examination | Region Year Europe The Americas Asia, Middle East and Africa |
Employee benefits (Tables)
Employee benefits (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Employee benefits | |
Change in benefit obligations, plan assets and funded status recognized in balance sheet | Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2018 2017 2018 2017 Benefit obligations at January 1, 4,055 3,708 7,892 7,188 132 147 Service cost 92 106 122 122 1 1 Interest cost 30 41 198 208 4 5 Contributions by plan participants 69 70 16 12 — — Benefit payments (239) (245) (318) (345) (11) (11) Benefit obligations of businesses acquired (divested) 10 56 60 8 8 — Actuarial (gain) loss 6 127 (92) 101 (12) (11) Plan amendments and other (4) 23 (119) (45) — (1) Exchange rate differences (26) 169 (330) 643 (2) 2 Benefit obligation at December 31, 3,993 4,055 7,429 7,892 120 132 Fair value of plan assets at January 1, 4,020 3,682 6,514 5,811 — — Actual return on plan assets (41) 207 (184) 437 — — Contributions by employer 89 90 152 139 11 11 Contributions by plan participants 69 70 16 12 — — Benefit payments (239) (245) (318) (345) (11) (11) Plan assets of businesses acquired (divested) 7 52 39 — — — Plan amendments and other — (3) (94) (47) — — Exchange rate differences (26) 167 (259) 507 — — Fair value of plan assets at December 31, 3,879 4,020 5,866 6,514 — — Funded status - underfunded (114) (35) (1,563) (1,378) (120) (132) |
Amount recognized in Accumulated other comprehensive loss | December 31, 2018 2017 2016 2018 2017 2016 Defined pension Other postretirement ($ in millions) benefits benefits Net actuarial (loss) gain (2,628) (2,321) (2,237) 30 20 10 Prior service credit 74 99 108 23 27 31 Amount recognized in OCI (1) and NCI (2) (2,554) (2,222) (2,129) 53 47 41 Taxes associated with amount recognized in OCI and NCI 535 503 487 — — — Amount recognized in OCI and NCI, net of tax (3) (2,019) (1,719) (1,642) 53 47 41 (1) OCI represents “Accumulated other comprehensive loss”. (2) NCI represents “Noncontrolling interests”. (3) NCI, net of tax, amounted to $(1) million, $0 million, and $0 million at December 31, 2018, 2017 and 2016. |
Schedule of amounts recognized in balance sheet | December 31, 2018 2017 2018 2017 2018 2017 Defined pension Other postretirement benefits benefits ($ in millions) Switzerland International International Overfunded plans 24 60 59 62 — — Underfunded plans — current — — (19) (18) (11) (12) Underfunded plans — non-current (138) (95) (1,603) (1,422) (109) (120) Funded status - underfunded (114) (35) (1,563) (1,378) (120) (132) Amounts reported as assets and liabilities held for sale (93) (133) (120) (106) — — December 31, ($ in millions) 2018 2017 Non-current assets Overfunded pension plans 83 122 Other employee-related benefits 1 22 Pension and other employee benefits 84 144 Amounts reported as Non-current assets held for sale 1 1 December 31, ($ in millions) 2018 2017 Current liabilities Underfunded pension plans (19) (18) Underfunded other postretirement benefit plans (11) (12) Other employee-related benefits (10) (17) Pension and other employee benefits (40) (47) Amounts reported as Current liabilities held for sale (4) (7) December 31, ($ in millions) 2018 2017 Non-current liabilities Underfunded pension plans (1,741) (1,517) Underfunded other postretirement benefit plans (109) (120) Other employee-related benefits (246) (245) Pension and other employee benefits (2,096) (1,882) Amounts reported as Non-current liabilities held for sale (266) (291) |
Schedule of PBO in excess of fair value of plan assets or ABO in excess of fair value of plan assets | PBO exceeds fair value of plan assets ABO exceeds fair value of plan assets ($ in millions) Switzerland International Switzerland International December 31, 2018 2017 2018 2017 2018 2017 2018 2017 PBO 3,482 3,557 6,897 7,477 3,482 3,557 6,872 5,864 ABO 3,482 3,557 6,743 7,235 3,482 3,557 6,724 5,725 Fair value of plan assets 3,344 3,461 5,275 6,038 3,344 3,461 5,254 4,453 |
Component of net periodic benefit cost | Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Operational pension cost: Service cost 92 106 133 122 122 116 1 1 1 Operational pension cost 92 106 133 122 122 116 1 1 1 Non-operational pension cost (credit): Interest cost 30 41 46 198 208 234 4 5 6 Expected return on plan assets (117) (112) (130) (305) (295) (272) — — — Amortization of prior service cost (credit) (15) 10 36 1 1 4 (5) (5) (12) Amortization of net actuarial loss — — — 92 91 85 (1) (1) — Curtailments, settlements and special termination benefits — — — 23 16 41 — (1) — Non-operational pension cost (credit) (102) (61) (48) 9 21 92 (2) (2) (6) Net periodic benefit cost (10) 45 85 131 143 208 (1) (1) (5) |
Weighted-average assumptions, Benefit obligation | December 31, 2018 2017 2018 2017 2018 2017 Defined pension Other postretirement benefits benefits (in %) Switzerland International International Discount rate 0.8 0.8 2.8 2.6 3.9 3.2 Rate of compensation increase — — 2.4 2.5 0.2 — Rate of pension increase — — 1.4 1.5 — — Cash balance interest credit rate 1.0 1.0 1.6 1.7 — — |
Weighted-average assumptions, Net periodic benefit cost | Defined pension Other postretirement benefits benefits Switzerland International International (in %) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Discount rate 0.8 1.1 1.2 2.6 2.9 3.4 3.2 3.3 3.6 Expected long-term rate of return on plan assets 3.0 3.0 3.5 4.9 5.0 4.8 — — — Rate of compensation increase — — — 2.5 2.5 2.4 — — — Cash balance interest credit rate 1.0 1.0 1.3 1.7 1.7 1.6 — — — |
Health care cost trend assumptions | December 31, 2018 2017 Health care cost trend rate assumed for next year 6.7 % 7.1 % Rate to which the trend rate is assumed to decline (the ultimate trend rate) 5.0 % 5.0 % Year that the rate reaches the ultimate trend rate |
Target asset allocation on weighted-average basis | Target (in %) Switzerland International Asset class Equity 19 22 Fixed income 54 61 Real estate 22 7 Other 5 10 100 100 |
Fair value of pension plan assets by asset category | December 31, 2018 Not subject Total ($ in millions) Level 1 Level 2 to leveling (1) fair value Asset class Equity Equity securities 209 — — 209 Mutual funds/commingled funds — 1,433 39 1,472 Emerging market mutual funds/commingled funds — 363 — 363 Fixed income Government and corporate securities 524 997 — 1,521 Government and corporate—mutual funds/commingled funds — 3,496 — 3,496 Emerging market bonds—mutual funds/commingled funds — 729 — 729 Real estate — — 1,381 1,381 Insurance contracts — 121 — 121 Cash and short-term investments 202 86 — 288 Private equity — — 139 139 Hedge funds — — 2 2 Commodities — 24 — 24 Total 935 7,249 1,561 9,745 December 31, 2017 Not subject Total ($ in millions) Level 1 Level 2 to leveling (1) fair value Asset class Equity Equity securities 274 — — 274 Mutual funds/commingled funds — 1,726 46 1,772 Emerging market mutual funds/commingled funds — 507 — 507 Fixed income Government and corporate securities 564 1,092 — 1,656 Government and corporate—mutual funds/commingled funds — 3,622 — 3,622 Emerging market bonds—mutual funds/commingled funds — 708 — 708 Real estate — 9 1,355 1,364 Insurance contracts — 113 — 113 Cash and short-term investments 162 140 — 302 Private equity — — 128 128 Hedge funds — — 15 15 Commodities — 73 — 73 Total 1,000 7,990 1,544 10,534 (1) Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling. |
Schedule of employer contributions to pension and other postretirement benefit plans | Defined pension Other postretirement benefits benefits Switzerland International International ($ in millions) 2018 2017 2018 2017 2018 2017 Total contributions to defined benefit pension and other postretirement benefit plans 89 90 152 139 11 11 Of which, discretionary contributions to defined benefit pension plans — — 25 15 — — |
Expected future cash flows of pension and postretirement benefit plans | Defined pension Other postretirement benefits benefits ($ in millions) Switzerland International International 2019 357 338 11 2020 271 348 11 2021 233 345 11 2022 228 350 10 2023 213 350 10 Years 2024 - 2028 941 1,840 42 |
Share-based payment arrangeme_2
Share-based payment arrangements (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Share-based payment arrangements | |
Assumptions used in valuation of options | 2018 2017 2016 Expected volatility 17 % 19 % 19 % Dividend yield 3.1 % 4.7 % 4.9 % Expected term years 6 years 6 years Risk-free interest rate (0.1) % (0.1) % (0.5) % |
Summary of activity related to options | Weighted- Weighted- Aggregate average average intrinsic exercise remaining value Number of Number of price contractual (in millions options shares (in Swiss term of Swiss (in millions) (in millions) (1) francs) (2) (in years) francs) (3) Outstanding at January 1, 2018 390.6 78.1 21.06 Granted 71.3 14.3 23.50 Exercised (4) (10.3) (2.1) 16.66 Forfeited (6.7) (1.3) 21.86 Outstanding at December 31, 2018 444.9 89.0 21.54 — Vested and expected to vest at December 31, 2018 439.4 87.9 21.52 — Exercisable at December 31, 2018 250.5 50.1 20.76 — (1) Information presented reflects the number of ABB Ltd shares that can be received upon exercise, as options have a conversion ratio of 5:1. (2) Information presented reflects the exercise price per ABB Ltd share. (3) Options outstanding at December 31, 2018, did not have any intrinsic value as the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange was below the various exercise prices per share. (4) The cash received upon exercise amounted to approximately $35 million. The shares were delivered out of treasury stock. |
Summary of options by exercise price | Weighted- average Number of Number of remaining options shares contractual Exercise price (in Swiss francs) (1) (in millions) (in millions) (2) term (in years) 21.50 81.0 16.2 21.00 72.3 14.5 19.50 78.1 15.6 21.50 74.2 14.8 22.50 68.7 13.7 23.50 70.7 14.1 Total number of options and shares 444.9 89.0 (1) Information presented reflects the exercise price per share of ABB Ltd. (2) Information presented reflects the number of shares of ABB Ltd that can be received upon exercise. |
Summary of activity, WARs | Number of WARs (in millions) Outstanding at January 1, 2018 37.1 Granted 10.9 Exercised (6.3) Forfeited (0.5) Outstanding at December 31, 2018 41.2 Exercisable at December 31, 2018 14.4 |
Assumptions used for ESAP fair value calculation | 2018 2017 2016 Expected volatility 19 % 17 % 20 % Dividend yield 4.1 % 3.1 % 3.7 % Expected term year 1 year 1 year Risk-free interest rate (0.6) % (0.6) % (0.7) % |
Summary of activity, ESAP | Weighted- Weighted- Aggregate average average intrinsic exercise remaining value Number of price contractual (in millions shares (in Swiss term of Swiss (in millions) (1) francs) (2) (in years) francs) (2)(3) Outstanding at January 1, 2018 2.9 26.26 Granted 3.6 20.38 Forfeited (0.2) 26.01 Not exercised (savings returned plus interest) (2.7) 26.26 Outstanding at December 31, 2018 3.6 20.38 — Vested and expected to vest at December 31, 2018 3.4 20.38 — Exercisable at December 31, 2018 — — — — (1) Includes shares represented by ADS. (2) Information presented for ADS is based on equivalent Swiss franc denominated awards. (3) Options outstanding at December 31, 2018, did not have any intrinsic value as the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange was below the exercise price per share. |
Summary of activity, LTIP | Weighted- average grant-date Number of Shares fair value Conditionally Granted per share (in millions) (Swiss francs) Nonvested at January 1, 2018 1.4 21.47 Granted 0.8 21.97 Vested (0.7) 21.78 Forfeited (0.2) 21.50 Nonvested at December 31, 2018 1.3 21.61 |
Earnings per share (Tables)
Earnings per share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings per share | |
Basic earnings per share | ($ in millions, except per share data in $) 2018 2017 2016 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 1,514 1,441 1,172 Income from discontinued operations, net of tax 659 772 727 Net income 2,173 2,213 1,899 Weighted-average number of shares outstanding (in millions) 2,132 2,138 2,151 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 0.71 0.67 0.54 Income from discontinued operations, net of tax 0.31 0.36 0.34 Net income 1.02 1.04 0.88 |
Diluted earnings per share | ($ in millions, except per share data in $) 2018 2017 2016 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 1,514 1,441 1,172 Income from discontinued operations, net of tax 659 772 727 Net income 2,173 2,213 1,899 Weighted-average number of shares outstanding (in millions) 2,132 2,138 2,151 Effect of dilutive securities: Call options and shares 7 10 3 Adjusted weighted-average number of shares outstanding (in millions) 2,139 2,148 2,154 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 0.71 0.67 0.54 Income from discontinued operations, net of tax 0.31 0.36 0.34 Net income 1.02 1.03 0.88 |
Other comprehensive income (Tab
Other comprehensive income (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other comprehensive income | |
Schedule of tax effects allocated to each component of total other comprehensive income (loss) | 2018 2017 2016 Before Tax Net of Before Tax Net of Before Tax Net of ($ in millions) tax effect tax tax effect tax tax effect tax Foreign currency translation adjustments: Foreign currency translation adjustments (641) 14 (627) 911 1 912 (469) (12) (481) Gain on liquidation of foreign subsidiary (31) — (31) — — — — — — Changes attributable to divestments (1) 12 — 12 12 — 12 7 — 7 Net change during the year (660) 14 (646) 923 1 924 (462) (12) (474) Available-for-sale securities: Net unrealized gains (losses) arising during the year (5) 1 (4) 1 — 1 — — — Reclassification adjustments for net (gains) losses included in net income 1 — 1 — — — — — — Net change during the year (4) 1 (3) 1 — 1 — — — Pension and other postretirement plans: Prior service (costs) credits arising during the year (11) 4 (7) (20) 4 (16) (46) 6 (40) Net actuarial gains (losses) arising during the year (411) 59 (352) (184) 45 (139) 38 6 44 Amortization of prior service cost (credit) included in net income (19) (5) (24) 6 — 6 28 (2) 26 Amortization of net actuarial loss included in net income 91 (22) 69 90 (27) 63 85 (23) 62 Net losses from pension settlements included in net income 23 (4) 19 13 (4) 9 37 (11) 26 Changes attributable to divestments (1) — — — 8 (2) 6 — — — Net change during the year (327) 32 (295) (87) 16 (71) 142 (24) 118 Cash flow hedge derivatives: Net gains (losses) arising during the year (51) 2 (49) 45 (7) 38 21 (5) 16 Reclassification adjustments for net (gains) losses included in net income 20 1 21 (26) 4 (22) (7) 1 (6) Changes attributable to divestments (1) — — — (4) 1 (3) — — — Net change during the year (31) 3 (28) 15 (2) 13 14 (4) 10 Total other comprehensive income (loss) (1,022) 50 (972) 852 15 867 (306) (40) (346) (1) Changes attributable to divestments are included in the computation of the net gain or loss on sale of businesses (see Note 4). |
Schedule of changes in component of accumulated other comprehensive loss (OCI), net of tax | Unrealized Pension and Unrealized Foreign gains (losses) other post- gains (losses) Accumulated currency on available- retirement of cash other translation for-sale plan flow hedge comprehensive ($ in millions) adjustments securities adjustments derivatives loss Balance at January 1, 2016 (3,135) 7 (1,719) (11) (4,858) Other comprehensive (loss) income before reclassifications (481) — 4 16 (461) Amounts reclassified from OCI — — 114 (6) 108 Changes attributable to divestments 7 — — — 7 Total other comprehensive (loss) income (474) — 118 10 (346) Less: Amounts attributable to noncontrolling interests (17) — — — (17) Balance at December 31, 2016 (3,592) 7 (1,601) (1) (5,187) Other comprehensive (loss) income before reclassifications 912 1 (155) 38 796 Amounts reclassified from OCI — — 78 (22) 56 Changes attributable to divestments 12 — 6 (3) 15 Total other comprehensive (loss) income 924 1 (71) 13 867 Less: Amounts attributable to noncontrolling interests 25 — — — 25 Balance at December 31, 2017 (2,693) 8 (1,672) 12 (4,345) Cumulative effect of changes in accounting principles(1) — (9) — — (9) Other comprehensive (loss) income before reclassifications (627) (4) (359) (49) (1,039) Amounts reclassified from OCI (31) 1 64 21 55 Changes attributable to divestments 12 — — — 12 Total other comprehensive (loss) income (646) (3) (295) (28) (972) Less: Amounts attributable to noncontrolling interests (15) — — — (15) Balance at December 31, 2018 (3,324) (4) (1,967) (16) (5,311) (1) See “New accounting pronouncements, Applicable for the current period” section of Note 2 for more details. |
Schedule of amounts reclassified out of OCI in respect of Pension and other postretirement plan adjustments | ($ in millions) Location of (gains) losses Details about OCI components reclassified from OCI 2018 2017 2016 Foreign currency translation adjustments: Gain on liquidation of foreign subsidiary Other income (expense), net (31) — — Pension and other postretirement plan adjustments: Amortization of prior service cost (credit) Non-operational pension (cost) credit (1) (19) 6 28 Amortization of net actuarial loss Non-operational pension (cost) credit (1) 91 90 85 Net losses from pension settlements Non-operational pension (cost) credit (1) 23 13 37 Total before tax 95 109 150 Tax Provision for taxes (31) (31) (36) Amounts reclassified from OCI 64 78 114 (1) Amounts include a total of $12 million, $9 million and $0 million in 2018, 2017 and 2016, respectively, reclassified from OCI to Income from discontinued operations (see Note 3). |
Restructuring and related exp_2
Restructuring and related expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
White Collar Productivity program | |
Schedule of liabilities associated with restructuring program | Contract settlement, Employee loss order ($ in millions) severance costs and other costs Total Liability at January 1, 2015 — — — Expenses 300 3 303 Cash payments (27) — (27) Liability at December 31, 2015 273 3 276 Expenses 182 3 185 Cash payments (91) (2) (93) Change in estimates (85) (1) (86) Exchange rate differences (17) (1) (18) Liability at December 31, 2016 262 2 264 Expenses 28 3 31 Cash payments (92) (4) (96) Change in estimates (118) — (118) Exchange rate differences 21 — 21 Liability at December 31, 2017 101 1 102 Cash payments (55) — (55) Change in estimates and exchange rate differences (13) — (13) Liability at December 31, 2018 33 1 34 |
Restructuring cumulative costs incurred to date per operating segment | Cumulative costs Net costs incurred in incurred up to ($ in millions) 2017 (1) 2016 (1) December 31, 2017(1) Electrification Products (17) 15 Industrial Automation (23) 34 Robotics and Motion (14) 26 Corporate and Other (32) 32 Total (86) 107 |
Schedule of restructuring expenses, net of changes in estimates | Cumulative costs incurred up to ($ in millions) 2017 2016 December 31, 2017 Employee severance costs (90) 97 Estimated contract settlement, loss order and other costs 3 2 Inventory and long-lived asset impairments 1 8 Total (86) 107 |
Schedule of allocation of restructuring and related expenses, net of changes in estimates | ($ in millions) 2017 2016 Total cost of sales (47) 57 Selling, general and administrative expenses (35) 35 Non-order related research and development expenses (5) 1 Other income (expense), net 1 14 Total (86) 107 |
OS Program | |
Restructuring cumulative costs incurred to date per operating segment | Cumulative costs Costs incurred incurred up to Total ($ in millions) in 2018 December 31, 2018 expected costs Electrification Products 32 32 40 Industrial Automation 21 21 60 Robotics and Motion 1 1 50 Corporate and Other 11 11 200 Total 65 65 350 |
