Johnson Controls 2013 Annual Report Download - page 61

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Fair Value of Financial Instruments
The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying
values. See Note 10, “Derivative Instruments and Hedging Activities,” and Note 11, “Fair Value Measurements,” of the notes to
consolidated financial statements for fair value of financial instruments, including derivative instruments, hedging activities and
long-term debt.
Assets and Liabilities Held for Sale
The Company classifies assets and liabilities (disposal groups) to be sold as held for sale in the period in which all of the following
criteria are met: management, having the authority to approve the action, commits to a plan to sell the disposal group; the disposal
group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such
disposal groups; an active program to locate a buyer and other actions required to complete the plan to sell the disposal group have
been initiated; the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify for recognition
as a completed sale within one year, except if events or circumstances beyond the Company's control extend the period of time
required to sell the disposal group beyond one year; the disposal group is being actively marketed for sale at a price that is reasonable
in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to
the plan will be made or that the plan will be withdrawn.
The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value
less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are
met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair
value of a disposal group less any costs to sell each reporting period it remains classified as held for sale and reports any subsequent
changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the carrying
value of the disposal group at the time it was initially classified as held for sale.
Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and
liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale, respectively, in the
consolidated statement of financial position. Refer to Note 3, "Assets and Liabilities Held for Sale," of the notes to consolidated
financial statements for further information.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
At September 30, 2013 and 2012, the Company held restricted cash of approximately $32 million and $29 million, respectively,
within cash and cash equivalents. These amounts primarily were collected from customers for payment of maintenance costs under
contract, and withdrawals are restricted for this purpose.
Receivables
Receivables consist of amounts billed and currently due from customers and unbilled costs and accrued profits related to revenues
on long-term contracts that have been recognized for accounting purposes but not yet billed to customers. The Company extends
credit to customers in the normal course of business and maintains an allowance for doubtful accounts resulting from the inability
or unwillingness of customers to make required payments. The allowance for doubtful accounts is based on historical experience,
existing economic conditions and any specific customer collection issues the Company has identified.
Inventories
Inventories are stated at the lower of cost or market. Finished goods and work-in-process inventories include material, labor and
manufacturing overhead costs.
In the fourth quarter of fiscal 2013, the Company changed its method of inventory costing for certain inventory in its Power
Solutions business to the first-in first-out (FIFO) method from the last-in first-out (LIFO) method. The Company's other businesses
also determine costs using the FIFO method. Prior to the change, Power Solutions utilized two methods of inventory costing:
LIFO for inventories in the U.S. and FIFO for inventories in other countries. The Company believes that the FIFO method is
preferable as it better reflects the current value of inventory on the Company’s consolidated statement of financial position, provides
better matching of revenues and expenses, results in uniformity across the Company’s global operations with respect to the method
of inventory accounting and improves comparability with the Company’s peers. The change has been reported through retrospective
application of the new accounting policy to all periods presented and resulted in a $5 million increase (less than $0.01 per diluted