Johnson Controls 2013 Annual Report Download - page 60

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60
The carrying amounts and classification of assets (none of which are restricted) and liabilities included in the Company’s
consolidated statements of financial position for the consolidated VIEs are as follows (in millions):
September 30,
2013 2012
Current assets $ 273 $ 199
Noncurrent assets 139 144
Total assets $ 412 $ 343
Current liabilities $ 212 $ 172
Noncurrent liabilities 39 25
Total liabilities $ 251 $ 197
The Company did not have a significant variable interest in any other consolidated VIEs for the presented reporting periods.
Nonconsolidated VIEs
The Company has a 40% interest in an equity method investee whereby the investee is a VIE. The investee produces and sells
lead-acid batteries of which the Company will both purchase and supply certain batteries to complement each investment partners’
portfolio. The Company has a contractual right to purchase the remaining 60% equity interest in the investee between May 2014
and May 2016 (the “call option”). If the Company does not exercise the call option prior to its expiration in May 2016, for a period
of six months thereafter the Company is subject to a contractual obligation at the counterparty’s option to sell the Company’s
equity investment in the investee to the counterparty (the “repurchase option”). The purchase price is fixed under both the call
option and the repurchase option. Based upon the criteria set forth in ASC 810, the Company has determined that the investee is
a VIE as the equity holders, through their equity investments, may not participate fully in the entity’s residual economics. The
Company is not the primary beneficiary as the Company does not have the power to make key operating decisions considered to
be most significant to the VIE. Therefore, the investee is accounted for under the equity method of accounting as the Company’s
interest exceeds 20% and the Company does not have a controlling interest. The investment balance included within investments
in partially-owned affiliates in the consolidated statement of financial position at September 30, 2013 and 2012 was $56 million
and $55 million, respectively, which represents the Company’s maximum exposure to loss. Current assets and liabilities related
to the VIE are immaterial and represent normal course of business trade receivables and payables for all presented periods. In
October 2013, the Company purchased an additional 50% equity interest in the investee to bring the Company's total interest in
the investee to 90%. As a result this transaction, the fixed price call option and repurchase option no longer exist, and the Company
will begin to consolidate the investee under the voting interest model in the first quarter of fiscal 2014.
As mentioned previously within the “Consolidated VIEs” section above, during the three month period ended December 31, 2011,
a pre-existing VIE was reorganized into three separate investments as a result of the counterparty exercising its option to put its
interest to the Company. The reorganized group entities are considered to be VIEs as the other owner party has been provided
decision making rights but does not have equity at risk. The Company is not considered to be the primary beneficiary of two of
the entities as the Company cannot make key operating decisions considered to be most significant to the VIEs. Therefore, the
entities are accounted for under the equity method of accounting as the Company’s interest exceeds 20% and the Company does
not have a controlling interest. The Company’s maximum exposure to loss includes the partially-owned affiliate investment balance
of $57 million and $52 million at September 30, 2013 and 2012, respectively, as well as the subordinated loan from the Company,
third party debt agreement and floor guaranty mentioned previously within the “Consolidated VIEs” section above. Current
liabilities due to the VIEs are not material and represent normal course of business trade payables for all presented periods.
The Company did not have a significant variable interest in any other nonconsolidated VIEs for the presented reporting periods.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.