Schedule of allocation of restructuring and related expenses, net of changes in estimates | ($ in millions) 2018 Total cost of sales 35 Selling, general and administrative expenses 23 Non-order related research and development expenses 3 Other income (expense), net 4 Total 65 |
Other restructuring-related activities | |
Schedule of restructuring expenses, net of changes in estimates | ($ in millions) 2018 2017 2016 Employee severance costs 74 130 66 Estimated contract settlement, loss order and other costs 29 32 32 Inventory and long-lived asset impairments 13 19 35 Total 116 181 133 |
Schedule of allocation of restructuring and related expenses, net of changes in estimates | ($ in millions) 2018 2017 2016 Total cost of sales 24 119 Selling, general and administrative expenses 52 10 Non-order related research and development expenses 2 — Other income (expense), net 38 52 Total 116 181 |
Operating segment and geograp_2
Operating segment and geographic data (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Operating segment and geographic data | |
Schedule of segment revenues | 2018 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,881 3,145 2,929 58 10,013 The Americas 3,650 1,544 2,788 21 8,003 Asia, Middle East and Africa 3,680 2,565 2,922 236 9,403 11,211 7,254 8,639 315 27,419 End Customer Markets Utilities 2,452 1,168 749 176 4,545 Industry 4,395 4,447 6,529 98 15,469 Transport and infrastructure 4,364 1,639 1,361 41 7,405 11,211 7,254 8,639 315 27,419 Product type Products 9,679 2,391 6,206 118 18,394 Systems 617 1,853 1,062 197 3,729 Services and software 915 3,010 1,371 — 5,296 11,211 7,254 8,639 315 27,419 Third-party revenues 11,211 7,254 8,639 315 27,419 Intersegment revenues (1) 475 140 508 (880) 243 Total Revenues 11,686 7,394 9,147 (565) 27,662 2017 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,514 2,773 2,613 132 9,032 The Americas 2,613 1,381 2,721 116 6,831 Asia, Middle East and Africa 3,464 2,570 2,543 493 9,070 9,591 6,724 7,877 741 24,933 End Customer Markets Utilities 2,597 1,270 633 575 5,075 Industry 4,022 3,796 5,991 155 13,964 Transport and infrastructure 2,972 1,658 1,253 11 5,894 9,591 6,724 7,877 741 24,933 Product type Products 8,322 1,796 5,661 169 15,948 Systems 614 2,089 959 565 4,227 Services and software 655 2,839 1,257 7 4,758 9,591 6,724 7,877 741 24,933 Third-party revenues 9,591 6,724 7,877 741 24,933 Intersegment revenues (1) 503 155 519 (914) 263 Total Revenues 10,094 6,879 8,396 (173) 25,196 2016 Electrification Industrial Robotics and Corporate and ($ in millions) Products Automation Motion Other Total Geographical markets Europe 3,309 2,398 2,571 541 8,819 The Americas 2,571 1,420 2,588 182 6,761 Asia, Middle East and Africa 3,457 2,673 2,227 692 9,049 9,337 6,491 7,386 1,415 24,629 End Customer Markets Utilities 2,568 1,236 657 1,189 5,650 Industry 4,083 3,625 5,351 200 13,259 Transport and infrastructure 2,686 1,630 1,378 26 5,720 9,337 6,491 7,386 1,415 24,629 Product type Products 8,042 1,355 5,366 434 15,197 Systems 656 2,364 853 957 4,830 Services and software 639 2,772 1,167 24 4,602 9,337 6,491 7,386 1,415 24,629 Third-party revenues 9,337 6,491 7,386 1,415 24,629 Intersegment revenues (1) 583 163 502 (948) 300 Total Revenues 9,920 6,654 7,888 467 24,929 (1) Intersegment revenues include sales to the Power Grids business which is presented as discontinued operations and are not eliminated from Total revenues. |
Schedule of operational EBITA reconciliations | ($ in millions) 2018 2017 2016 Operational EBITA: Electrification Products 1,626 1,510 1,459 Industrial Automation 1,019 953 897 Robotics and Motion 1,447 1,260 1,232 Corporate and Other: — Non-Core and divested businesses (291) (163) (30) — Stranded corporate costs (297) (286) (252) — Corporate costs and other intersegment elimination (499) (457) (378) Consolidated Operational EBITA 3,005 2,817 2,928 Acquisition-related amortization (273) (229) (245) Restructuring and restructuring-related expenses (1) (172) (300) (442) Changes in obligations related to divested businesses (106) (94) — Changes in pre-acquisition estimates (8) (8) (131) Gains and losses on sale of businesses 57 252 (10) Acquisition- and divestment-related expenses and integration costs (204) (81) (9) Foreign exchange/commodity timing differences in income from operations: Unrealized gains and losses on derivatives where the underlying hedged transaction has not yet been realized (1) 56 (19) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized (23) 8 (1) Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) (9) (30) (8) Certain other non-operational items: Regulatory, compliance and legal costs (34) (102) (10) Asset write downs/impairments (25) — (16) Gain on liquidation of foreign subsidiary 31 — — Corporate re-branding and marketing costs — — (30) Losses and other (costs) recoveries on Korea fraud 8 (40) (73) Other non-operational items (20) (19) (5) Income from operations 2,226 2,230 1,929 Interest and dividend income 72 73 71 Interest and other finance expense (262) (234) (201) Non-operational pension cost 83 33 (38) Income from continuing operations before taxes 2,119 2,102 1,761 (1) Amounts in 2017 and 2016 also include the incremental implementation costs in relation to the White Collar Productivity program. |
Schedule of depreciation and amortization, capital expenditure and total assets after intersegment eliminations | Depreciation and Total assets (1), (2) amortization Capital expenditure (1) at December 31, ($ in millions) 2018 2017 2016 2018 2017 2016 2018 2017 2016 Electrification Products 355 315 348 244 218 215 12,049 8,881 8,343 Industrial Automation 160 112 71 104 71 53 6,669 6,961 4,294 Robotics and Motion 208 216 249 123 118 112 8,397 8,416 7,870 Corporate and Other 193 193 202 301 345 252 17,326 19,200 18,884 Consolidated 916 836 870 772 752 632 44,441 43,458 39,391 (1) Capital expenditure and Total assets are after intersegment eliminations and therefore reflect third‑party activities only. (2) Assets held for sale of $8,591 million, $8,603 million and $8,504 million are included in Corporate and Other at December 31, 2018, 2017 and 2016, respectively (see Note 3). |
Schedule of geographic information for long-lived assets | Long-lived assets at December 31, ($ in millions) 2018 2017 Europe 2,110 2,040 The Americas 1,168 934 Asia, Middle East and Africa 855 830 Total 4,133 3,804 |
Significant accounting polici_3
Significant accounting policies - General (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Minimum | |
Property, Plant and Equipment | |
Operating cycle of a portion of the Company's activities | 1 year |
Voting rights in joint ventures and affiliated companies | |
Percentage of voting rights in joint ventures and affiliated companies required for using the equity method of accounting | 20.00% |
Maximum | |
Voting rights in joint ventures and affiliated companies | |
Percentage of voting rights in joint ventures and affiliated companies required for using the equity method of accounting | 50.00% |
Factories and office buildings | Minimum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 30 years |
Factories and office buildings | Maximum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 40 years |
Other facilities | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 15 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 3 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 15 years |
Furniture and office equipment | Minimum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 3 years |
Furniture and office equipment | Maximum | |
Property, Plant and Equipment | |
Estimated useful lives of property, plant and equipment, average | 8 years |
Significant accounting polici_4
Significant accounting policies - Intangibles (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Software for internal use | Minimum | |
Finite-lived intangible assets | |
Useful life | 3 years |
Software for internal use | Maximum | |
Finite-lived intangible assets | |
Useful life | 5 years |
Customer-, Technology- and Marketing-related intangibles | Minimum | |
Finite-lived intangible assets | |
Useful life | 5 years |
Customer-, Technology- and Marketing-related intangibles | Maximum | |
Finite-lived intangible assets | |
Useful life | 20 years |
Significant accounting polici_5
Significant accounting policies - New Accounting Pronouncements (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2018 | Jan. 31, 2018 |
Impact of new accounting pronouncements | |||||
Total assets | $ 43,458 | $ 39,391 | $ 44,441 | ||
Total liabilities | 28,109 | 29,907 | |||
Deferred tax assets | 162 | 79 | |||
Retained earnings | 19,594 | 19,839 | |||
Accounting Standards Update 2014-09 | Cumulative effect of adoption | |||||
Impact of new accounting pronouncements | |||||
Total assets | $ 196 | ||||
Total liabilities | 196 | ||||
Assets held for sale | 50 | ||||
Liabilities held for sale | 50 | ||||
Accounting Standards Update 2016-16 | |||||
Impact of new accounting pronouncements | |||||
Deferred tax assets | $ (201) | ||||
Retained earnings | $ (201) | ||||
Accounting Standards Update 2017-07 | Adjustment | |||||
Impact of new accounting pronouncements | |||||
Net periodic defined benefits expense (Reversal of Expense), excluding service cost component | 42 | (38) | |||
Discontinued operation, Net periodic defined benefits expense (Reversal of Expense), excluding service cost component | $ 9 | $ 0 | |||
Accounting Standards Update 2016-01 | Adjustment | |||||
Impact of new accounting pronouncements | |||||
Net cumulative unrealized gains on available-for-sale equity securities | $ 9 | ||||
Accounting Standards Update 2016-02 | Proforma Adjustment | |||||
Impact of new accounting pronouncements | |||||
Total assets | 1,400 | ||||
Total liabilities | 1,400 | ||||
Liabilities held for sale | $ 200 |
Changes in presentation of fi_3
Changes in presentation of financial statements - Held for sale and discontinued operations (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Revenues | $ 27,662 | $ 25,196 | $ 24,929 | |
Operating results of the discontinued businesses | ||||
Provision for taxes | (228) | (273) | (251) | |
Income from discontinued operations, net of tax | 723 | 846 | 799 | |
Income from discontinued operations, net of tax | 659 | 772 | 727 | |
Current assets held for sale and in discontinued operations | ||||
Current assets held for sale and in discontinued operations | $ 5,164 | 5,164 | 5,043 | |
Non-current assets held for sale and in discontinued operations | ||||
Non-current assets held for sale and in discontinued operations | 3,427 | 3,427 | 3,560 | |
Non-current liabilities held for sale and in discontinued operations | ||||
Non-current liabilities held for sale and in discontinued operations | 429 | 429 | 470 | |
Power Grids business | Intersegment elimination | ||||
Current assets held for sale and in discontinued operations | ||||
Receivables, net | 2,377 | 2,377 | 2,406 | |
Contract assets | 1,236 | 1,236 | 1,008 | |
Inventories, net | 1,457 | 1,457 | 1,518 | |
Other current assets | 94 | 94 | 111 | |
Current assets held for sale and in discontinued operations | 5,164 | 5,164 | 5,043 | |
Non-current assets held for sale and in discontinued operations | ||||
Property, plant and equipment, net | 1,477 | 1,477 | 1,559 | |
Goodwill | 1,620 | 1,620 | 1,663 | |
Other non-current assets | 330 | 330 | 338 | |
Non-current assets held for sale and in discontinued operations | 3,427 | 3,427 | 3,560 | |
Current liabilities held for sale and in discontinued operations | ||||
Accounts payable, trade | 1,732 | 1,732 | 1,683 | |
Contract liabilities | 998 | 998 | 1,116 | |
Other current liabilities | 1,455 | 1,455 | 1,721 | |
Current liabilities held for sale and in discontinued operations | 4,185 | 4,185 | 4,520 | |
Non-current liabilities held for sale and in discontinued operations | ||||
Pension and other employee benefits | 268 | 268 | 293 | |
Other non-current liabilities | 161 | 161 | 177 | |
Non-current liabilities held for sale and in discontinued operations | $ 429 | 429 | 470 | |
Held for sale and discontinued operations | Intersegment elimination | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Revenues | 243 | 263 | 300 | |
Held for sale and discontinued operations | Power Grids business | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Divestment percentage | 80.10% | |||
Divestment value | $ 11,000 | 11,000 | ||
Net interest and other finance expense recorded on allocated basis | 43 | 33 | 36 | |
Separation costs incurred to execute the transaction | 18 | |||
Operating results of the discontinued businesses | ||||
Total revenues | 9,698 | 10,028 | 9,984 | |
Total cost of sales | (7,378) | (7,501) | (7,597) | |
Gross profit | 2,320 | 2,527 | 2,387 | |
Expenses | (1,326) | (1,376) | (1,278) | |
Income from operations | 994 | 1,152 | 1,108 | |
Net interest and other finance expense | 55 | 42 | 58 | |
Non-operational pension (cost) credit | 12 | 9 | ||
Income from discontinued operations before taxes | 951 | 1,119 | 1,050 | |
Provision for taxes | (228) | (273) | (251) | |
Income from discontinued operations, net of tax | 723 | 846 | 799 | |
Income from discontinued operations, net of tax | 874 | 1,034 | 966 | |
Held for sale and discontinued operations | Power Grids business | Corporate and Other | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Allocated overhead and other management costs reclassified to another segment | $ 297 | $ 286 | $ 252 |
Changes in presentation of fi_4
Changes in presentation of financial statements - Reclassifications and other changes (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | |||
Receivables, net | $ 6,386 | $ 5,861 | |
Contract assets | 1,082 | 1,141 | $ 1,222 |
Inventories, net | 4,284 | 3,737 | |
Total assets | 44,441 | 43,458 | 39,391 |
Current liabilities | |||
Contract liabilities | 1,707 | 1,792 | $ 1,690 |
Other current liabilities | 3,780 | 3,509 | |
Total liabilities | $ 29,907 | 28,109 | |
Previous classification | |||
Current assets | |||
Receivables, net | 7,002 | ||
Inventories, net | 3,591 | ||
Total assets | 43,262 | ||
Current liabilities | |||
Billings in excess of sales | 744 | ||
Advances from customers | 1,047 | ||
Other current liabilities | 3,510 | ||
Total liabilities | 27,913 | ||
Adjustment | |||
Current assets | |||
Receivables, net | (1,141) | ||
Contract assets | 1,141 | ||
Inventories, net | (146) | ||
Current liabilities | |||
Other current liabilities | (1) | ||
Advances from customers previously recorded net within inventories reclassified to contract liabilities | 146 | ||
Deferred revenues reclassified from other current liabilities to contract liabilities | $ 1 |
Changes in presentation of fi_5
Changes in presentation of financial statements - Changes affecting operating segments (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Revenues | $ 27,662 | $ 25,196 | $ 24,929 |
Operational EBITA | 3,005 | 2,817 | 2,928 |
Total assets | 44,441 | 43,458 | 39,391 |
Depreciation and amortization | 916 | 836 | 870 |
Capital expenditure | 772 | 752 | 632 |
Cash and cash equivalents | 3,445 | 4,526 | |
Operating | |||
Segment Reporting Information [Line Items] | |||
Revenues | 27,419 | 24,933 | 24,629 |
Cash and cash equivalents | 1,932 | 2,098 | |
EPC-RM | |||
Segment Reporting Information [Line Items] | |||
Revenues | 5 | 18 | |
Operational EBITA | (82) | (9) | |
Total assets | 18 | 13 | |
EPC-PG | |||
Segment Reporting Information [Line Items] | |||
Revenues | 526 | 897 | |
Operational EBITA | (55) | (13) | |
Total assets | 680 | 853 | |
Depreciation and amortization | 2 | 6 | |
Capital expenditure | 3 | ||
Corporate and Other | |||
Segment Reporting Information [Line Items] | |||
Revenues | (565) | (173) | 467 |
Total assets | 17,326 | 19,200 | 18,884 |
Depreciation and amortization | 193 | 193 | 202 |
Capital expenditure | 301 | 345 | 252 |
Cash and cash equivalents | 1,932 | 2,098 | |
Corporate and Other | Operating | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 315 | $ 741 | $ 1,415 |
Acquisitions and business div_3
Acquisitions and business divestments - Acquisitions (Details) $ in Millions | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($)entity | Dec. 31, 2017USD ($)entity | Dec. 31, 2016USD ($)entity |
Acquisitions and business divestments | ||||
Purchase price for acquisitions (net of cash acquired) | $ 2,638 | $ 1,992 | $ 13 | |
Aggregate excess of purchase price over fair value of net assets acquired | $ 1,472 | $ 1,267 | $ 12 | |
Number of acquired businesses | entity | 3 | 4 | 1 | |
Allocation of the purchase consideration for business acquisitions | ||||
Goodwill | $ 10,764 | $ 9,536 | $ 7,953 | |
Intangibles other than software: Customer-related | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Weighted-average useful life (in years) | 14 years | 20 years | ||
Business acquisitions in 2018 | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 457 | |||
Fixed assets | 388 | |||
Deferred tax liabilities | (111) | |||
Inventories | 438 | |||
Other assets and liabilities, net | 101 | |||
Goodwill | 1,472 | |||
Noncontrolling interest | 107 | |||
Total consideration (net of cash acquired) | 2,638 | |||
Business acquisitions in 2018 | Technology | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 87 | |||
Weighted-average useful life (in years) | 7 years | |||
Business acquisitions in 2018 | Intangibles other than software: Customer-related | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 214 | |||
Weighted-average useful life (in years) | 14 years | |||
Business acquisitions in 2018 | Trade names | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 122 | |||
Weighted-average useful life (in years) | 13 years | |||
Business acquisitions in 2018 | Supply agreement | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 34 | |||
Weighted-average useful life (in years) | 13 years | |||
GEIS | ||||
Acquisitions and business divestments | ||||
Acquisition price (net of cash acquired) | $ 2,622 | |||
Cash acquired from acquisition | $ 192 | |||
Gross receivables acquired | $ 658 | |||
Receivables after adjusting for contractual cash flows not expected to be collected | 624 | |||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | 457 | |||
Fixed assets | 379 | |||
Deferred tax liabilities | (110) | |||
Inventories | 435 | |||
Other assets and liabilities, net | 126 | |||
Goodwill | 1,442 | |||
Noncontrolling interest | 107 | |||
Total consideration (net of cash acquired) | 2,622 | |||
GEIS | Technology | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | 87 | |||
GEIS | Intangibles other than software: Customer-related | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | 214 | |||
GEIS | Trade names | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | 122 | |||
GEIS | Supply agreement | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | 34 | |||
Business acquisitions in 2018, Other | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Fixed assets | 9 | |||
Deferred tax liabilities | (1) | |||
Inventories | 3 | |||
Other assets and liabilities, net | (25) | |||
Goodwill | 30 | |||
Total consideration (net of cash acquired) | $ 16 | |||
Business acquisitions in 2017 | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 737 | |||
Fixed assets | 131 | |||
Debt acquired | (50) | |||
Deferred tax liabilities | (249) | |||
Inventories | 176 | |||
Other assets and liabilities, net | (20) | |||
Goodwill | 1,267 | |||
Total consideration (net of cash acquired) | 1,992 | |||
Business acquisitions in 2017 | Technology | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 412 | |||
Weighted-average useful life (in years) | 7 years | |||
Business acquisitions in 2017 | Intangibles other than software: Customer-related | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 264 | |||
Weighted-average useful life (in years) | 20 years | |||
Business acquisitions in 2017 | Trade names | ||||
Allocation of the purchase consideration for business acquisitions | ||||
Intangible assets | $ 61 | |||
Weighted-average useful life (in years) | 10 years |
