Investor Presentaiton
EATON CORPORATION plc
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts are in millions unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the
sum of components may not equal total amounts reported due to rounding.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information and Basis of Presentation
Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to improving the
quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to
operate sustainably and to help our customers manage power - today and well into the future. By capitalizing on the global
growth trends of electrification and digitalization, we're accelerating the planet's transition to renewable energy, helping to solve
the world's most urgent power management challenges, and doing what's best for our stakeholders and all of society.
Founded in 1911, 2023 marks Eaton's 100th anniversary of being listed on the New York Stock Exchange. We reported
revenues of $20.8 billion in 2022 and serve customers in more than 170 countries.
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting
principles in the United States. Preparation of the consolidated financial statements requires management to make estimates and
assumptions that affect amounts reported in the consolidated financial statements and notes. Actual results could differ from
these estimates. Management has evaluated subsequent events through the date the consolidated financial statements were filed
with the Securities Exchange Commission.
The consolidated financial statements include the accounts of Eaton and all subsidiaries and other entities it controls.
Intercompany transactions and balances have been eliminated. The equity method of accounting is used for investments in
associate companies where the Company has significant influence and generally a 20% to 50% ownership interest. Equity
investments are evaluated for impairment whenever events or circumstances indicate the book value of the investment exceeds
fair value. An impairment would exist if there is an other-than-temporary decline in value. Investments in associate companies
included in Other assets were $788 million and $777 million as of December 31, 2022 and December 31, 2021, respectively,
and income from these investments is reported in Other expense (income) - net. Eaton does not have off-balance sheet
arrangements with unconsolidated entities.
Eaton's reporting currency is United States Dollars (USD). The functional currency for most subsidiaries is their local
currency. Financial statements for these subsidiaries are translated at exchange rates in effect at the balance sheet date as to
assets and liabilities and weighted-average exchange rates as to revenues and expenses. The resulting translation adjustments
are recognized in Accumulated other comprehensive loss. For subsidiaries operating in highly inflationary economies, non-
monetary assets and liabilities such as inventory and property, plant and equipment and their related expenses are remeasured at
historical exchange rates, while monetary assets and liabilities are remeasured at exchange rates in effect at the balance sheet
date. Remeasurement adjustments for these subsidiaries are recognized in income.
Certain prior year amounts have been reclassified to conform to the current year presentation.
LIBOR Transition
In July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate
(LIBOR), announced it intends to phase out LIBOR. The final publication of rates for certain USD LIBOR tenors is expected to
be on June 30, 2023. Various parties, including government agencies, are seeking to identify alternative rates to replace LIBOR.
The Company's new revolving credit facilities discussed in Note 8 do not reference LIBOR and all interest rate swaps that
referenced LIBOR have been settled. Based on the Company's evaluation, the impacts of the transition from LIBOR to
alternative rates in its contracts will not have a material impact on the consolidated financial statements.
Goodwill and Indefinite Life Intangible Assets
Goodwill is evaluated annually for impairment as of July 1 using either a quantitative or qualitative analysis. Additionally,
goodwill is evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. Goodwill is tested for impairment at the
reporting unit level, and is based on the net assets for each reporting unit, including goodwill and intangible assets. The
Company's reporting units are equivalent to the reportable operating segments, except for the Aerospace segment which has
two reporting units. Goodwill is assigned to each reporting unit, as this represents the lowest level that constitutes a business
and is the level at which management regularly reviews the operating results. The Company performs a quantitative analysis
using a discounted cash flow model and other valuation techniques, but may elect to perform a qualitative analysis.
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