Significant accounting policies | 2. Significant accounting policies Basis of presentation The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) as applicable to interim financial reporting. Unless otherwise indicated, all financial data presented in these condensed consolidated financial statements are expressed in US dollars. These condensed consolidated financial statements, in the Company’s opinion, include all adjustments, consisting of normal recurring accruals necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, comprehensive income, cash flows and changes in stockholders’ equity. The results of operations for the periods presented are not necessarily indicative of the operating results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are consolidated if the Company has a controlling financial interest, which may exist based on ownership of a majority of the voting interest, or based on the Company’s determination that it is the primary beneficiary of a variable interest entity (“VIE”) or if otherwise required by US GAAP. The Company did not have any material interests in VIEs during the periods presented in these condensed consolidated financial statements. All intercompany balances and transactions are eliminated in consolidation. The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ materially from these estimates. Recently issued and adopted accounting pronouncements In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). On January 1, 2018, the Company adopted the new accounting standard Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging“ (Topic 815) - “Targeted Improvements to Accounting for Hedging Activities.” The ASU better aligns hedge accounting with the Company’s risk management activities, simplifies the application of hedge accounting, and improves transparency as to the scope and results of hedging programs. The Company early adopted the new pronouncement effective January 1, 2018, as allowed, using the modified retrospective approach by recognizing the cumulative effect of initially applying the new pronouncement as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative effect of the changes made to our January 1, 2018 condensed consolidated balance sheet for the adoption of ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) and ASU 2017-12 “Derivatives and Hedging” (Topic 815) - “Targeted Improvements to Accounting for Hedging Activities” is as follows: (in millions) Balance at December 31, 2017 Adjustments due to ASU 2014-09 Adjustments due to ASU 2017-12 Balance at January 1, 2018 Assets Trade accounts receivable, net $ 1,062.4 $ 41.3 $ — $ 1,103.7 Inventories 839.5 (2.1 ) — 837.4 Prepaid expenses and other current assets 149.6 1.8 — 151.4 Liabilities Trade accounts payable $ 941.7 $ 7.0 $ — $ 948.7 Other accrued expenses 301.6 33.2 — 334.8 Equity Accumulated deficit $ (934.1 ) $ 0.8 $ (0.5 ) $ (933.8 ) Accumulated other comprehensive loss (278.5 ) — 0.5 (278.0 ) The following tables summarize the impact of adopting the new revenue standard upon the Company’s condensed consolidated balance sheet and statement of operations as of and for the quarter ended March 31, 2018 : Three months ended March 31, 2018 (in millions) As reported Balances without adoption of ASC 606 Effect of change higher/(lower) Net sales $ 2,158.0 $ 2,151.7 $ 6.3 Cost of goods sold 1,671.4 1,665.5 5.9 Gross profit $ 486.6 $ 486.2 $ 0.4 Income tax expense $ 10.2 $ 10.1 $ 0.1 Net income 65.4 65.1 0.3 March 31, 2018 (in millions) As reported Balances without adoption of ASC 606 Effect of change higher/(lower) Assets Trade accounts receivable, net $ 1,288.5 $ 1,240.2 $ 48.3 Inventories 921.9 930.3 (8.4 ) Prepaid expenses and other current assets 174.6 165.8 8.8 Liabilities Trade accounts payable $ 1,011.7 $ 997.8 $ 13.9 Other accrued expenses 330.7 297.0 33.7 Equity Accumulated deficit $ (868.4 ) $ (869.5 ) $ 1.1 In March 2017, the FASB issued ASU 2017-07 “Compensation - Retirement Benefits” (Topic 715) - “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” On January 1, 2018, the Company adopted the amendments to ASC 715 that improves the presentation of net periodic pension and postretirement benefit costs, by separating the presentation of service costs from other components of net periodic costs. The interest cost, expected return on assets, and amortization of prior service costs have been reclassified from warehousing, selling, and administrative expenses to other expense, net. The mark to market, curtailment, and settlement expenses have been reclassified from other operating expenses, net to other expense, net. The effect of the retrospective presentation change related to the net periodic cost of our defined benefit pension and other postretirement employee benefits (“OPEB”) plans on our consolidated income statement was as follows: Three months ended March 31, 2017 (in millions) As revised Previously reported Effect of change higher/(lower) Warehousing, selling and administrative $ 228.5 $ 226.1 $ 2.4 Other income (expense), net (6.7 ) (9.1 ) (2.4 ) In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows” (Topic 230) - “Classification of Certain Cash Receipts and Cash Payments.” The ASU clarifies and provides specific guidance on eight cash flow classification issues that were not currently addressed by the previous guidance. The Company adopted the ASU as of January 1, 2018 and accordingly restated the condensed consolidated statement of cash flows for the three months ended March 31, 2017 to conform with the current period presentation under this new guidance. As a result of the adoption, the Company reclassified $3.2 million of cash outflows previously reported as operating activities to financing activities within the condensed consolidated statement of cash flows related to contingent consideration payments for the three months ended March 31, 2017 . The Company also adopted the following standards during 2018, none of which had a material impact to the financial statements or financial statement disclosures: Standard Effective date 2017-09 Compensation - Stock Compensation - Scope of Modification Accounting January 1, 2018 2017-04 Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment January 1, 2018 2017-01 Business Combinations - Clarifying the Definition of a Business January 1, 2018 2016-18 Statement of Cash Flows - Restricted Cash January 1, 2018 2016-16 Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory January 1, 2018 2016-01 Financial Instrument - Recognition and Measurement of Financial Assets and Financial Liabilities January 1, 2018 Accounting pronouncements issued and not yet adopted In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842), which supersedes the lease recognition requirements in ASC Topic 840, “Leases.” The core principal of the guidance is that an entity should recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal years. Early adoption is permitted. The guidance is to be applied using a modified retrospective transition method with the option to elect a package of practical expedients. The Company has established a project team who has completed the initial scoping and has begun implementing a software solution to comply with the new standard's reporting and disclosure requirements. The Company is also in the process of identifying changes to processes and controls. Upon adoption of this standard, the Company expects the condensed consolidated balance sheet to include a right of use asset and liability related to certain operating lease arrangements. In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326) - “Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to use a Current Expected Credit Loss model, which is a new impairment model based on expected losses rather than incurred losses. Under the model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity’s estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon initial recognition of the related assets. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. The Company expects to adopt this guidance when effective, and does not expect the guidance to have a significant impact to the condensed consolidated financial statements when adopted on January 1, 2020. In January 2018, the FASB issued ASU 2018-02 “Income Statement - Reporting Comprehensive Income” (Topic 220) “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“AOCI”), which gives entities the option to reclassify certain tax effects, that the FASB refers to as having been stranded, resulting from the Tax Cuts and Jobs Act from AOCI to retained earnings. The new guidance may be applied retrospectively to each period in which the effect of the Tax Cuts and Jobs Act is recognized, or in the period of adoption. The Company must adopt this guidance for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating early adoption of this guidance, and is currently determining the impact to the Company's reported accumulated deficit and accumulated other comprehensive loss line items within the condensed consolidated balance sheet. |