Acquisitions and business div_4
Acquisitions and business divestments - Acquisitions, Pro forma financial information (Details) - GEIS - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Acquisitions and business divestments | |||
Total revenues | $ 1,317 | ||
Net income | $ 1 | ||
Total revenues | $ 28,936 | $ 27,881 | |
Income from continuing operation, net of tax | 1,622 | 1,631 | |
Impact on cost of sales from additional amortization of intangible assets | (10) | (20) | |
Impact on cost of sales from fair valuing acquired inventory | 26 | (26) | |
Impact on cost of sales from additional depreciation of property, plant and equipment | (4) | (8) | |
Impact on selling, general and administrative expenses from additional amortization of intangible assets | (5) | (12) | |
Impact on selling, general and administrative expenses from acquisition-related costs | 44 | 20 | |
Impact on interest expense from financing costs | (15) | (62) | |
Taxation adjustments | (5) | 33 | |
Total pro forma adjustments | $ 31 | $ (75) |
Acquisitions and business div_5
Acquisitions and business divestments - Divestments (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Business divestments | |||
Proceeds from divestments of consolidated businesses, net of transaction costs | $ 605 | ||
Net gains relating to divestments of consolidated businesses, net of transaction costs | $ 0 | 252 | $ 0 |
Loss of retained obligations changes | $ (94) |
Cash and equivalents, marketa_3
Cash and equivalents, marketable securities and short-term investments - Unrealized gains and losses (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | $ 4,165 | $ 5,598 |
Gross unrealized gains | 14 | |
Gross unrealized losses | (8) | (3) |
Fair value | 4,157 | 5,609 |
Cash and equivalents | 3,445 | 4,526 |
Marketable securities and short-term investments | 712 | 1,083 |
Securities for Reverse Repurchase Agreements | 206 | 305 |
Changes in fair value recorded in net income | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 3,858 | 5,102 |
Gross unrealized losses | (3) | |
Fair value | 3,855 | 5,102 |
Cash and equivalents | 3,445 | 4,526 |
Marketable securities and short-term investments | 410 | 576 |
Cash | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 1,983 | 1,963 |
Fair value | 1,983 | 1,963 |
Cash and equivalents | 1,983 | 1,963 |
Time deposits | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 1,463 | 2,834 |
Fair value | 1,463 | 2,834 |
Cash and equivalents | 1,462 | 2,563 |
Marketable securities and short-term investments | 1 | 271 |
Other short-term investments | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 206 | 305 |
Fair value | 206 | 305 |
Marketable securities and short-term investments | 206 | 305 |
Equity securities | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 206 | |
Gross unrealized losses | (3) | |
Fair value | 203 | |
Marketable securities and short-term investments | 203 | |
Changes in fair value recorded in other comprehensive income | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 307 | 496 |
Gross unrealized gains | 14 | |
Gross unrealized losses | (5) | (3) |
Fair value | 302 | 507 |
Marketable securities and short-term investments | 302 | 507 |
Debt securities - U.S. government obligations | Available-for-sale securities | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 217 | 127 |
Gross unrealized losses | (3) | (2) |
Fair value | 214 | 125 |
Marketable securities and short-term investments | 214 | 125 |
Debt securities - Other government obligations | Available-for-sale securities | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 2 | |
Fair value | 2 | |
Marketable securities and short-term investments | 2 | |
Debt securities - Corporate | Available-for-sale securities | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 90 | 215 |
Gross unrealized gains | 1 | |
Gross unrealized losses | (2) | (1) |
Fair value | 88 | 215 |
Marketable securities and short-term investments | $ 88 | 215 |
Equity securities | ||
Cash and equivalents, marketable securities and short-term investments | ||
Cost basis | 152 | |
Gross unrealized gains | 13 | |
Fair value | 165 | |
Marketable securities and short-term investments | $ 165 |
Cash and equivalents, marketa_4
Cash and equivalents, marketable securities and short-term investments - Contractual maturities (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Available-for-sale securities | ||
Available-for-sale securities, Less than one year, Cost basis | $ 80 | |
Available-for-sale securities, One to five years, Cost basis | 166 | |
Available-for-sale securities, Six to ten years, Cost basis | 60 | |
Available-for-sale securities, Due after ten years, Cost basis | 1 | |
Available-for-sale securities, Total Cost basis | 307 | |
Available-for-sale securities, Less than one year, Fair value | 80 | |
Available-for-sale securities, One to five years, Fair value | 163 | |
Available-for-sale securities, Six to ten years, Fair value | 58 | |
Available-for-sale securities, Due after ten years, Fair value | 1 | |
Available-for-sale securities, Total Fair value | 302 | |
Available-for-sale marketable securities pledged as collateral | $ 68 | $ 66 |
Debt Securities, Available-for-sale, Restriction Type [Extensible List] | us-gaap:AssetPledgedAsCollateralMember | us-gaap:AssetPledgedAsCollateralMember |
Derivative financial instrume_3
Derivative financial instruments - General information and gain or loss recognized or reclassified (Details) item in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($)itemozt | Dec. 31, 2017USD ($)itemozt | Dec. 31, 2016USD ($)itemozt | |
Financial Instruments: | |||
Company policy, maximum level of hedging of foreign currency risk exposure as percentage of anticipated sales and purchases over the next 12 months (as a percent) | 100.00% | ||
Maximum number of months for which forecasted foreign currency exposures are hedged | 12 months | ||
Unrealized (losses) gains in OCI, net of tax, on derivatives designated as cash flow hedges | $ (16) | $ 12 | $ (1) |
Expected losses on derivatives designated as cash flow hedges to be reclassified from OCI to earnings in the next fiscal year | $ (6) | ||
Longest maturity of a derivative classified as a cash flow hedge | 61 months | ||
Gains (losses) recognized in OCI on derivatives (effective portion) | $ (51) | 34 | 11 |
Gains (losses) reclassified from OCI into income (effective portion) | (22) | 25 | 17 |
Gains (losses), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings | $ (24) | 23 | 14 |
Gains (losses) recognized in income, derivatives not designated in hedge relationships | $ 94 | $ (133) | |
Minimum | |||
Financial Instruments: | |||
Percentage of commodity hedging on anticipated commodity exposure | 50.00% | ||
Commodity hedging on anticipated commodity exposure period | 12 months | ||
Maximum | |||
Financial Instruments: | |||
Percentage of commodity hedging on anticipated commodity exposure | 100.00% | ||
Commodity hedging on anticipated commodity exposure period | 18 months | ||
Copper swaps (in metric tonnes) | |||
Financial Instruments: | |||
Notional amounts of outstanding commodity derivatives | t | 46,143 | 28,976 | 17,667 |
Aluminum swaps (in metric tonnes) | |||
Financial Instruments: | |||
Notional amounts of outstanding commodity derivatives | t | 9,491 | 1,869 | 27 |
Silver swaps (in ounces) | |||
Financial Instruments: | |||
Notional amounts of outstanding commodity derivatives | oz | 2,861,294 | 1,966,729 | 1,586,395 |
Foreign exchange contracts | |||
Financial Instruments: | |||
Notional amount of derivative | $ 13,612 | $ 16,261 | $ 14,144 |
Gains (losses) recognized in OCI on derivatives (effective portion) | (6) | 3 | (7) |
Gains (losses) reclassified from OCI into income (effective portion) | 2 | 1 | |
Foreign exchange contracts | Total revenues | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | (121) | 92 | (90) |
Foreign exchange contracts | Total cost of sales | |||
Financial Instruments: | |||
Gains (losses) reclassified from OCI into income (effective portion) | 2 | 9 | |
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 46 | (41) | (28) |
Foreign exchange contracts | Selling, general and administrative expenses | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 10 | (18) | 8 |
Foreign exchange contracts | Non-order related research and development expenses | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | (1) | (1) | |
Foreign exchange contracts | Interest and other finance expense | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 40 | 22 | (35) |
Embedded foreign exchange derivatives | |||
Financial Instruments: | |||
Notional amount of derivative | 733 | 899 | 1,125 |
Embedded foreign exchange derivatives | Total revenues | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 58 | 7 | (5) |
Embedded foreign exchange derivatives | Total cost of sales | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | (4) | (2) | (4) |
Embedded foreign exchange derivatives | Selling, general and administrative expenses | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 2 | 5 | (2) |
Interest rate contracts | |||
Financial Instruments: | |||
Notional amount of derivative | 3,300 | 5,706 | 3,021 |
Interest rate contracts | Interest and other finance expense | |||
Financial Instruments: | |||
Gains (losses) recognized in income on derivatives designated as fair value hedges | (4) | (23) | (28) |
Gains (losses) recognized in income on hedged item | 5 | 27 | 30 |
Commodity contracts | |||
Financial Instruments: | |||
Gains (losses) recognized in OCI on derivatives (effective portion) | (9) | 9 | 3 |
Gains (losses) reclassified from OCI into income (effective portion) | 6 | (2) | |
Commodity contracts | Total cost of sales | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | (33) | 31 | 31 |
Other | Interest and other finance expense | |||
Financial Instruments: | |||
Gains (losses) recognized in income, derivatives not designated in hedge relationships | 3 | (2) | (7) |
Cash-settled call options | |||
Financial Instruments: | |||
Gains (losses) recognized in OCI on derivatives (effective portion) | (36) | 22 | 15 |
Gains (losses) reclassified from OCI into income (effective portion) | $ (22) | $ 15 | $ 9 |
Equity derivatives | |||
Financial Instruments: | |||
Cash-settled call options held on ABB Ltd shares | item | 41 | 37 | 47 |
Conversion ratio | 5 | ||
Total fair value of cash settled call options on ABB Ltd shares | $ 6 | $ 42 | $ 23 |
Derivative financial instrume_4
Derivative financial instruments - Balance sheet location (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Fair values of derivatives | ||
Derivative assets | $ 181 | $ 279 |
Derivative liabilities | 220 | 259 |
Current in "Other current assets" | ||
Fair values of derivatives | ||
Derivative assets | 143 | 211 |
Current in "Other current assets" | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 3 | 31 |
Current in "Other current assets" | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 140 | 180 |
Current in "Other current assets" | Foreign exchange contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 1 | |
Current in "Other current assets" | Foreign exchange contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 117 | 134 |
Current in "Other current assets" | Commodity contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 5 | |
Current in "Other current assets" | Commodity contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 8 | 31 |
Current in "Other current assets" | Cash-settled call options | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 3 | 25 |
Current in "Other current assets" | Embedded foreign exchange derivatives | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 15 | 15 |
Non-current in "Other non-current assets" | ||
Fair values of derivatives | ||
Derivative assets | 63 | 93 |
Non-current in "Other non-current assets" | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 38 | 57 |
Non-current in "Other non-current assets" | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 25 | 36 |
Non-current in "Other non-current assets" | Foreign exchange contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 14 | 24 |
Non-current in "Other non-current assets" | Commodity contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 1 | 1 |
Non-current in "Other non-current assets" | Interest rate contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 35 | 41 |
Non-current in "Other non-current assets" | Cash-settled call options | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 3 | 16 |
Non-current in "Other non-current assets" | Cash-settled call options | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 1 | |
Non-current in "Other non-current assets" | Embedded foreign exchange derivatives | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative assets | 10 | 10 |
Current in "Other current liabilities" | ||
Fair values of derivatives | ||
Derivative liabilities | 192 | 207 |
Current in "Other current liabilities" | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 3 | |
Current in "Other current liabilities" | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 189 | 207 |
Current in "Other current liabilities" | Foreign exchange contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 1 | |
Current in "Other current liabilities" | Foreign exchange contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 160 | 183 |
Current in "Other current liabilities" | Commodity contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 2 | |
Current in "Other current liabilities" | Commodity contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 21 | 7 |
Current in "Other current liabilities" | Cross-currency interest rate swaps | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 2 | |
Current in "Other current liabilities" | Embedded foreign exchange derivatives | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 8 | 15 |
Non-current in "Other non-current liabilities" | ||
Fair values of derivatives | ||
Derivative liabilities | 37 | 70 |
Non-current in "Other non-current liabilities" | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 5 | 5 |
Non-current in "Other non-current liabilities" | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 32 | 65 |
Non-current in "Other non-current liabilities" | Foreign exchange contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 4 | 1 |
Non-current in "Other non-current liabilities" | Foreign exchange contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 30 | 62 |
Non-current in "Other non-current liabilities" | Commodity contracts | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 1 | |
Non-current in "Other non-current liabilities" | Interest rate contracts | Derivatives designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | 1 | 4 |
Non-current in "Other non-current liabilities" | Embedded foreign exchange derivatives | Derivatives not designated as hedging instruments | ||
Fair values of derivatives | ||
Derivative liabilities | $ 1 | $ 3 |
Derivative financial instrume_5
Derivative financial instruments - Offsetting assets (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Derivatives | ||
Gross amount of recognized assets | $ 181 | $ 279 |
Derivative liabilities eligible for set-off in case of default | (121) | (167) |
Net asset exposure | 60 | 112 |
Reverse repurchase agreements | ||
Gross amount of recognized assets | 206 | 305 |
Non-cash collateral received | (206) | (305) |
Total | ||
Gross amount of recognized assets | 387 | 584 |
Derivative liabilities eligible for set-off in case of default | (121) | (167) |
Non-cash collateral received | (206) | (305) |
Net asset exposure | $ 60 | $ 112 |
Derivative financial instrume_6
Derivative financial instruments - Offsetting liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Derivatives | ||
Gross amount of recognized liabilities | $ 220 | $ 259 |
Derivative liabilities eligible for set-off in case of default | (121) | (167) |
Net liability exposure | 99 | 92 |
Total | ||
Gross amount of recognized liabilities | 220 | 259 |
Derivative liabilities eligible for set-off in case of default | (121) | (167) |
Net liability exposure | $ 99 | $ 92 |
Fair values - Fair value hierar
Fair values - Fair value hierarchy (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Assets. | |||
Securities in "Marketable securities and short-term investments" | $ 712 | $ 1,083 | |
Liabilities | |||
Derivative liabilities-current in "Other current liabilities" | 192 | 207 | |
Derivative liabilities-non-current in "Other non-current liabilities" | 37 | 70 | |
Financial assets reclassification from Level 1 to Level 2 | 0 | 0 | $ 0 |
Financial assets reclassification from Level 2 to Level 1 | 0 | 0 | 0 |
Financial liabilities reclassification from Level 1 to Level 2 | 0 | 0 | 0 |
Financial liabilities reclassification from Level 2 to Level 1 | 0 | 0 | $ 0 |
Recurring | |||
Assets. | |||
Receivable under securities lending arrangement | 79 | ||
Derivative assets-current in "Other current assets" | 143 | 211 | |
Derivative assets-non-current in "Other non-current assets" | 63 | 93 | |
Total financial assets, fair value | 711 | 890 | |
Liabilities | |||
Derivative liabilities-current in "Other current liabilities" | 192 | 207 | |
Derivative liabilities-non-current in "Other non-current liabilities" | 37 | 70 | |
Total financial liabilities, fair value | 229 | 277 | |
Non-recurring | |||
Assets. | |||
Total financial assets, fair value | 0 | 0 | |
Equity securities | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 203 | 165 | |
Debt securities - U.S. government obligations | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 214 | 125 | |
Debt securities - Other government obligations | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 2 | ||
Debt securities - Corporate | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 88 | 215 | |
Level 1 | Recurring | |||
Assets. | |||
Receivable under securities lending arrangement | 79 | ||
Total financial assets, fair value | 214 | 204 | |
Level 1 | Debt securities - U.S. government obligations | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 214 | 125 | |
Level 2 | Recurring | |||
Assets. | |||
Derivative assets-current in "Other current assets" | 143 | 211 | |
Derivative assets-non-current in "Other non-current assets" | 63 | 93 | |
Total financial assets, fair value | 497 | 686 | |
Liabilities | |||
Derivative liabilities-current in "Other current liabilities" | 192 | 207 | |
Derivative liabilities-non-current in "Other non-current liabilities" | 37 | 70 | |
Total financial liabilities, fair value | 229 | 277 | |
Level 2 | Equity securities | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 203 | 165 | |
Level 2 | Debt securities - Other government obligations | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | 2 | ||
Level 2 | Debt securities - Corporate | Recurring | |||
Assets. | |||
Securities in "Marketable securities and short-term investments" | $ 88 | $ 215 |
Fair values - Carrying value an
Fair values - Carrying value and fair value (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Carrying value | ||
Cash and equivalents (excluding securities with original maturities up to 3 months) | ||
Cash | $ 1,983 | $ 1,963 |
Time deposits | 1,462 | 2,563 |
Marketable securities and short-term investments (excluding securities) | ||
Time deposits | 1 | 271 |
Receivables under reverse repurchase agreements | 206 | 305 |
Other non-current assets: | ||
Loans granted | 30 | 29 |
Restricted cash and cash deposits | 39 | 35 |
Liabilities | ||
Short-term debt and current maturities of long-term debt (excluding capital lease obligations) | 2,008 | 694 |
Long-term debt (excluding capital lease obligations) | 6,457 | 6,567 |
Total fair value | ||
Cash and equivalents (excluding securities with original maturities up to 3 months) | ||
