Johnson Controls 2014 Annual Report Download - page 62

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62
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,
2014 2013
Current assets $ 218 $ 273
Noncurrent assets 138 139
Total assets $ 356 $ 412
Current liabilities $ 189 $ 212
Noncurrent liabilities 37 39
Total liabilities $ 226 $ 251
The Company did not have a significant variable interest in any other consolidated VIEs for the presented reporting periods.
Nonconsolidated VIEs
As of September 30, 2013, the Company had a 40% interest in an equity method investee whereby the investee was a VIE. The
investee produces and sells lead-acid batteries of which the Company both purchases and supplies certain batteries to complement
each investment partner’s portfolio. The Company had 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 did not exercise the call option prior to its expiration
in May 2016, for a period of six months thereafter the Company was 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 was
fixed under both the call option and the repurchase option. Based upon the criteria set forth in ASC 810, the Company determined
that the investee was a VIE as the equity holders, through their equity investments, may not participate fully in the entity’s residual
economics. The Company was not the primary beneficiary as the Company did not have the power to make key operating decisions
considered to be most significant to the VIE. Therefore, the investee was accounted for under the equity method of accounting as
the Company’s interest exceeded 20% and the Company did not have a controlling interest. The investment balance included
within investments in partially-owned affiliates in the consolidated statements of financial position at September 30, 2013 was
$56 million, which represented the Company’s maximum exposure to loss. Current assets and liabilities related to the VIE were
immaterial and represented normal course of business trade receivables and payables for all presented periods. In the first quarter
of fiscal 2014, 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 of this transaction, the fixed price call option and repurchase option no longer exist, and the
Company consolidates the investee under the voting interest model. Refer to Note 2, "Acquisitions and Divestitures," of the notes
to consolidated financial statements for additional information regarding this transaction.
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 $59 million and $57 million at September 30, 2014 and 2013, 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.