Cash | 1,983 | 1,963 |
Time deposits | 1,462 | 2,563 |
Marketable securities and short-term investments (excluding securities) | ||
Time deposits | 1 | 271 |
Receivables under reverse repurchase agreements | 206 | 305 |
Other non-current assets: | ||
Loans granted | 31 | 30 |
Restricted cash and cash deposits | 39 | 35 |
Liabilities | ||
Short-term debt and current maturities of long-term debt (excluding capital lease obligations) | 2,008 | 694 |
Long-term debt (excluding capital lease obligations) | 6,546 | 6,819 |
Total fair value | Level 1 | ||
Cash and equivalents (excluding securities with original maturities up to 3 months) | ||
Cash | 1,983 | 1,963 |
Other non-current assets: | ||
Restricted cash and cash deposits | 39 | 35 |
Liabilities | ||
Short-term debt and current maturities of long-term debt (excluding capital lease obligations) | 1,480 | 400 |
Long-term debt (excluding capital lease obligations) | 5,839 | 6,046 |
Total fair value | Level 2 | ||
Cash and equivalents (excluding securities with original maturities up to 3 months) | ||
Time deposits | 1,462 | 2,563 |
Marketable securities and short-term investments (excluding securities) | ||
Time deposits | 1 | 271 |
Receivables under reverse repurchase agreements | 206 | 305 |
Other non-current assets: | ||
Loans granted | 31 | 30 |
Liabilities | ||
Short-term debt and current maturities of long-term debt (excluding capital lease obligations) | 528 | 294 |
Long-term debt (excluding capital lease obligations) | $ 707 | $ 773 |
Receivables, net and Contract_3
Receivables, net and Contract assets and liabilities - Receivables, net and Allowance for doubtful accounts (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | |
Receivables, net and Contract assets and liabilities | |||||
Trade receivables | $ 5,970 | $ 5,553 | |||
Other receivables | 635 | 510 | |||
Allowance | $ (202) | $ (202) | $ (160) | (219) | (202) |
Total receivables, net | 6,386 | 5,861 | |||
Contractual retention amounts billed to customers | $ 176 | $ 168 | |||
Percent of outstanding contractual retention amounts billed to customers expected to be collected in the year following the balance sheet date | 62.00% | ||||
Percent of outstanding contractual retention amounts billed to customers expected to be collected the second year following the balance sheet date | 28.00% | ||||
Allowance for doubtful accounts | |||||
Balance at January 1 | $ 202 | 202 | 160 | ||
Additions | 126 | 61 | 116 | ||
Deductions | (93) | (74) | (64) | ||
Exchange rate differences | (16) | 13 | (10) | ||
Balance at December 31 | $ 219 | $ 202 | $ 202 |
Receivables, net and Contract_4
Receivables, net and Contract assets and liabilities - Contract assets and Contract liabilities (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Jan. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Receivables, net and Contract assets and liabilities | |||||
Contract assets | $ 1,082 | $ 1,141 | $ 1,222 | ||
Contract liabilities | $ 1,707 | $ 1,792 | $ 1,690 | ||
Significant changes in the Contract assets and Contract liabilities balances | |||||
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2018/2017 | $ (879) | $ (1,212) | |||
Additions to Contract liabilities - excluding amounts recognized as revenue during the period | 518 | 868 | |||
Receivables recognized that were included in the Contract assets balance at Jan 1, 2018/2017 | $ (633) | $ (584) |
Receivables, net and Contract_5
Receivables, net and Contract assets and liabilities - Performance obligations (Details) $ in Millions | Dec. 31, 2018USD ($) |
Receivables, net and Contract assets and liabilities | |
Performance obligation, unfulfilled orders | $ 13,084 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Period of performance obligation, unfulfilled orders | 1 year |
Percentage of performance obligation, unfulfilled orders | 76.00% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Period of performance obligation, unfulfilled orders | 1 year |
Percentage of performance obligation, unfulfilled orders | 14.00% |
Inventories, net (Details)
Inventories, net (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Inventories, net | ||
Raw materials | $ 1,823 | $ 1,412 |
Work in process | 837 | 840 |
Finished goods | 1,525 | 1,379 |
Advances to suppliers | 99 | 106 |
Total inventory, net | $ 4,284 | $ 3,737 |
Property, plant and equipment_3
Property, plant and equipment, net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property, plant and equipment, net | |||
Property, plant and equipment, gross | $ 9,661 | $ 9,351 | |
Accumulated depreciation | (5,528) | (5,547) | |
Total property, plant and equipment, net | 4,133 | 3,804 | |
Assets under capital leases included in property, plant and equipment, net | |||
Capital lease assets, gross | 240 | 208 | |
Accumulated depreciation | (122) | (105) | |
Total capital lease assets, net | 118 | 103 | |
Depreciation expense | |||
Depreciation expense including depreciation of assets under capital leases | 578 | 549 | $ 566 |
Land and buildings | |||
Property, plant and equipment, net | |||
Property, plant and equipment, gross | 3,573 | 3,268 | |
Assets under capital leases included in property, plant and equipment, net | |||
Capital lease assets, gross | 171 | 127 | |
Machinery and equipment | |||
Property, plant and equipment, net | |||
Property, plant and equipment, gross | 5,624 | 5,572 | |
Assets under capital leases included in property, plant and equipment, net | |||
Capital lease assets, gross | 69 | 81 | |
Construction in progress | |||
Property, plant and equipment, net | |||
Property, plant and equipment, gross | $ 464 | $ 511 |
Goodwill and other intangible_3
Goodwill and other intangible assets - Changes in goodwill (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill | |||
Goodwill, at cost | $ 7,971 | ||
Accumulated impairment charges, beginning balance | (18) | ||
Goodwill at the opening balance | $ 9,536 | $ 7,953 | |
Goodwill acquired during the year | 1,472 | 1,267 | 12 |
Goodwill allocated to disposals | (31) | (2) | |
Exchange rate differences and other | (213) | 318 | |
Goodwill at the closing balance | 10,764 | 9,536 | 7,953 |
Electrification Products | |||
Goodwill | |||
Goodwill, at cost | 2,805 | ||
Goodwill at the opening balance | 2,969 | 2,805 | |
Goodwill acquired during the year | 1,442 | ||
Goodwill allocated to disposals | (31) | ||
Exchange rate differences and other | (104) | 164 | |
Goodwill at the closing balance | 4,276 | 2,969 | 2,805 |
Industrial Automation | |||
Goodwill | |||
Goodwill, at cost | 1,592 | ||
Goodwill at the opening balance | 2,939 | 1,592 | |
Goodwill acquired during the year | 1,263 | ||
Goodwill allocated to disposals | (1) | ||
Exchange rate differences and other | (75) | 85 | |
Goodwill at the closing balance | 2,864 | 2,939 | 1,592 |
Robotics and Motion | |||
Goodwill | |||
Goodwill, at cost | 3,536 | ||
Goodwill at the opening balance | 3,607 | 3,536 | |
Goodwill acquired during the year | 30 | 4 | |
Exchange rate differences and other | (34) | 67 | |
Goodwill at the closing balance | 3,603 | 3,607 | 3,536 |
Corporate and Other | |||
Goodwill | |||
Goodwill, at cost | 38 | ||
Accumulated impairment charges, beginning balance | (18) | ||
Goodwill at the opening balance | 21 | 20 | |
Goodwill allocated to disposals | (1) | ||
Exchange rate differences and other | 2 | ||
Goodwill at the closing balance | $ 21 | $ 21 | $ 20 |
Goodwill and other intangible_4
Goodwill and other intangible assets - Future amortization (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Finite Lived Intangible Assets | |||
Gross carrying amount | $ 5,099 | $ 4,668 | |
Accumulated amortization | (2,492) | (2,243) | |
Total | 2,607 | 2,425 | |
Additions to intangible assets other than goodwill | 596 | 806 | |
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | 522 | 737 | |
Amortization expense | |||
Amortization expense of intangible assets other than goodwill | 338 | 287 | $ 304 |
Future amortization expense of intangible assets | |||
2019 | 342 | ||
2020 | 321 | ||
2021 | 285 | ||
2022 | 253 | ||
2023 | 234 | ||
Thereafter | 1,172 | ||
Total | 2,607 | 2,425 | |
Capitalized software for internal use | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 779 | 704 | |
Accumulated amortization | (586) | (572) | |
Total | 193 | 132 | |
Additions to intangible assets other than goodwill | 139 | 69 | |
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | $ 65 | ||
Weighted-average useful life | 2 years | ||
Amortization expense | |||
Amortization expense of intangible assets other than goodwill | $ 59 | 50 | 50 |
Future amortization expense of intangible assets | |||
Total | 193 | 132 | |
Capitalized software for sale | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 30 | 31 | |
Accumulated amortization | (30) | (31) | |
Intangibles other than software: | |||
Amortization expense | |||
Amortization expense of intangible assets other than goodwill | 279 | 237 | $ 254 |
Intangibles other than software: Customer-related | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 2,609 | 2,452 | |
Accumulated amortization | (909) | (782) | |
Total | 1,700 | 1,670 | |
Additions to intangible assets other than goodwill | 214 | 264 | |
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | $ 214 | $ 264 | |
Weighted-average useful life | 14 years | 20 years | |
Future amortization expense of intangible assets | |||
Total | $ 1,700 | $ 1,670 | |
Intangibles other than software: Technology-related | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 1,131 | 1,082 | |
Accumulated amortization | (701) | (636) | |
Total | 430 | 446 | |
Additions to intangible assets other than goodwill | 87 | 412 | |
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | $ 87 | $ 412 | |
Weighted-average useful life | 7 years | 7 years | |
Future amortization expense of intangible assets | |||
Total | $ 430 | $ 446 | |
Intangibles other than software: Marketing-related | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 483 | 366 | |
Accumulated amortization | (240) | (199) | |
Total | 243 | 167 | |
Additions to intangible assets other than goodwill | 122 | 61 | |
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | $ 122 | $ 61 | |
Weighted-average useful life | 13 years | 10 years | |
Future amortization expense of intangible assets | |||
Total | $ 243 | $ 167 | |
Intangibles other than software: Other | |||
Finite Lived Intangible Assets | |||
Gross carrying amount | 67 | 33 | |
Accumulated amortization | (26) | (23) | |
Total | 41 | 10 | |
Additions to intangible assets other than goodwill | 34 | ||
Intangible assets other than goodwill related to business combinations | |||
Amount acquired | $ 34 | ||
Weighted-average useful life | 13 years | ||
Future amortization expense of intangible assets | |||
Total | $ 41 | $ 10 |
Debt (Details)
Debt (Details) € in Millions, SFr in Millions, $ in Millions | Mar. 26, 2019EUR (€) | Mar. 26, 2019USD ($) | Feb. 28, 2019CHF (SFr) | Feb. 28, 2019USD ($) | Apr. 30, 2018USD ($) | May 31, 2017EUR (€) | May 31, 2017USD ($) | May 31, 2016EUR (€) | May 31, 2016USD ($) | Dec. 31, 2018EUR (€)Program | Dec. 31, 2018CHF (SFr)Program | Dec. 31, 2018USD ($)Program | Dec. 31, 2017EUR (€) | Dec. 31, 2017CHF (SFr) | Dec. 31, 2017USD ($) |
Debt | |||||||||||||||
Total debt | $ 8,618 | $ 7,408 | |||||||||||||
Short-term debt (weighted-average interest rate of 2.3% and 2.7%, respectively) | 561 | 317 | |||||||||||||
Current maturities of long-term debt (weighted average nominal interest rate of 2.7% and 2.0%, respectively) | 1,470 | 409 | |||||||||||||
Short-term debt and current maturities of long-term debt | $ 2,031 | $ 726 | |||||||||||||
Short-term debt, weighted average interest rate (as a percent) | 2.30% | 2.30% | 2.30% | 2.70% | 2.70% | 2.70% | |||||||||
Current maturities of long-term debt, weighted average nominal interest rate (as a percent) | 2.70% | 2.70% | 2.70% | 2.00% | 2.00% | 2.00% | |||||||||
Number of commercial paper programs | Program | 2 | 2 | 2 | ||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 8,057 | $ 7,091 | |||||||||||||
Current portion of long-term debt | (1,470) | (409) | |||||||||||||
Long-term debt | 6,587 | 6,682 | |||||||||||||
Maturities of long-term debt | |||||||||||||||
2019 | 1,448 | ||||||||||||||
2020 | 326 | ||||||||||||||
2021 | 1,269 | ||||||||||||||
2022 | 1,250 | ||||||||||||||
2023 | 1,252 | ||||||||||||||
Thereafter | 2,366 | ||||||||||||||
Total | 7,911 | ||||||||||||||
ABB Finance (USA) Inc | |||||||||||||||
Long-term debt: | |||||||||||||||
Ownership interest (as a percent) | 100.00% | 100.00% | |||||||||||||
Floating rate | |||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 3,106 | $ 3,213 | |||||||||||||
Debt nominal interest rate (as a percent) | 1.70% | 1.70% | 1.70% | 1.70% | 1.70% | 1.70% | |||||||||
Debt effective interest rate (as a percent) | 1.10% | 1.10% | 1.10% | 0.60% | 0.60% | 0.60% | |||||||||
Fixed rate | |||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 4,951 | $ 3,878 | |||||||||||||
Debt nominal interest rate (as a percent) | 3.60% | 3.60% | 3.60% | 3.50% | 3.50% | 3.50% | |||||||||
Debt effective interest rate (as a percent) | 3.60% | 3.60% | 3.60% | 3.50% | 3.50% | 3.50% | |||||||||
Current portion of long-term debt | |||||||||||||||
Long-term debt: | |||||||||||||||
Debt nominal interest rate (as a percent) | 2.70% | 2.70% | 2.70% | 2.00% | 2.00% | 2.00% | |||||||||
Debt effective interest rate (as a percent) | 2.70% | 2.70% | 2.70% | 2.00% | 2.00% | 2.00% | |||||||||
Bonds | |||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 7,842 | $ 6,845 | |||||||||||||
Proceeds from issuance of bonds | SFr 449 | $ 449 | $ 1,494 | ||||||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
Minimum threshold for early redemption by the entity | 100.00% | ||||||||||||||
1.50% CHF Bonds, due 2018 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | SFr | SFr 350 | ||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 358 | ||||||||||||||
Debt nominal interest rate (as a percent) | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | |||||||||
2.625% EUR Instruments, due 2019 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | € | € 1,250 | € 1,250 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 1,431 | $ 1,493 | |||||||||||||
Debt nominal interest rate (as a percent) | 2.625% | 2.625% | 2.625% | 2.625% | 2.625% | 2.625% | |||||||||
Repurchase terms | |||||||||||||||
Repayment of bonds | € 1,250 | $ 1,414 | |||||||||||||
2.8% USD Notes, due 2020 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 300 | ||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 299 | ||||||||||||||
Debt nominal interest rate (as a percent) | 2.80% | 2.80% | 2.80% | 2.80% | 2.80% | 2.80% | |||||||||
4.0% USD Notes, due 2021 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 650 | $ 650 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 646 | $ 644 | |||||||||||||
Debt nominal interest rate (as a percent) | 4.00% | 4.00% | 4.00% | 4.00% | 4.00% | 4.00% | |||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
2.25% CHF Bonds, due 2021 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | SFr | SFr 350 | SFr 350 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 373 | $ 378 | |||||||||||||
Debt nominal interest rate (as a percent) | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% | |||||||||
Repurchase terms | |||||||||||||||
Minimum threshold for early redemption by the entity | 85.00% | ||||||||||||||
5.625% USD Notes, due 2021 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 250 | $ 250 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 265 | $ 270 | |||||||||||||
Debt nominal interest rate (as a percent) | 5.625% | 5.625% | 5.625% | 5.625% | 5.625% | 5.625% | |||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
2.875% USD Notes, due 2022 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 1,250 | $ 1,250 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 1,242 | $ 1,256 | |||||||||||||
Debt nominal interest rate (as a percent) | 2.875% | 2.875% | 2.875% | 2.875% | 2.875% | 2.875% | |||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
2.875% USD Notes, due 2022 | Interest rate swaps | |||||||||||||||
Repurchase terms | |||||||||||||||
Amount of hedged item | $ 1,050 | ||||||||||||||
3.375% USD Notes, due 2023 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | 450 | ||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 448 | ||||||||||||||
Debt nominal interest rate (as a percent) | 3.375% | 3.375% | 3.375% | 3.375% | 3.375% | 3.375% | |||||||||
Repurchase terms | |||||||||||||||
Redemption period prior to their maturity | 1 month | ||||||||||||||
0.625% EUR Instruments, due 2023 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | € | € 700 | € 700 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | € | € 807 | € 834 | |||||||||||||
Debt nominal interest rate (as a percent) | 0.625% | 0.625% | 0.625% | 0.625% | 0.625% | 0.625% | |||||||||
Proceeds from issuance of bonds | € 697 | $ 807 | |||||||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
0.75% EUR Instruments, due 2024 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | € | € 750 | € 750 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | € | € 862 | € 889 | |||||||||||||
Debt nominal interest rate (as a percent) | 0.75% | 0.75% | 0.75% | ||||||||||||
Proceeds from issuance of bonds | € 745 | $ 824 | |||||||||||||
3.8% USD Notes, due 2028 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 750 | ||||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 746 | ||||||||||||||
Debt nominal interest rate (as a percent) | 3.80% | 3.80% | 3.80% | 3.80% | 3.80% | 3.80% | |||||||||
Repurchase terms | |||||||||||||||
Redemption period prior to their maturity | 3 months | ||||||||||||||
4.375% USD Notes, due 2042 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | $ 750 | $ 750 | |||||||||||||
Long-term debt: | |||||||||||||||
Total | $ 723 | 723 | |||||||||||||
Debt nominal interest rate (as a percent) | 4.375% | 4.375% | 4.375% | ||||||||||||
Repurchase terms | |||||||||||||||
Percentage of principal amount of bonds used in redemption calculation | 100.00% | ||||||||||||||
0.3% CHF Notes, due 2024 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | SFr | SFr 280 | ||||||||||||||
Long-term debt: | |||||||||||||||
Debt nominal interest rate (as a percent) | 0.30% | ||||||||||||||
1.0% CHF Notes, due 2029 | |||||||||||||||
Debt | |||||||||||||||
Debt instrument, face amount | SFr | SFr 170 | ||||||||||||||
Long-term debt: | |||||||||||||||
Debt nominal interest rate (as a percent) | 1.00% | ||||||||||||||
U.S. dollar-denominated commercial paper | |||||||||||||||
Debt | |||||||||||||||
Commercial paper program, capacity | 2,000 | $ 2,000 | |||||||||||||
Commercial paper, amount outstanding | 825 | 292 | 259 | ||||||||||||
Euro-commercial paper | |||||||||||||||
Debt | |||||||||||||||
Commercial paper program, capacity | 2,000 | 2,000 | |||||||||||||
Commercial paper, amount outstanding | $ 509 | 172 | 0 | ||||||||||||
Line of credit | |||||||||||||||
Debt | |||||||||||||||
Amount drawn | $ 0 | $ 0 | |||||||||||||
Line of credit | Multicurrency credit facility maturing 2019 extended to 2021 | |||||||||||||||
Debt | |||||||||||||||
Commitment fee as a proportion of the margin (as a percent) | 35.00% | ||||||||||||||
Commitment fee on credit facility (as a percent) | 0.07% | ||||||||||||||
Utilization fee on credit facility on drawings representing one-third or less of the total facility (as a percent) | 0.075% | ||||||||||||||
Utilization fee on credit facility on drawings representing between one-third and two-thirds of the total facility (as a percent) | 0.15% | ||||||||||||||
Utilization fee on credit facility over two-thirds of the facility, percentage | 0.30% | ||||||||||||||
Line of credit | Multicurrency credit facility maturing 2019 extended to 2021 | LIBOR | |||||||||||||||
Debt | |||||||||||||||
Interest cost above variable interest rate on facility (as a percent) | 0.20% | ||||||||||||||
Line of credit | Multicurrency credit facility maturing 2019 extended to 2021 | EURIBOR | |||||||||||||||
Debt | |||||||||||||||
Interest cost above variable interest rate on facility (as a percent) | 0.20% |
Other provisions, other curre_3
Other provisions, other current liabilities and other non-current liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Other Provisions | ||
Contract-related provisions | $ 590 | $ 443 |
Restructuring and restructuring- related provisions | 277 | 334 |
Provisions for contractual penalties and compliance and litigation matters | 209 | 209 |
Provision for insurance-related reserves | 166 | 153 |
Other | 130 | 138 |
Total | 1,372 | 1,277 |
Other current liabilities | ||
Employee-related liabilities | 1,506 | 1,439 |
Accrued expenses | 546 | 389 |
Non-trade payables | 477 | 454 |
Accrued customer rebates | 299 | 230 |
Other tax liabilities | 277 | 274 |
Income taxes payable | 260 | 313 |
Derivative liabilities (see Note 6) | 192 | 207 |
Accrued interest | 73 | 61 |
Deferred income | 36 | 33 |
Pension and other employee benefits (see Note 17) | 34 | 40 |
Other | 80 | 69 |
Total | 3,780 | 3,509 |
Other non-current liabilities: | ||
Income tax related liabilities | 1,111 | 1,197 |
Provisions for contractual penalties and compliance and litigation matters | 132 | 137 |
Non-current deposit liabilities | 91 | 95 |
Employee-related liabilities | 74 | 70 |
Environmental provisions | 56 | 53 |
Derivative liabilities (see Note 6) | 37 | 70 |
Deferred income | 12 | 11 |
Other | 176 | 216 |
Total | $ 1,689 | $ 1,849 |
Leases (Details)
Leases (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Leases | |||
Rent expense | $ 364 | $ 385 | $ 390 |
Sublease income received on leased assets | 7 | $ 11 | $ 13 |
Future net minimum lease payments for operating leases | |||
2019 | 329 | ||
2020 | 254 | ||
2021 | 191 | ||
2022 | 132 | ||
2023 | 105 | ||
Thereafter | 267 | ||
Total operating leases, excluding sublease rentals | 1,278 | ||
Sublease income | (13) | ||
Total operating lease | 1,265 | ||
Future net minimum lease payments for capital leases | |||
2019 | 34 | ||
2020 | 27 | ||
2021 | 24 | ||
2022 | 24 | ||
2023 | 19 | ||
Thereafter | 111 | ||
Total minimum lease payments | 239 | ||
Less: amount representing estimated executory costs included in total minimum lease payments | (1) | ||
Net minimum lease payments | 238 | ||
Less amount representing interest | (87) | ||
Present value of minimum lease payments | $ 151 |
Commitments and contingencies -
Commitments and contingencies - Contingencies (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Contingencies for regulatory, compliance and legal matters | ||
Contingencies - Regulatory, Compliance and Legal | ||
Accrued loss contingency related to regulatory compliance and legal contingencies | $ 221 | $ 229 |
Commitments and contingencies_2
Commitments and contingencies - Product warranty reconciliation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Guarantees - general | |||
Maximum potential payments | $ 1,658 | $ 1,864 | |
Additional obligations with respect to guarantee | 7,400 | 7,700 | |
Additional obligations with respect to guarantee relate to discontinued operations | 4,300 | 4,700 | |
Reconciliation of Provisions for warranties including guarantees of product performance | |||
Product warranties at beginning of period | 909 | 815 | $ 763 |
Net change in warranties due to acquisitions and divestments | 41 | 30 | |
Claims paid in cash or in kind | (307) | (243) | (248) |
Net increase to provision for changes in estimates, warranties issued | 341 | 234 | 327 |
Exchange rate differences | (36) | 73 | (27) |
Product warranties at end of period | 948 | 909 | 815 |
Performance guarantees | |||
Guarantees - general | |||
Maximum potential payments | $ 1,584 | 1,775 | |
Performance guarantees | Projects executed as a member of consortia | Minimum | |||
Guarantees - general | |||
Original maturity of performance guarantees | 1 year | ||
Performance guarantees | Projects executed as a member of consortia | Maximum | |||
Guarantees - general | |||
Original maturity of performance guarantees | 8 years | ||
Financial guarantees | |||
Guarantees - general | |||
Maximum potential payments | $ 10 | 17 | |
Carrying amount of liabilities | 0 | 0 | 0 |
Indemnification guarantees | |||
Guarantees - general | |||
Maximum potential payments | 64 | 72 | |
High Voltage cables systems guarantees | |||
Guarantees - general | |||
Maximum potential payments | $ 771 | 929 | |
High Voltage cables systems guarantees | Minimum | |||
Guarantees - general | |||
Original maturity of performance guarantees | 1 year | ||
High Voltage cables systems guarantees | Maximum | |||
Guarantees - general | |||
Original maturity of performance guarantees | 10 years | ||
Warranties | |||
Reconciliation of Provisions for warranties including guarantees of product performance | |||
Net increase to provision for changes in estimates, warranties issued | $ 92 | ||
Warranties | Business acquisitions in 2013 | |||
Reconciliation of Provisions for warranties including guarantees of product performance | |||
Net increase to provision for changes in estimates, warranties issued | 36 | 23 | 151 |
Excluded products sold prior to the acquisition date | $ 16 | $ 8 | $ 131 |
Income taxes - Provision, Recon
Income taxes - Provision, Reconciliation, and Deferred Taxes (Details) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Provision for taxes | ||||
Current taxes | $ 686 | $ 782 | $ 671 | |
Deferred taxes | (142) | (199) | (145) | |
Tax expense from continuing operations | 544 | 583 | 526 | |
Tax expense from discontinued operations | 228 | 273 | 251 | |
Tax Cuts and Jobs Act effect | ||||
Estimated tax benefit from Tax Cuts and Jobs Act | $ (30) | |||
One-time transition tax | 26 | |||
Reconciliation of taxes: | ||||
Income from continuing operations before taxes | $ 2,119 | $ 2,102 | $ 1,761 | |
Weighted-average global tax rate (as a percent) | 22.20% | 23.60% | 19.90% | |
Income taxes at weighted average tax rate | $ 470 | $ 497 | $ 350 | |
Items taxed at rates other than the weighted-average tax rate | (43) | (114) | 9 | |
Changes in valuation allowance, net | 41 | 763 | (8) | |
Effects of changes in tax laws and (enacted) tax rates | 1 | (747) | 42 | |
Non-deductible expenses, excluding goodwill | 86 | 58 | 79 | |
Other, net | (11) | 126 | 54 | |
Tax expense from continuing operations | $ 544 | $ 583 | $ 526 | |
Effective tax rate for the year (as a percent) | 25.70% | 27.70% | 29.90% | |
Non-taxable amount of net gains from sale of businesses | $ 17 | $ 72 | ||
Increase in deferred tax assets | 721 | 721 | ||
Deferred tax valuation allowance | 668 | |||
Income tax reconciliation due to interpretation of tax law and double tax treaty agreement | (22) | 148 | $ 53 | |
Deferred tax assets: | ||||
Unused tax losses and credits | 521 | 600 | 521 | |
Provisions and other accrued liabilities | 761 | 769 | 761 | |
Pension | 458 | 476 | 458 | |
Inventories | 263 | 253 | 263 | |
Property, plant and equipment and other non-current assets | 1,146 | 1,039 | 1,146 | |
Other | 93 | 114 | 93 | |
Total gross deferred tax asset | 3,242 | 3,251 | 3,242 | |
Valuation allowance | (1,303) | (1,535) | (1,303) | $ (539) |
Total gross deferred tax asset, net of valuation allowance | 1,939 | 1,716 | 1,939 | |
Deferred tax liabilities: | ||||
Property, plant and equipment | (210) | (202) | (210) | |
Intangibles and other assets | (724) | (770) | (724) | |
Pension and other liabilities | (217) | (153) | (217) | |
Inventories | (69) | (67) | (69) | |
Unremitted earnings | (557) | (445) | (557) | |
Total gross deferred tax liability | (1,777) | (1,637) | (1,777) | |
Net deferred tax asset (liability) | 162 | 79 | 162 | |
Included in: | ||||
"Deferred taxes"-non-current assets | 1,212 | 1,006 | 1,212 | |
"Deferred taxes"-non-current liabilities | (1,050) | (927) | (1,050) | |
Net deferred tax asset (liability) | 162 | 79 | 162 | |
Unused tax losses and credits, valuation allowance | 148 | 145 | 148 | |
Foreign subsidiary retained earnings permanently reinvested | $ 100 | 100 | $ 100 | |
Net operating loss carry-forwards, available to certain subsidiaries | 2,153 | |||
Tax credits, available to certain subsidiaries | 120 | |||
Expiration through 2038 | ||||
Included in: | ||||
Net operating loss carry-forwards, available to certain subsidiaries | 1,413 | |||
Tax credits, available to certain subsidiaries | 95 | |||
Central Europe | ||||
Reconciliation of taxes: | ||||
Changes in valuation allowance, net | $ 40 |
Income taxes - Unrecognized tax
Income taxes - Unrecognized tax benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Unrecognized tax benefits | |||
Unrecognized tax benefits, balance at beginning of period | $ 1,025 | $ 760 | $ 744 |
Net change due to acquisitions and divestments, Unrecognized tax benefits | 8 | ||
Increase relating to prior year tax positions, Unrecognized tax benefits | 35 | 115 | 88 |
Decrease relating to prior year tax positions, Unrecognized tax benefits | (99) | (76) | (21) |
Increase relating to current year tax positions, Unrecognized tax benefits | 126 | 223 | 167 |
Decrease due to settlements with tax authorities, Unrecognized tax benefits | (44) | (23) | (96) |
Decrease as a result of the applicable statute of limitations, Unrecognized tax benefits | (66) | (75) | (95) |
Exchange rate differences, Unrecognized tax benefits | (24) | 101 | (27) |
Unrecognized tax benefits, balance at end of period | 961 | 1,025 | 760 |
Penalties and interest related to unrecognized tax benefits: | |||
Beginning balance of penalties and interest related to unrecognized tax benefits | 242 | 172 | 145 |
Increase relating to prior year tax positions, penalties and interest | 37 | 103 | 74 |
Decrease relating to prior year tax positions, penalties and interest | 14 | (37) | (20) |
Increase relating to current year tax positions, penalties and interest | 5 | 13 | |
Decrease due to settlements with tax authorities, penalties and interest | (17) | (2) | (21) |
Decrease as a result of the applicable statute of limitations, penalties and interest | (31) | (12) | (13) |
Exchange rate differences, penalties and interest | (11) | 18 | (6) |
Ending balance of penalties and interest related to unrecognized tax benefits | 239 | 242 | 172 |
Total unrecognized tax benefits, including penalties and interest: | |||
Classification as unrecognized tax items at beginning | 1,267 | 932 | 889 |
Net change due to acquisitions and divestments | 8 | ||
Increase relating to prior year tax positions | 72 | 218 | 162 |
Decrease relating to prior year tax positions | (85) | (113) | (41) |
Increase relating to current year tax positions | 131 | 223 | 180 |
Decrease due to settlements with tax authorities | (61) | (25) | (117) |
Decrease as a result of the applicable statute of limitations | (97) | (87) | (108) |
Exchange rate differences | (35) | 119 | (33) |
Balance at end, which would, if recognized, affect the effective tax rate | 1,200 | 1,267 | 932 |
Increase relating to current year tax positions, Unrecognized tax benefits, interpretation of tax law and double tax treaty | 111 | $ 193 | $ 132 |
Expected resolution of uncertain tax positions, pending cases | $ 52 |
Employee benefits - Change in b
Employee benefits - Change in benefit obligation and fair value of plan assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Amounts recognized in accumulated other comprehensive loss | |||
Amounts recognized in AOCI attributable to Noncontrolling interests | $ (1) | $ 0 | $ 0 |
Defined pension benefits | |||
Defined Benefit Plan, Change in Fair Value of Plan Assets | |||
Fair value of plan assets at January 1 | 10,534 | ||
Fair value of plan assets at December 31 | 9,745 | 10,534 | |
Amounts recognized in accumulated other comprehensive loss | |||
Net actuarial (loss) gain | (2,628) | (2,321) | (2,237) |
Prior service credit | 74 | 99 | 108 |
Amount recognized in OCI and NCI | (2,554) | (2,222) | (2,129) |
Taxes associated with amount recognized in OCI and NCI | 535 | 503 | 487 |
Amount recognized in OCI and NCI, net of tax | (2,019) | (1,719) | (1,642) |
Defined pension benefits | Switzerland | |||
Defined Benefit Plan, Change in Benefit Obligation | |||
Benefit obligations at January 1 | 4,055 | 3,708 | |
Service cost | 92 | 106 | 133 |
Interest cost | 30 | 41 | 46 |
Contributions by plan participants | 69 | 70 | |
Benefit payments | (239) | (245) | |
Benefit obligations of businesses acquired (divested) | 10 | 56 | |
Actuarial (gain) loss | 6 | 127 | |
Plan amendments and other | (4) | 23 | |
Exchange rate differences | (26) | 169 | |
Benefit obligation at December 31 | 3,993 | 4,055 | 3,708 |
Defined Benefit Plan, Change in Fair Value of Plan Assets | |||
Fair value of plan assets at January 1 | 4,020 | 3,682 | |
Actual return on plan assets | (41) | 207 | |
Contributions by employer | 89 | 90 | |
Contributions by plan participants | 69 | 70 | |
Benefit payments | (239) | (245) | |
Plan assets of businesses acquired (divested) | 7 | 52 | |
Plan amendments and other | (3) | ||
Exchange rate differences | (26) | 167 | |
Fair value of plan assets at December 31 | 3,879 | 4,020 | 3,682 |
Funded status-underfunded | (114) | (35) | |
Defined pension benefits | International | |||
Defined Benefit Plan, Change in Benefit Obligation | |||
Benefit obligations at January 1 | 7,892 | 7,188 | |
Service cost | 122 | 122 | 116 |
Interest cost | 198 | 208 | 234 |
Contributions by plan participants | 16 | 12 | |
Benefit payments | (318) | (345) | |
Benefit obligations of businesses acquired (divested) | 60 | 8 | |
Actuarial (gain) loss | (92) | 101 | |
Plan amendments and other | (119) | (45) | |
Exchange rate differences | (330) | 643 | |
Benefit obligation at December 31 | 7,429 | 7,892 | 7,188 |
Defined Benefit Plan, Change in Fair Value of Plan Assets | |||
Fair value of plan assets at January 1 | 6,514 | 5,811 | |
Actual return on plan assets | (184) | 437 | |
Contributions by employer | 152 | 139 | |
Contributions by plan participants | 16 | 12 | |
Benefit payments | (318) | (345) | |
Plan assets of businesses acquired (divested) | 39 | ||
Plan amendments and other | (94) | (47) | |
Exchange rate differences | (259) | 507 | |
Fair value of plan assets at December 31 | 5,866 | 6,514 | 5,811 |
Funded status-underfunded | (1,563) | (1,378) | |
Other postretirement benefits | |||
Amounts recognized in accumulated other comprehensive loss | |||
Net actuarial (loss) gain | 30 | 20 | 10 |
Prior service credit | 23 | 27 | 31 |
Amount recognized in OCI and NCI | 53 | 47 | 41 |
Amount recognized in OCI and NCI, net of tax | 53 | 47 | 41 |
Other postretirement benefits | International | |||
Defined Benefit Plan, Change in Benefit Obligation | |||
Benefit obligations at January 1 | 132 | 147 | |
Service cost | 1 | 1 | 1 |
Interest cost | 4 | 5 | 6 |
Benefit payments | (11) | (11) | |
Benefit obligations of businesses acquired (divested) | 8 | ||
Actuarial (gain) loss | (12) | (11) | |
Plan amendments and other | (1) | ||
Exchange rate differences | (2) | 2 | |
Benefit obligation at December 31 | 120 | 132 | $ 147 |
Defined Benefit Plan, Change in Fair Value of Plan Assets | |||
Contributions by employer | 11 | 11 | |
Benefit payments | (11) | (11) | |
Funded status-underfunded | $ (120) | $ (132) |
Employee benefits - Balance she
Employee benefits - Balance sheet location and funded status (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Non-current assets | |||
Other employee-related benefits | $ 1 | $ 22 | |
Pension and other employee benefits | 84 | 144 | |
Amounts reported as Non-current assets held for sale | 1 | 1 | |
Current liabilities. | |||
Other employee-related benefits, Current | (10) | (17) | |
Pension and other employee benefits, Current | (40) | (47) | |
Amounts reported as Current liabilities held for sale | (4) | (7) | |
Non-current liabilities | |||
Other employee-related benefits, Noncurrent | (246) | (245) | |
Pension and other employee benefits, Noncurrent | (2,096) | (1,882) | |
Amounts reported as Non-current liabilities held for sale | (266) | (291) | |
Funded status, difference of benefit obligation and plan assets | |||
ABO | 11,249 | 11,683 | |
Switzerland | PBO exceeds fair value of plan assets | |||
Funded status, difference of benefit obligation and plan assets | |||
PBO | 3,482 | 3,557 | |
ABO | 3,482 | 3,557 | |
Fair value of plan assets | 3,344 | 3,461 | |
Switzerland | ABO exceeds fair value of plan assets | |||
Funded status, difference of benefit obligation and plan assets | |||
PBO | 3,482 | 3,557 | |
ABO | 3,482 | 3,557 | |
Fair value of plan assets | 3,344 | 3,461 | |
International | PBO exceeds fair value of plan assets | |||
Funded status, difference of benefit obligation and plan assets | |||
PBO | 6,897 | 7,477 | |
ABO | 6,743 | 7,235 | |
Fair value of plan assets | 5,275 | 6,038 | |
International | ABO exceeds fair value of plan assets | |||
Funded status, difference of benefit obligation and plan assets | |||
PBO | 6,872 | 5,864 | |
ABO | 6,724 | 5,725 | |
Fair value of plan assets | 5,254 | 4,453 | |
Defined pension benefits | |||
Defined Benefit Plan Amounts Recognized in Balance Sheet | |||
Overfunded plans | 83 | 122 | |
Underfunded plans-Current | (19) | (18) | |
Underfunded plans-Noncurrent | (1,741) | (1,517) | |
Non-current assets | |||
Overfunded plans | 83 | 122 | |
Current liabilities. | |||
Underfunded plans-Current | (19) | (18) | |
Non-current liabilities | |||
Underfunded plans-Noncurrent | (1,741) | (1,517) | |
Funded status, difference of benefit obligation and plan assets | |||
Fair value of plan assets | 9,745 | 10,534 | |
Defined pension benefits | Switzerland | |||
Defined Benefit Plan Amounts Recognized in Balance Sheet | |||
Overfunded plans | 24 | 60 | |
Underfunded plans-Noncurrent | (138) | (95) | |
Funded status-underfunded | (114) | (35) | |
Amounts reported as assets and liabilities held for sale | (93) | (133) | |
Non-current assets | |||
Overfunded plans | 24 | 60 | |
Non-current liabilities | |||
Underfunded plans-Noncurrent | (138) | (95) | |
Funded status, difference of benefit obligation and plan assets | |||
PBO | 3,993 | 4,055 | $ 3,708 |
Fair value of plan assets | 3,879 | 4,020 | 3,682 |
Defined pension benefits | International | |||
Defined Benefit Plan Amounts Recognized in Balance Sheet | |||
Overfunded plans | 59 | 62 | |
Underfunded plans-Current | (19) | (18) | |
Underfunded plans-Noncurrent | (1,603) | (1,422) | |
Funded status-underfunded | (1,563) | (1,378) | |
Amounts reported as assets and liabilities held for sale | (120) | (106) | |
Non-current assets | |||
Overfunded plans | 59 | 62 | |
Current liabilities. | |||
Underfunded plans-Current | (19) | (18) | |
Non-current liabilities | |||
Underfunded plans-Noncurrent | (1,603) | (1,422) | |
Funded status, difference of benefit obligation and plan assets | |||
PBO | 7,429 | 7,892 | 7,188 |
Fair value of plan assets | 5,866 | 6,514 | 5,811 |
Other postretirement benefits | |||
Defined Benefit Plan Amounts Recognized in Balance Sheet | |||
Underfunded plans-Current | (11) | (12) | |
Underfunded plans-Noncurrent | (109) | (120) | |
Current liabilities. | |||
Underfunded plans-Current | (11) | (12) | |
Non-current liabilities | |||
Underfunded plans-Noncurrent | (109) | (120) | |
Other postretirement benefits | International | |||
Defined Benefit Plan Amounts Recognized in Balance Sheet | |||
Underfunded plans-Current | (11) | (12) | |
Underfunded plans-Noncurrent | (109) | (120) | |
Funded status-underfunded | (120) | (132) | |
Current liabilities. | |||
Underfunded plans-Current | (11) | (12) | |
Non-current liabilities | |||
Underfunded plans-Noncurrent | (109) | (120) | |
Funded status, difference of benefit obligation and plan assets | |||
PBO | $ 120 | $ 132 | $ 147 |
Employee benefits - Net periodi
Employee benefits - Net periodic benefit costs and assumptions (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Net periodic benefit cost: | |||
Non-operational pension cost (credit) | $ (83) | $ (33) | $ 38 |
Net periodic benefit cost, discontinued operation | 45 | 55 | 67 |
Defined pension benefits | Switzerland | |||
Net periodic benefit cost: | |||
Service cost | 92 | 106 | 133 |
Operational pension cost | 92 | 106 | 133 |
Interest cost | 30 | 41 | 46 |
Expected return on plan assets | (117) | (112) | (130) |
Amortization of prior service cost (credit) | (15) | 10 | 36 |
Non-operational pension cost (credit) | (102) | (61) | (48) |
Net periodic benefit cost | $ (10) | $ 45 | $ 85 |
Weighted-average assumptions to determine benefit obligations | |||
Discount rate (as a percent) | 0.80% | 0.80% | |
Cash balance interest credit rate (as a percent) | 1.00% | 1.00% | |
Weighted-average assumptions to determine the Net periodic benefit cost | |||
Discount rate (as a percent) | 0.80% | 1.10% | 1.20% |
Expected long-term rate of return on plan assets (as a percent) | 3.00% | 3.00% | 3.50% |
Cash balance interest credit rate (as a percent) | 1 | 1 | 1.30 |
Defined pension benefits | International | |||
Net periodic benefit cost: | |||
Service cost | $ 122 | $ 122 | $ 116 |
Operational pension cost | 122 | 122 | 116 |
Interest cost | 198 | 208 | 234 |
Expected return on plan assets | (305) | (295) | (272) |
Amortization of prior service cost (credit) | 1 | 1 | 4 |
Amortization of net actuarial loss | 92 | 91 | 85 |
Curtailments, settlements and special termination benefits | 23 | 16 | 41 |
Non-operational pension cost (credit) | 9 | 21 | 92 |
Net periodic benefit cost | $ 131 | $ 143 | $ 208 |
Weighted-average assumptions to determine benefit obligations | |||
Discount rate (as a percent) | 2.80% | 2.60% | |
Rate of compensation increase (as a percent) | 2.40% | 2.50% | |
Rate of pension increase (as a percent) | 1.40% | 1.50% | |
Cash balance interest credit rate (as a percent) | 1.60% | 1.70% | |
Weighted-average assumptions to determine the Net periodic benefit cost | |||
Discount rate (as a percent) | 2.60% | 2.90% | 3.40% |
Expected long-term rate of return on plan assets (as a percent) | 4.90% | 5.00% | 4.80% |
Rate of compensation increase (as a percent) | 2.50% | 2.50% | 2.40% |
Cash balance interest credit rate (as a percent) | 1.70 | 1.70 | 1.60 |
Other postretirement benefits | |||
Non-pension postretirement benefit plans, participant contributions | |||
Health care cost trend rate assumed for next year (as a percent) | 6.70% | 7.10% | |
Rate to which the trend rate is assumed to decline (the ultimate trend rate), (as a percent) | 5.00% | 5.00% | |
Year that the rate reaches the ultimate trend rate | 2028 | 2028 | |
Other postretirement benefits | International | |||
Net periodic benefit cost: | |||
Service cost | $ 1 | $ 1 | $ 1 |
Operational pension cost | 1 | 1 | 1 |
Interest cost | 4 | 5 | 6 |
Amortization of prior service cost (credit) | (5) | (5) | (12) |
Amortization of net actuarial loss | (1) | (1) | |
Curtailments, settlements and special termination benefits | (1) | ||
Non-operational pension cost (credit) | (2) | (2) | (6) |
Net periodic benefit cost | $ (1) | $ (1) | $ (5) |
Weighted-average assumptions to determine benefit obligations | |||
Discount rate (as a percent) | 3.90% | 3.20% | |
Rate of compensation increase (as a percent) | 0.20% | ||
Weighted-average assumptions to determine the Net periodic benefit cost | |||
Discount rate (as a percent) | 3.20% | 3.30% | 3.60% |
Employee benefits - Target asse
Employee benefits - Target asset allocation (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Defined Benefit Plan Disclosure | ||
Expected long-term return on global asset allocation (as a percent) | 4.10% | |
Company's capital stock and debit instruments included in plan assets | $ 8 | $ 11 |
Switzerland | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 100.00% | |
International | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 100.00% | |
Equity securities | Switzerland | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 19.00% | |
Equity securities | International | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 22.00% | |
Fixed income | Switzerland | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 54.00% | |
Fixed income | International | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 61.00% | |
Real estate | Switzerland | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 22.00% | |
Real estate | International | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 7.00% | |
Other | Switzerland | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 5.00% | |
Other | International | ||
Defined Benefit Plan Disclosure | ||
Target asset allocation (as a percent) | 10.00% |
Employee benefits - Fair value
Employee benefits - Fair value of plan assets (Details) - Defined pension benefits - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | $ 9,745 | $ 10,534 |
Equity securities | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 209 | 274 |
Mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,472 | 1,772 |
Emerging market mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 363 | 507 |
Government and corporate securities | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,521 | 1,656 |
Government and corporate mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 3,496 | 3,622 |
Emerging market bonds - mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 729 | 708 |
Real estate | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,381 | 1,364 |
Insurance contracts | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 121 | 113 |
Cash and short-term investments | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 288 | 302 |
Private equity | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 139 | 128 |
Hedge funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 2 | 15 |
Commodity contracts | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 24 | 73 |
Level 1 | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 935 | 1,000 |
Level 1 | Equity securities | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 209 | 274 |
Level 1 | Government and corporate securities | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 524 | 564 |
Level 1 | Cash and short-term investments | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 202 | 162 |
Level 2 | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 7,249 | 7,990 |
Level 2 | Mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,433 | 1,726 |
Level 2 | Emerging market mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 363 | 507 |
Level 2 | Government and corporate securities | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 997 | 1,092 |
Level 2 | Government and corporate mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 3,496 | 3,622 |
Level 2 | Emerging market bonds - mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 729 | 708 |
Level 2 | Real estate | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 9 | |
Level 2 | Insurance contracts | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 121 | 113 |
Level 2 | Cash and short-term investments | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 86 | 140 |
Level 2 | Commodity contracts | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 24 | 73 |
Not subject to leveling | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,561 | 1,544 |
Not subject to leveling | Mutual funds/commingled funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 39 | 46 |
Not subject to leveling | Real estate | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 1,381 | 1,355 |
Not subject to leveling | Private equity | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | 139 | 128 |
Not subject to leveling | Hedge funds | ||
Defined Benefit Plan, Fair Value of Pension Plan Assets | ||
Assets | $ 2 | $ 15 |
Employee benefits - Contributio
Employee benefits - Contributions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Contributions | |||
Contributions by employer, noncash | $ 6 | ||
Expense of defined contribution plans | 245 | $ 233 | $ 210 |
Defined contribution expense relating to discontinued operation | 59 | 61 | 58 |
Defined pension benefits | |||
Contributions | |||
Contributions by employer, noncash | 31 | 31 | $ 52 |
Estimated contribution by employer, next fiscal year | 202 | ||
Estimated discretionary contributions by employer, next fiscal year | 8 | ||
Defined pension benefits | Switzerland | |||
Contributions | |||
Total contributions to defined benefit pension and other postretirement benefit plans | 89 | 90 | |
Expected future cash flows in respect of pension and other postretirement benefit plans | |||
2019 | 357 | ||
2020 | 271 | ||
2021 | 233 | ||
2022 | 228 | ||
2023 | 213 | ||
Years 2024-2028 | 941 | ||
Defined pension benefits | International | |||
Contributions | |||
Total contributions to defined benefit pension and other postretirement benefit plans | 152 | 139 | |
Of which, discretionary contributions to defined benefit pension plans | 25 | 15 | |
Expected future cash flows in respect of pension and other postretirement benefit plans | |||
2019 | 338 | ||
2020 | 348 | ||
2021 | 345 | ||
2022 | 350 | ||
2023 | 350 | ||
Years 2024-2028 | 1,840 | ||
Other postretirement benefits | |||
Contributions | |||
Estimated contribution by employer, next fiscal year | 11 | ||
Other postretirement benefits | International | |||
Contributions | |||
Total contributions to defined benefit pension and other postretirement benefit plans | 11 | $ 11 | |
Expected future cash flows in respect of pension and other postretirement benefit plans | |||
2019 | 11 | ||
2020 | 11 | ||
2021 | 11 | ||
2022 | 10 | ||
2023 | 10 | ||
Years 2024-2028 | $ 42 |
Share-based payment arrangeme_3
Share-based payment arrangements - General and MIP (Details) shares in Millions, instrument in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($)SFr / sharesinstrumentplanshares | Dec. 31, 2017USD ($)SFr / sharesinstrumentshares | Dec. 31, 2016USD ($)SFr / shares | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Number of share-based payment plans | plan | 3 | ||
Compensation cost for equity-settled stock based arrangements | $ | $ 50 | $ 49 | $ 45 |
Shares that could be issued out of contingent capital for share-based payment arrangements (in shares) | 94 | ||
Treasury stock that could be used to settle share-based payment arrangements (in shares) | 36 | ||
Options | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Share-based compensation, vesting period | 3 years | ||
Expiration period after date of grant | 6 years | ||
Time period of interest rate used as the basis for the risk-free rate | 6 years | ||
Assumptions used for calculations of fair value, warrants and options | |||
Expected volatility (as a percent) | 17.00% | 19.00% | 19.00% |
Dividend yield (as a percent) | 3.10% | 4.70% | 4.90% |
Expected term | 6 years | 6 years | 6 years |
Risk-free interest rate (as a percent) | (0.10%) | (0.10%) | (0.50%) |
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at beginning of period | instrument | 390.6 | ||
Number of options Granted | instrument | 71.3 | ||
Number of options Exercised | instrument | (10.3) | ||
Number of options Forfeited | instrument | (6.7) | ||
Number of options outstanding at end of period | instrument | 444.9 | 390.6 | |
Number of options Vested and expected to vest at end of period | instrument | 439.4 | ||
Number of options Exercisable at end of period | instrument | 250.5 | ||
Number of shares outstanding at beginning of period (in shares) | 78.1 | ||
Share-equivalent of instruments granted (in shares) | 14.3 | ||
Share-equivalent of instruments exercised (in shares) | (2.1) | ||
Share-equivalent of instruments forfeited (in shares) | (1.3) | ||
Number of shares outstanding at end of period (in shares) | 89 | 78.1 | |
Share-equivalent of instruments of shares Vested and expected to vest at end of period (in shares) | 87.9 | ||
Share-equivalent of instruments exercisable at end of period (in shares) | 50.1 | ||
Weighted-average exercise price, Outstanding at beginning of period (in Swiss francs per share) | SFr / shares | 21.06 | ||
Weighted-average exercise price, Granted (in Swiss francs per share) | SFr / shares | 23.50 | ||
Weighted-average exercise price, Exercised (in Swiss francs per share) | SFr / shares | 16.66 | ||
Weighted-average exercise price, Forfeited (in Swiss francs per share) | SFr / shares | 21.86 | ||
Weighted-average exercise price, Outstanding at end of period (in Swiss francs per share) | SFr / shares | 21.54 | 21.06 | |
Weighted-average exercise price, Vested and expected to vest (in Swiss francs per share) | SFr / shares | 21.52 | ||
Weighted-average exercise price, Exercisable (in Swiss francs per share) | SFr / shares | 20.76 | ||
Weighted-average remaining contractual term, Outstanding | 3 years | ||
Weighted-average remaining contractual term, Vested and expected to vest | 3 years | ||
Weighted-average remaining contractual term, Exercisable | 1 year 8 months 12 days | ||
Conversion ratio | 5 | ||
Cash received upon exercise of options and warrants | $ | $ 35 | ||
Unrecognized compensation cost, non-vested warrants and option | $ | $ 50 | ||
Weighted average period over which unrecognized share-based compensation costs are expected to be reported | 2 years 1 month 6 days | ||
Weighted-average grant-date fair value of warrants and options (per instrument) | SFr / shares | 0.46 | 0.47 | 0.47 |
Aggregate intrinsic value of instruments exercised | $ | $ 13 | $ 38 | $ 27 |
Exercise price of 21.50 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 81 | ||
Number of shares outstanding at end of period (in shares) | 16.2 | ||
Weighted-average remaining contractual term, Outstanding | 4 months 24 days | ||
Exercise price (in Swiss francs) | SFr / shares | 21.50 | ||
Exercise price of 21.00 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 72.3 | ||
Number of shares outstanding at end of period (in shares) | 14.5 | ||
Weighted-average remaining contractual term, Outstanding | 1 year 8 months 12 days | ||
Exercise price (in Swiss francs) | SFr / shares | 21 | ||
Exercise price of 19.50 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 78.1 | ||
Number of shares outstanding at end of period (in shares) | 15.6 | ||
Weighted-average remaining contractual term, Outstanding | 2 years 7 months 6 days | ||
Exercise price (in Swiss francs) | SFr / shares | 19.50 | ||
Exercise price of 21.50 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 74.2 | ||
Number of shares outstanding at end of period (in shares) | 14.8 | ||
Weighted-average remaining contractual term, Outstanding | 3 years 8 months 12 days | ||
Exercise price (in Swiss francs) | SFr / shares | 21.50 | ||
Exercise price of 22.50 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 68.7 | ||
Number of shares outstanding at end of period (in shares) | 13.7 | ||
Weighted-average remaining contractual term, Outstanding | 4 years 7 months 6 days | ||
Exercise price (in Swiss francs) | SFr / shares | 22.50 | ||
Exercise Price of 23.5 | Options | |||
Summary of the activity related to share-based compensation arrangement | |||
Number of options outstanding at end of period | instrument | 70.7 | ||
Number of shares outstanding at end of period (in shares) | 14.1 | ||
Weighted-average remaining contractual term, Outstanding | 5 years 8 months 12 days | ||
Exercise price (in Swiss francs) | SFr / shares | 23.50 |
Share-based payment arrangeme_4
Share-based payment arrangements - WARs (Details) - WARs - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Vesting period | 3 years | ||
Income (expense) related to the cash-settled call options | $ 14 | $ (19) | |
Income (expense) related to the cash-settled call option | (18) | 15 | |
Aggregate fair value of outstanding WARs | $ 6 | $ 42 | |
Summary of the activity related to share-based compensation arrangements. | |||
Beginning of period (in number of shares) | 37.1 | ||
Granted (in number of WARs) | 10.9 | ||
Exercised (in number of WARs) | (6.3) | ||
Forfeited (in number of WARs) | (0.5) | ||
End of period (in number of shares) | 41.2 | 37.1 | |
Exercisable (in number of WARs) | 14.4 | ||
Share-based liabilities paid upon exercise of WARs | $ 6 | $ 10 | $ 7 |
Share-based payment arrangeme_5
Share-based payment arrangements - ESAP (Details) - ESAP $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | |||||
Dec. 31, 2018$ / sharesshares | Dec. 31, 2018SFr / shares$ / sharesshares | Dec. 31, 2017SFr / shares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016$ / shares | Dec. 31, 2016SFr / shares | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Length of each savings period under the employee share acquisition plan (ESAP) | 12 months | 12 months | ||||
Number of ABB Ltd shares representing each ADS in the United States | $ / shares | 1 | 1 | ||||
Contractual term | 1 year | 1 year | ||||
Time period of interest rate used as the basis for the risk-free rate | 1 year | 1 year | ||||
Expected volatility (as a percent) | 19.00% | 19.00% | 17.00% | 20.00% | 20.00% | |
Dividend yield (as a percent) | 4.10% | 4.10% | 3.10% | 3.70% | 3.70% | |
Expected term | 1 year | 1 year | 1 year | 1 year | 1 year | |
Risk-free interest rate (as a percent) | (0.60%) | (0.60%) | (0.60%) | (0.70%) | (0.70%) | |
Summary of the activity related to share-based compensation arrangement | ||||||
Number of shares outstanding at beginning | shares | 2.9 | 2.9 | ||||
Number of shares Granted | shares | 3.6 | 3.6 | ||||
Number of shares Forfeited | shares | (0.2) | (0.2) | ||||
Number of shares not exercised (savings returned plus interest) | shares | (2.7) | (2.7) | ||||
Number of shares outstanding at end | shares | 3.6 | 3.6 | 2.9 | |||
Number of shares vested and expected to vest | shares | 3.4 | 3.4 | ||||
Weighted-average exercise price at beginning of period (in Swiss francs per share) | SFr / shares | 26.26 | |||||
Exercise prices per ADS (in Swiss francs or USD per share) | (per share) | $ 20.37 | SFr 20.38 | SFr 26.26 | $ 26.24 | $ 20.52 | SFr 20.12 |
Weighted average exercise price, Forfeited (in Swiss francs per share) | SFr / shares | 26.01 | |||||
Weighted-average exercise price, Not exercised (savings returned plus interest) (in Swiss francs per share) | SFr / shares | 26.26 | |||||
Weighted-average exercise price at end of period (in Swiss francs per share) | SFr / shares | 20.38 | 26.26 | ||||
Weighted-average exercise price of shares Vested and expected to vest at end of period (in Swiss francs per share) | SFr / shares | 20.38 | |||||
Weighted-average remaining contractual term of ESAP | 9 months 18 days | 9 months 18 days | ||||
Weighted-average remaining contractual term of ESAP, Vested and expected to vest | 9 months 18 days | 9 months 18 days | ||||
Aggregate intrinsic value of ESAP | $ | $ 17 | |||||
Weighted-average grant-date fair value (per option) | SFr / shares | 1.10 | 1.37 | 1.24 |
Share-based payment arrangeme_6
Share-based payment arrangements - LTIP (Details) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2018SFr / shares | Dec. 31, 2018USD ($)shares | Dec. 31, 2017SFr / shares | Dec. 31, 2017USD ($)componentshares | Dec. 31, 2016SFr / shares | Dec. 31, 2016USD ($)component | |
LTIP | ||||||
Summary of the activity related to share-based compensation arrangements. | ||||||
Weighted-average grant-date fair value of shares Granted (in Swiss francs per share) | SFr 21.97 | |||||
LTIP | Performance shares | ||||||
Summary of the activity related to share-based compensation arrangements. | ||||||
Beginning of period (in number of shares) | shares | 1.4 | |||||
Granted (in number of shares) | shares | 0.8 | |||||
Vested (in number of shares) | shares | (0.7) | |||||
Forfeited (in number of shares) | shares | (0.2) | |||||
End of period (in number of shares) | shares | 1.3 | 1.4 | ||||
Weighted-average grant-date fair value of shares Nonvested at beginning of period (in Swiss francs per share) | 21.47 | |||||
Weighted-average grant-date fair value of shares Granted (in Swiss francs per share) | 21.97 | SFr 22.13 | SFr 20.77 | |||
Weighted-average grant-date fair value of shares Vested (in Swiss francs per share) | 21.78 | |||||
Weighted-average grant-date fair value of shares Forfeited (in Swiss francs per share) | 21.50 | |||||
Weighted-average grant-date fair value of shares Nonvested at end of period (in Swiss francs per share) | SFr 21.61 | SFr 21.47 | ||||
Aggregate fair value of shares, at the dates of grant | $ | $ 19 | $ 22 | $ 22 | |||
Grant-date fair value of shares vested | $ | $ 17 | $ 22 | $ 15 | |||
LTIP 2018 Launches | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Vesting percentage if criteria threshold is equaled or exceeded | 200.00% | |||||
LTIP 2018 Launches | Performance shares to be settled in equity | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Percentage of vested award to be received if criteria threshold is met | 65.00% | |||||
LTIP 2018 Launches | Performance shares to be settled in either cash or equity | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Percentage of vested award to be received if criteria threshold is met | 35.00% | |||||
LTIP 2017 and 2016 Launches | Vesting based on earnings per share performance | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Period of weighted cumulative earnings per share performance | 3 years | 3 years | 3 years | |||
Percentage of cumulative earnings per share performance of the first year's result | 33.00% | 33.00% | 33.00% | |||
Percentage of cumulative earnings per share performance of the second year's result | 67.00% | 67.00% | 67.00% | |||
Percentage of cumulative earnings per share performance of the third year's result | 100.00% | 100.00% | 100.00% | |||
Limit on the actual number of shares received after the evaluation period, as a percentage of the conditional grant | 200.00% | 200.00% | 200.00% | |||
LTIP 2017 and 2016 Launches | Performance shares to be settled in equity | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Percentage of vested award to be received if criteria threshold is met | 70.00% | |||||
LTIP 2017 and 2016 Launches | Performance shares to be settled in either cash or equity | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Percentage of vested award to be received if criteria threshold is met | 30.00% | |||||
LTIP 2017 Launch | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Number of components under long-term incentive plan (LTIP) | component | 2 | |||||
LTIP 2017 Launch | Vesting based on achievement of threshold net income | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Vesting percentage if criteria threshold is equaled or exceeded | 150.00% | 150.00% | ||||
LTIP 2016 Launch | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Number of components under long-term incentive plan (LTIP) | component | 2 |
Stockholders' equity - General
Stockholders' equity - General and dividends (Details) $ in Millions | 1 Months Ended | 12 Months Ended | |||||||||
Apr. 30, 2018USD ($) | Mar. 31, 2018SFr / shares | Apr. 30, 2017SFr / shares | Apr. 30, 2017USD ($) | Jul. 31, 2016USD ($) | Apr. 30, 2016SFr / shares | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2018SFr / sharesshares | Dec. 31, 2017SFr / sharesshares | |
Equity | |||||||||||
Company's authorized shares | shares | 2,672,000,000 | 2,672,000,000 | |||||||||
Company's registered and issued shares | shares | 2,168,148,264 | 2,168,148,264 | |||||||||
Distribution declared to ABB Ltd's shareholders (in Swiss francs per share) | SFr / shares | SFr 0.78 | SFr 0.76 | SFr 0.74 | ||||||||
Common stock, par value (in dollars per share) | SFr / shares | 0.86 | SFr 0.12 | SFr 0.12 | ||||||||
Nominal value of ABB Ltd share after nominal value reduction (in Swiss francs per share) | SFr / shares | SFr 0.12 | ||||||||||
Nominal value reduction | $ 1,626 | ||||||||||
Distribution to ABB Ltd's shareholders | $ 1,736 | $ 1,622 | $ 1,736 | $ 1,622 | |||||||
Capital stock | |||||||||||
Equity | |||||||||||
Nominal value reduction | $ 1,239 | ||||||||||
Additional paid-in capital | |||||||||||
Equity | |||||||||||
Nominal value reduction | (15) | (15) | |||||||||
Retained earnings | |||||||||||
Equity | |||||||||||
Nominal value reduction | $ 402 | $ 402 | |||||||||
Distribution to ABB Ltd's shareholders | $ 1,736 | $ 1,622 |
Stockholders' equity - Treasury
Stockholders' equity - Treasury stock activity (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Jul. 31, 2017 | Apr. 30, 2017 | Jul. 31, 2016 | Apr. 30, 2016 | Mar. 31, 2018 | Jun. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Treasury stock activity | ||||||||||
Value of shares repurchased | $ 249 | $ 251 | $ 1,280 | |||||||
Open market stock repurchases | ||||||||||
Treasury stock activity | ||||||||||
Shares repurchased | 10,000,000 | 10,000,000 | ||||||||
Value of shares repurchased | $ 249 | $ 251 | ||||||||
Share repurchase program ending no later than September 2016 | ||||||||||
Treasury stock activity | ||||||||||
Value of shares repurchased | $ 3,000 | $ 1,280 | ||||||||
Treasury shares held for cancellation under the buyback program | 146,600,000 | 60,400,000 | ||||||||
Treasury shares repurchase to supports its employee share programs | 24,700,000 | 4,900,000 | ||||||||
Value of shares repurchased to support employee share programs | $ 500 | |||||||||
Cancellation of treasury shares (in shares) | 46,595,000 | 100,000,000 | ||||||||
Share repurchase program ending no later than September 2016 | Maximum | ||||||||||
Treasury stock activity | ||||||||||
Authorized amount of share buyback program | $ 4,000 | |||||||||
Capital stock and additional paid-in capital | Share repurchase program ending no later than September 2016 | ||||||||||
Treasury stock activity | ||||||||||
Value of shares cancelled under the buyback program | $ 953 | $ 2,047 |
Stockholders' equity - Obligati
Stockholders' equity - Obligations to deliver (Details) SFr / shares in Units, shares in Millions, SFr in Millions, $ in Millions | 1 Months Ended | 12 Months Ended | |||
Feb. 28, 2018SFr / shares | Dec. 31, 2018CHF (SFr)SFr / sharesshares | Dec. 31, 2017shares | Dec. 31, 2016shares | Dec. 31, 2018USD ($)shares | |
Details of Stockholder's equity | |||||
Call options held by bank (in shares) | 13.3 | 13.3 | |||
Call options held by the bank, weighted-average strike price (in Swiss francs per share) | SFr / shares | SFr 21.57 | ||||
Call options held by bank, exercisable (in shares) | 5.1 | 5.1 | |||
Call options held by the bank, exercisable, weighted-average strike price (in Swiss francs per share) | SFr / shares | SFr 21.12 | ||||
Proposed distribution (in Swiss francs per share) | SFr / shares | SFr 0.80 | ||||
Minimum | |||||
Details of Stockholder's equity | |||||
Call options held by the bank, strike price (in Swiss francs per share) | SFr / shares | 19.50 | ||||
Call options held by the bank, exercisable, strike price (in Swiss francs per share) | SFr / shares | 19.50 | ||||
Maximum | |||||
Details of Stockholder's equity | |||||
Call options held by the bank, strike price (in Swiss francs per share) | SFr / shares | 23.50 | ||||
Call options held by the bank, exercisable, strike price (in Swiss francs per share) | SFr / shares | SFr 22.50 | ||||
ABB Ltd (unconsolidated) | |||||
Details of Stockholder's equity | |||||
Total statutory stockholders' equity | SFr 8,511 | $ 8,652 | |||
Share capital of ABB Ltd, Zurich | 260 | 264 | |||
Reserves of ABB Ltd, Zurich | 9,045 | 9,195 | |||
Restricted legal reserves for own shares of ABB Ltd, Zurich | 794 | 807 | |||
Share capital restricted and not available for distribution | SFr 52 | $ 53 | |||
Percentage of share capital restricted | 20.00% | 20.00% | |||
Options under 2013 launch of the MIP | |||||
Details of Stockholder's equity | |||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 21.50 | ||||
Options under 2013 launch of the MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 16.2 | 16.2 | |||
Options under 2014 launch of MIP | |||||
Details of Stockholder's equity | |||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 21 | ||||
Options under 2014 launch of MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 14.5 | 14.5 | |||
Options under 2015 launch of MIP | |||||
Details of Stockholder's equity | |||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 19.50 | ||||
Options under 2015 launch of MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 15.6 | 15.6 | |||
Options under 2016 launch of MIP | |||||
Details of Stockholder's equity | |||||
Shares issued relating to call options (in shares) | 8.9 | ||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 21.50 | ||||
Options under 2016 launch of MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 14.8 | 14.8 | |||
Options under 2017 launch of MIP | |||||
Details of Stockholder's equity | |||||
Shares issued relating to call options (in shares) | 6.3 | ||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 22.50 | ||||
Options under 2017 launch of MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 13.7 | 13.7 | |||
Options under 2018 launch of MIP | |||||
Details of Stockholder's equity | |||||
Shares issued relating to call options (in shares) | 2.4 | ||||
Strike price of options granted (in Swiss francs per share) | SFr / shares | SFr 23.50 | ||||
Options under 2018 launch of MIP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 14.1 | 14.1 | |||
ESAP | |||||
Details of Stockholder's equity | |||||
Shares issued from treasury stock (in shares) | 2.8 | 2.6 | |||
ESAP | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options granted (in shares) | 3.6 | 3.6 | |||
Other share-based payment arrangements | Maximum | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of options and shares granted (in shares) | 1 | 1 | |||
LTIP 2018, 2017 and 2016 Launches | |||||
Details of Stockholder's equity | |||||
Outstanding obligation of shares granted (in shares) | 4.5 | 4.5 |
Earnings per share (Details)
Earnings per share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings per share | |||
Shares excluded from the calculation of diluted earnings (loss) per share | 88 | 31 | 87 |
Amounts attributable to ABB shareholders: | |||
Income from continuing operations, net of tax | $ 1,514 | $ 1,441 | $ 1,172 |
Income from discontinued operations, net of tax | 659 | 772 | 727 |
Net income attributable to ABB | $ 2,173 | $ 2,213 | $ 1,899 |
Weighted-average number of shares outstanding (in shares) | 2,132 | 2,138 | 2,151 |
Income from continuing operations, net of tax (in dollars per share) | $ 0.71 | $ 0.67 | $ 0.54 |
Income from discontinued operations, net of tax (in dollars per share) | 0.31 | 0.36 | 0.34 |
Net income (in dollars per share) | $ 1.02 | $ 1.04 | $ 0.88 |
Amounts attributable to ABB shareholders: | |||
Income from continuing operations, net of tax | $ 1,514 | $ 1,441 | $ 1,172 |
Income from discontinued operations, net of tax | 659 | 772 | 727 |
Net income attributable to ABB | $ 2,173 | $ 2,213 | $ 1,899 |
Weighted-average number of shares outstanding (in shares) | 2,132 | 2,138 | 2,151 |
Effect of dilutive securities: | |||
Call options and shares | 7 | 10 | 3 |
Adjusted weighted-average number of shares outstanding (in shares) | 2,139 | 2,148 | 2,154 |
Income from discontinued operations, net of tax (in dollars per share) | $ 0.71 | $ 0.67 | $ 0.54 |
Income from discontinued operations, net of tax (in dollars per share) | 0.31 | 0.36 | 0.34 |
Net income (in dollars per share) | $ 1.02 | $ 1.03 | $ 0.88 |
Other comprehensive income - Am
Other comprehensive income - Amounts recorded within "Total other comprehensive income (loss)" (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Foreign currency translation adjustments, before tax: | |||
Foreign currency translation adjustments, before tax | $ (641) | $ 911 | $ (469) |
Gain on liquidation of foreign subsidiary, before tax | 31 | ||
Changes attributable to divestments, before tax | 12 | 12 | 7 |
Foreign currency translation adjustments, before tax | (660) | 923 | (462) |
Available-for-sale securities, before tax | |||
Net unrealized gains (losses) arising during the year, before tax | (5) | 1 | |
Reclassification adjustments for net (gains) losses included in net income, before tax | 1 | ||
Net change during the year | (4) | 1 | |
Pension and other postretirement plans: | |||
Prior service (costs) credits arising during the year, before tax | (11) | (20) | (46) |
Net actuarial gains (losses) arising during the year, before tax | (411) | (184) | 38 |
Amortization of prior service cost (credit) included in net income, before tax | (19) | 6 | 28 |
Amortization of net actuarial loss included in net income, before tax | 91 | 90 | 85 |
Net losses from pension settlements included in net income, before tax | 23 | 13 | 37 |
Changes attributable to divestments, before tax | 8 | ||
Net change during the year | (327) | (87) | 142 |
Cash flow hedge derivatives, before tax | |||
Net gains (losses) arising during the year, before tax | (51) | 45 | 21 |
Reclassification adjustments for net (gains) losses included in net income, before tax | 20 | (26) | (7) |
Changes attributable to divestments, before tax | (4) | ||
Net change during the year | (31) | 15 | 14 |
Total other comprehensive income (loss), before tax | (1,022) | 852 | (306) |
Foreign currency translation adjustments, tax effect | |||
Foreign currency translation adjustments, tax effect | 14 | 1 | (12) |
Foreign currency translation adjustments, tax effect | 14 | 1 | (12) |
Available-for-sale securities, tax effect | |||
Net unrealized gains (losses) arising during the year, tax effect | 1 | ||
Unrealized gains (losses) on available-for-sale securities, tax effect | 1 | ||
Pension and other postretirement plans, tax effect | |||
Prior service (costs) credits arising during the year, tax effect | 4 | 4 | 6 |
Net actuarial gains (losses) arising during the year, tax effect | 59 | 45 | 6 |
Amortization of prior service cost included in net income, tax effect | (5) | (2) | |
Amortization of net actuarial loss included in net income, tax effect | (22) | (27) | (23) |
Net losses from pension settlements included in net income, tax effect | (4) | (4) | (11) |
Changes attributable to divestments, tax effect | (2) | ||
Net change during the year | 32 | 16 | (24) |
Cash flow hedge derivatives, tax effect | |||
Net gains (losses) arising during the year, tax effect | 2 | (7) | (5) |
Reclassification adjustments for net (gains) losses included in net income, tax effect | 1 | 4 | 1 |
Changes attributable to divestments, tax effect | 1 | ||
Unrealized gains (losses) of cash flow hedge derivatives, tax effect | 3 | (2) | (4) |
Total other comprehensive income (loss), tax effect | 50 | 15 | (40) |
Foreign currency translation adjustments, net of tax | |||
Foreign currency translation adjustments | (627) | 912 | (481) |
Gain on liquidation of foreign subsidiary | 31 | ||
Changes attributable to divestments, net of tax | 12 | 12 | 7 |
Foreign currency translation adjustments | (646) | 924 | (474) |
Available-for-sale securities, net of tax | |||
Net unrealized gains (losses) arising during the year, net of tax | (4) | 1 | |
Reclassification adjustments for net (gains) losses included in net income, net of tax | 1 | ||
Unrealized gains (losses) on available-for-sale securities | (3) | 1 | |
Pension and other postretirement plans, net of tax | |||
Prior service (costs) credits arising during the year, net of tax | (7) | (16) | (40) |
Net actuarial gains (losses) arising during the year, net of tax | (352) | (139) | 44 |
Amortization of prior service cost included in net income, net of tax | (24) | 6 | 26 |
Amortization of net actuarial loss included in net income, net of tax | 69 | 63 | 62 |
Net losses from pension settlements included in net income | 19 | 9 | 26 |
Changes attributable to divestments, net of tax | 6 | ||
Net change, net of tax | (295) | (71) | 118 |
Cash flow hedge derivatives, net of tax | |||
Net gains (losses) arising during the year | (49) | 38 | 16 |
Reclassification adjustments for net (gains) losses included in net income, net of tax | 21 | (22) | (6) |
Changes attributable to divestments, net of tax | (3) | ||
Unrealized gains (losses) of cash flow hedge derivatives | (28) | 13 | 10 |
Total other comprehensive income (loss) income | $ (972) | $ 867 | $ (346) |
Other comprehensive income - Ch
Other comprehensive income - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Changes in component of accumulated other comprehensive income (loss), net of tax | |||
Balance at the beginning of the period | $ (4,345) | $ (5,187) | $ (4,858) |
Cumulative effect of changes in accounting principles | (9) | ||
Other comprehensive (loss) income before reclassifications | (1,039) | 796 | (461) |
Amounts reclassified from OCI | 55 | 56 | 108 |
Changes attributable to divestments, before tax | 12 | 15 | 7 |
Total other comprehensive income (loss) income | (972) | 867 | (346) |
Less: Amounts attributable to noncontrolling interests | (15) | 25 | (17) |
Balance at the end of the period | (5,311) | (4,345) | (5,187) |
Foreign currency translation adjustments | |||
Changes in component of accumulated other comprehensive income (loss), net of tax | |||
Balance at the beginning of the period | (2,693) | (3,592) | (3,135) |
Other comprehensive (loss) income before reclassifications | (627) | 912 | (481) |
Amounts reclassified from OCI | (31) | ||
Changes attributable to divestments, before tax | 12 | 12 | 7 |
Total other comprehensive income (loss) income | (646) | 924 | (474) |
Less: Amounts attributable to noncontrolling interests | (15) | 25 | (17) |
Balance at the end of the period | (3,324) | (2,693) | (3,592) |
Unrealized gains (losses) on available-for-sale securities | |||
Changes in component of accumulated other comprehensive income (loss), net of tax | |||
Balance at the beginning of the period | 8 | 7 | 7 |
Cumulative effect of changes in accounting principles | (9) | ||
Other comprehensive (loss) income before reclassifications | (4) | 1 | |
Amounts reclassified from OCI | 1 | ||
Total other comprehensive income (loss) income | (3) | 1 | |
Balance at the end of the period | (4) | 8 | 7 |
Pension and other post-retirement plan adjustments | |||
Changes in component of accumulated other comprehensive income (loss), net of tax | |||
Balance at the beginning of the period | (1,672) | (1,601) | (1,719) |
Other comprehensive (loss) income before reclassifications | (359) | (155) | 4 |
Amounts reclassified from OCI | 64 | 78 | 114 |
Changes attributable to divestments, before tax | 6 | ||
Total other comprehensive income (loss) income | (295) | (71) | 118 |
Balance at the end of the period | (1,967) | (1,672) | (1,601) |
Unrealized gains (losses) of cash flow hedge derivatives | |||
Changes in component of accumulated other comprehensive income (loss), net of tax | |||
Balance at the beginning of the period | 12 | (1) | (11) |
Other comprehensive (loss) income before reclassifications | (49) | 38 | 16 |
Amounts reclassified from OCI | 21 | (22) | (6) |
Changes attributable to divestments, before tax | (3) | ||
Total other comprehensive income (loss) income | (28) | 13 | 10 |
Balance at the end of the period | $ (16) | $ 12 | $ (1) |
Other comprehensive income - Re
Other comprehensive income - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Amounts reclassified out of OCI | |||
Gain on liquidation of foreign subsidiary | $ 31 | ||
Income from continuing operations before taxes | 2,119 | $ 2,102 | $ 1,761 |
Tax | (544) | (583) | (526) |
Net income | 2,298 | 2,365 | 2,034 |
Amounts reclassified out of "Accumulated other comprehensive loss" | |||
Amounts reclassified out of OCI | |||
Amounts reclassified from OCI to income from discontinued operations | 12 | 9 | 0 |
Foreign currency translation adjustments | Amounts reclassified out of "Accumulated other comprehensive loss" | |||
Amounts reclassified out of OCI | |||
Gain on liquidation of foreign subsidiary | (31) | ||
Pension and other post-retirement plan adjustments | Amounts reclassified out of "Accumulated other comprehensive loss" | |||
Amounts reclassified out of OCI | |||
Non-operational pension (cost) credit | 23 | 13 | 37 |
Income from continuing operations before taxes | 95 | 109 | 150 |
Tax | (31) | (31) | (36) |
Net income | 64 | 78 | 114 |
Amortization of prior service cost | Amounts reclassified out of "Accumulated other comprehensive loss" | |||
Amounts reclassified out of OCI | |||
Non-operational pension (cost) credit | (19) | 6 | 28 |
Amortization of net actuarial losses | Amounts reclassified out of "Accumulated other comprehensive loss" | |||
Amounts reclassified out of OCI | |||
Non-operational pension (cost) credit | $ 91 | $ 90 | $ 85 |
Restructuring and related exp_3
Restructuring and related expenses (Details) $ in Millions | 1 Months Ended | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
White Collar Productivity program | |||||
Liabilities associated with reorganization. | |||||
Liability at beginning of period | $ 102 | $ 264 | $ 276 | ||
Expenses | 31 | 185 | $ 303 | ||
Cash payments | (55) | (96) | (93) | (27) | |
Changes in estimates | (118) | (86) | |||
Exchange rate differences | 21 | (18) | |||
Change in estimates and exchange rate differences | (13) | ||||
Liability at end of period | $ 34 | 34 | 102 | 264 | 276 |
Costs incurred in | (86) | 107 | |||
Cumulative costs incurred | 325 | ||||
White Collar Productivity program | Total cost of sales | |||||
Liabilities associated with reorganization. | |||||
Changes in estimates | (53) | (38) | |||
Costs incurred in | (47) | 57 | |||
White Collar Productivity program | Selling, general and administrative expenses | |||||
Liabilities associated with reorganization. | |||||
Changes in estimates | (55) | (35) | |||
Costs incurred in | (35) | 35 | |||
White Collar Productivity program | Non-order related research and development expenses | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | (5) | 1 | |||
White Collar Productivity program | Other income (expense), net. | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 1 | 14 | |||
White Collar Productivity program | Employee severance costs | |||||
Liabilities associated with reorganization. | |||||
Liability at beginning of period | 101 | 262 | 273 | ||
Expenses | 28 | 182 | 300 | ||
Cash payments | (55) | (92) | (91) | (27) | |
Changes in estimates | (118) | (85) | |||
Exchange rate differences | 21 | (17) | |||
Change in estimates and exchange rate differences | (13) | ||||
Liability at end of period | 33 | 33 | 101 | 262 | 273 |
Costs incurred in | (90) | 97 | |||
Cumulative costs incurred | 307 | ||||
White Collar Productivity program | Estimated contract settlement, loss order and other costs | |||||
Liabilities associated with reorganization. | |||||
Liability at beginning of period | 1 | 2 | 3 | ||
Expenses | 3 | 3 | 3 | ||
Cash payments | (4) | (2) | |||
Changes in estimates | (1) | ||||
Exchange rate differences | (1) | ||||
Liability at end of period | $ 1 | $ 1 | 1 | 2 | $ 3 |
Costs incurred in | 3 | 2 | |||
Cumulative costs incurred | 8 | ||||
White Collar Productivity program | Inventory and long-lived asset impairments | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 1 | 8 | |||
Cumulative costs incurred | 10 | ||||
White Collar Productivity program | Electrification Products | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | (17) | 15 | |||
Cumulative costs incurred | 72 | ||||
White Collar Productivity program | Industrial Automation | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | (23) | 34 | |||
Cumulative costs incurred | 106 | ||||
White Collar Productivity program | Robotics and Motion | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | (14) | 26 | |||
Cumulative costs incurred | 56 | ||||
White Collar Productivity program | Corporate and Other | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | (32) | 32 | |||
Cumulative costs incurred | 91 | ||||
OS Program | |||||
Liabilities associated with reorganization. | |||||
Term of program (in years) | 2 years | ||||
Regional executive committee roles | 3 | ||||
Costs incurred in | $ 65 | ||||
Cumulative costs incurred | $ 65 | 65 | |||
Total expected costs | 350 | 350 | |||
OS Program | Total cost of sales | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 35 | ||||
OS Program | Selling, general and administrative expenses | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 23 | ||||
OS Program | Non-order related research and development expenses | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 3 | ||||
OS Program | Other income (expense), net. | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 4 | ||||
OS Program | Electrification Products | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 32 | ||||
Cumulative costs incurred | 32 | 32 | |||
Total expected costs | 40 | 40 | |||
OS Program | Industrial Automation | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 21 | ||||
Cumulative costs incurred | 21 | 21 | |||
Total expected costs | 60 | 60 | |||
OS Program | Robotics and Motion | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 1 | ||||
Cumulative costs incurred | 1 | 1 | |||
Total expected costs | 50 | 50 | |||
OS Program | Corporate and Other | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 11 | ||||
Cumulative costs incurred | 11 | 11 | |||
Total expected costs | 200 | 200 | |||
Other restructuring-related activities | |||||
Liabilities associated with reorganization. | |||||
Liability at beginning of period | 246 | ||||
Liability at end of period | $ 245 | 245 | 246 | ||
Costs incurred in | 116 | 181 | 133 | ||
Other restructuring-related activities | Total cost of sales | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 24 | 119 | 69 | ||
Other restructuring-related activities | Selling, general and administrative expenses | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 52 | 10 | 4 | ||
Other restructuring-related activities | Non-order related research and development expenses | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 2 | 5 | |||
Other restructuring-related activities | Other income (expense), net. | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 38 | 52 | 55 | ||
Other restructuring-related activities | Employee severance costs | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 74 | 130 | 66 | ||
Other restructuring-related activities | Estimated contract settlement, loss order and other costs | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | 29 | 32 | 32 | ||
Other restructuring-related activities | Inventory and long-lived asset impairments | |||||
Liabilities associated with reorganization. | |||||
Costs incurred in | $ 13 | $ 19 | $ 35 |
Operating segment and geograp_3
Operating segment and geographic data - Segment revenues (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Revenue | $ 27,662 | $ 25,196 | $ 24,929 |
Operating | |||
Segment Reporting Information [Line Items] | |||
Revenue | 27,419 | 24,933 | 24,629 |
Intersegment elimination | |||
Segment Reporting Information [Line Items] | |||
Revenue | 243 | 263 | 300 |
Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 18,394 | 15,948 | 15,197 |
Systems | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,729 | 4,227 | 4,830 |
Services and software | |||
Segment Reporting Information [Line Items] | |||
Revenue | 5,296 | 4,758 | 4,602 |
End Customer Markets, Utilities | |||
Segment Reporting Information [Line Items] | |||
Revenue | 4,545 | 5,075 | 5,650 |
End Customer Markets, Industry | |||
Segment Reporting Information [Line Items] | |||
Revenue | 15,469 | 13,964 | 13,259 |
End Customer Markets, Transport and infrastructure | |||
Segment Reporting Information [Line Items] | |||
Revenue | 7,405 | 5,894 | 5,720 |
Europe | |||
Segment Reporting Information [Line Items] | |||
Revenue | 10,013 | 9,032 | 8,819 |
The Americas | |||
Segment Reporting Information [Line Items] | |||
Revenue | 8,003 | 6,831 | 6,761 |
Asia, Middle East and Africa | |||
Segment Reporting Information [Line Items] | |||
Revenue | 9,403 | 9,070 | 9,049 |
Electrification Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 11,686 | 10,094 | 9,920 |
Electrification Products | Operating | |||
Segment Reporting Information [Line Items] | |||
Revenue | 11,211 | 9,591 | 9,337 |
Electrification Products | Intersegment elimination | |||
Segment Reporting Information [Line Items] | |||
Revenue | 475 | 503 | 583 |
Electrification Products | Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 9,679 | 8,322 | 8,042 |
Electrification Products | Systems | |||
Segment Reporting Information [Line Items] | |||
Revenue | 617 | 614 | 656 |
Electrification Products | Services and software | |||
Segment Reporting Information [Line Items] | |||
Revenue | 915 | 655 | 639 |
Electrification Products | End Customer Markets, Utilities | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,452 | 2,597 | 2,568 |
Electrification Products | End Customer Markets, Industry | |||
Segment Reporting Information [Line Items] | |||
Revenue | 4,395 | 4,022 | 4,083 |
Electrification Products | End Customer Markets, Transport and infrastructure | |||
Segment Reporting Information [Line Items] | |||
Revenue | 4,364 | 2,972 | 2,686 |
Electrification Products | Europe | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,881 | 3,514 | 3,309 |
Electrification Products | The Americas | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,650 | 2,613 | 2,571 |
Electrification Products | Asia, Middle East and Africa | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,680 | 3,464 | 3,457 |
Industrial Automation | |||
Segment Reporting Information [Line Items] | |||
Revenue | 7,394 | 6,879 | 6,654 |
Industrial Automation | Operating | |||
Segment Reporting Information [Line Items] | |||
Revenue | 7,254 | 6,724 | 6,491 |
Industrial Automation | Intersegment elimination | |||
Segment Reporting Information [Line Items] | |||
Revenue | 140 | 155 | 163 |
Industrial Automation | Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,391 | 1,796 | 1,355 |
Industrial Automation | Systems | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,853 | 2,089 | 2,364 |
Industrial Automation | Services and software | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,010 | 2,839 | 2,772 |
Industrial Automation | End Customer Markets, Utilities | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,168 | 1,270 | 1,236 |
Industrial Automation | End Customer Markets, Industry | |||
Segment Reporting Information [Line Items] | |||
Revenue | 4,447 | 3,796 | 3,625 |
Industrial Automation | End Customer Markets, Transport and infrastructure | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,639 | 1,658 | 1,630 |
Industrial Automation | Europe | |||
Segment Reporting Information [Line Items] | |||
Revenue | 3,145 | 2,773 | 2,398 |
Industrial Automation | The Americas | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,544 | 1,381 | 1,420 |
Industrial Automation | Asia, Middle East and Africa | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,565 | 2,570 | 2,673 |
Robotics and Motion | |||
Segment Reporting Information [Line Items] | |||
Revenue | 9,147 | 8,396 | 7,888 |
Robotics and Motion | Operating | |||
Segment Reporting Information [Line Items] | |||
Revenue | 8,639 | 7,877 | 7,386 |
Robotics and Motion | Intersegment elimination | |||
Segment Reporting Information [Line Items] | |||
Revenue | 508 | 519 | 502 |
Robotics and Motion | Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 6,206 | 5,661 | 5,366 |
Robotics and Motion | Systems | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,062 | 959 | 853 |
Robotics and Motion | Services and software | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,371 | 1,257 | 1,167 |
Robotics and Motion | End Customer Markets, Utilities | |||
Segment Reporting Information [Line Items] | |||
Revenue | 749 | 633 | 657 |
Robotics and Motion | End Customer Markets, Industry | |||
Segment Reporting Information [Line Items] | |||
Revenue | 6,529 | 5,991 | 5,351 |
Robotics and Motion | End Customer Markets, Transport and infrastructure | |||
Segment Reporting Information [Line Items] | |||
Revenue | 1,361 | 1,253 | 1,378 |
Robotics and Motion | Europe | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,929 | 2,613 | 2,571 |
Robotics and Motion | The Americas | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,788 | 2,721 | 2,588 |
Robotics and Motion | Asia, Middle East and Africa | |||
Segment Reporting Information [Line Items] | |||
Revenue | 2,922 | 2,543 | 2,227 |
Corporate and Other | |||
Segment Reporting Information [Line Items] | |||
Revenue | (565) | (173) | 467 |
Corporate and Other | Operating | |||
Segment Reporting Information [Line Items] | |||
Revenue | 315 | 741 | 1,415 |
Corporate and Other | Intersegment elimination | |||
Segment Reporting Information [Line Items] | |||
Revenue | (880) | (914) | (948) |
Corporate and Other | Products | |||
Segment Reporting Information [Line Items] | |||
Revenue | 118 | 169 | 434 |
Corporate and Other | Systems | |||
Segment Reporting Information [Line Items] | |||
Revenue | 197 | 565 | 957 |
Corporate and Other | Services and software | |||
Segment Reporting Information [Line Items] | |||
Revenue | 7 | 24 | |
Corporate and Other | End Customer Markets, Utilities | |||
Segment Reporting Information [Line Items] | |||
Revenue | 176 | 575 | 1,189 |
Corporate and Other | End Customer Markets, Industry | |||
Segment Reporting Information [Line Items] | |||
Revenue | 98 | 155 | 200 |
Corporate and Other | End Customer Markets, Transport and infrastructure | |||
Segment Reporting Information [Line Items] | |||
Revenue | 41 | 11 | 26 |
Corporate and Other | Europe | |||
Segment Reporting Information [Line Items] | |||
Revenue | 58 | 132 | 541 |
Corporate and Other | The Americas | |||
Segment Reporting Information [Line Items] | |||
Revenue | 21 | 116 | 182 |
Corporate and Other | Asia, Middle East and Africa | |||
Segment Reporting Information [Line Items] | |||
Revenue | $ 236 | $ 493 | $ 692 |
Revenue | United States | |||
Segment Reporting Information [Line Items] | |||
Concentration risk (as a percent) | 22.00% | 20.00% | 19.00% |
Revenue | China | |||
Segment Reporting Information [Line Items] | |||
Concentration risk (as a percent) | 15.00% | 15.00% | 14.00% |
Revenue | Excludes Switzerland | |||
Segment Reporting Information [Line Items] | |||
Concentration risk (as a percent) | 98.00% | 98.00% | 98.00% |
Operating segment and geograp_4
Operating segment and geographic data - Income and expense by segment (Details) $ in Millions | Apr. 01, 2019segment | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Operating segment and geographic data | ||||
Number of operating segments | segment | 4 | |||
Revenues | $ 27,662 | $ 25,196 | $ 24,929 | |
Operational EBITA: | 3,005 | 2,817 | 2,928 | |
Acquisition-related amortization | (273) | (229) | (245) | |
Restructuring and restructuring-related expenses | (172) | (300) | (442) | |
Changes in obligations related to divested businesses | (106) | (94) | ||
Changes in pre-acquisition estimates | (8) | (8) | (131) | |
Gains and losses on sale of businesses | 57 | 252 | (10) | |
Acquisition- and divestment-related expenses and integration costs | (204) | (81) | (9) | |
Foreign exchange/commodity timing differences in income from operations: Unrealized gains and losses on derivatives where the underlying hedged transaction has not yet been realized | (1) | 56 | (19) | |
Foreign exchange/commodity timing differences in income from operations: Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized | (23) | 8 | (1) | |
Foreign exchange/commodity timing differences in income from operations: Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) | (9) | (30) | (8) | |
Regulatory, compliance and legal costs | (34) | (102) | (10) | |
Asset write downs/impairments | (25) | (16) | ||
Gain on liquidation of foreign subsidiary | 31 | |||
Corporate re-branding and marketing costs | (30) | |||
Losses and other (costs)recoveries on Korea fraud | (8) | 40 | 73 | |
Other non-operational items | (20) | (19) | (5) | |
Income from operations | 2,226 | 2,230 | 1,929 | |
Interest and dividend income | 72 | 73 | 71 | |
Interest and other finance expense | (262) | (234) | (201) | |
Non-operational pension cost | 83 | 33 | (38) | |
Income from continuing operations before taxes | 2,119 | 2,102 | 1,761 | |
Intersegment elimination | Non-Core and divested businesses | ||||
Operating segment and geographic data | ||||
Operational EBITA: | (291) | (163) | (30) | |
Intersegment elimination | Stranded corporate costs | ||||
Operating segment and geographic data | ||||
Operational EBITA: | (297) | (286) | (252) | |
Intersegment elimination | Corporate costs and other intersegment elimination | ||||
Operating segment and geographic data | ||||
Operational EBITA: | (499) | (457) | (378) | |
Operating | Electrification Products | ||||
Operating segment and geographic data | ||||
Operational EBITA: | 1,626 | 1,510 | 1,459 | |
Operating | Industrial Automation | ||||
Operating segment and geographic data | ||||
Operational EBITA: | 1,019 | 953 | 897 | |
Operating | Robotics and Motion | ||||
Operating segment and geographic data | ||||
Operational EBITA: | $ 1,447 | $ 1,260 | $ 1,232 |
Operating segment and geograp_5
Operating segment and geographic data - Depreciation and amortization, Capital expenditure, and Total assets by segment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Operating segment and geographic data | |||
Depreciation and amortization | $ 916 | $ 836 | $ 870 |
Capital expenditure | 772 | 752 | 632 |
Total assets | 44,441 | 43,458 | 39,391 |
Electrification Products | |||
Operating segment and geographic data | |||
Depreciation and amortization | 355 | 315 | 348 |
Capital expenditure | 244 | 218 | 215 |
Total assets | 12,049 | 8,881 | 8,343 |
Robotics and Motion | |||
Operating segment and geographic data | |||
Depreciation and amortization | 208 | 216 | 249 |
Capital expenditure | 123 | 118 | 112 |
Total assets | 8,397 | 8,416 | 7,870 |
Industrial Automation | |||
Operating segment and geographic data | |||
Depreciation and amortization | 160 | 112 | 71 |
Capital expenditure | 104 | 71 | 53 |
Total assets | 6,669 | 6,961 | 4,294 |
Corporate and Other | |||
Operating segment and geographic data | |||
Depreciation and amortization | 193 | 193 | 202 |
Capital expenditure | 301 | 345 | 252 |
Total assets | 17,326 | 19,200 | 18,884 |
Assets held for sale | $ 8,591 | $ 8,603 | $ 8,504 |
Operating segment and geograp_6
Operating segment and geographic data - Geographical information for and long-lived assets (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information | ||
Long-lived assets at December 31 | $ 4,133 | $ 3,804 |
Europe | ||
Segment Reporting Information | ||
Long-lived assets at December 31 | 2,110 | 2,040 |
The Americas | ||
Segment Reporting Information | ||
Long-lived assets at December 31 | 1,168 | 934 |
Asia, Middle East and Africa | ||
Segment Reporting Information | ||
Long-lived assets at December 31 | $ 855 | $ 830 |
Operating segment and geograp_7
Operating segment and geographic data - Concentration risk (Details) - Property, plant and equipment, net - Geographic concentration | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
United States | ||
Concentration risk | ||
Concentration risk (as a percent) | 22.00% | 19.00% |
China | ||
Concentration risk | ||
Concentration risk (as a percent) | 11.00% | 10.00% |
Switzerland | ||
Concentration risk | ||
Concentration risk (as a percent) | 11.00% | 13.00% |