CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). This requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The following policies are considered by management to be the most critical in understanding the judgments that are involved in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s results of operations, financial position and cash flows.

Revenue Recognition

The Building Technologies & Solutions business recognizes revenue from certain long-term contracts over the contractual period under the percentage-of-completion ("POC") method of accounting. This method of accounting recognizes sales and gross profit as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded primarily in accounts receivable. Likewise, contracts where billings to date have exceeded recognized revenues are recorded primarily in ~~other current liabilities.~~deferred revenue. Changes to the original estimates may be required during the life of the contract and such estimates are reviewed monthly. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values. Estimated losses are recorded when identified. Claims against customers are recognized as revenue upon settlement. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. The periodic reviews have not resulted in adjustments that were significant to the Company’s results of operations. The Company continually evaluates all of the assumptions, risks and uncertainties inherent with the application of the POC method of accounting.

The Building Technologies & Solutions business enters into extended warranties and long-term service and maintenance agreements with certain customers. For these arrangements, revenue is recognized on a straight-line basis over the respective contract term.

The Building Technologies & Solutions business also sells certain heating, ventilating and air conditioning ("HVAC") and refrigeration products and services in bundled arrangements, where multiple products and/or services are involved. Significant deliverables within these arrangements include equipment, commissioning, service labor and extended warranties. Approximately four to twelve months separate the timing of the first deliverable until the last piece of equipment is delivered, and there may be extended warranty arrangements with duration of one to five years commencing upon the end of the standard warranty period. In addition, the Buildings business sells security monitoring systems that may have multiple elements, including equipment, installation, monitoring services and maintenance agreements. Revenues associated with sale of equipment and related installations are recognized once delivery, installation and customer acceptance is completed, while the revenue for monitoring and maintenance services are recognized as services are rendered. In accordance with ASU No. 2009-13, "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force," the Company divides bundled arrangements into separate deliverables and revenue is allocated to each deliverable based on the relative selling price method. In order to estimate relative selling price, market data and transfer price studies are utilized. Revenue recognized for security monitoring equipment and installation is limited to the lesser of their allocated amounts under the estimated selling price hierarchy or the non-contingent up-front consideration received at the time of installation, since collection of future amounts under the arrangement with the customer is contingent upon the delivery of monitoring and maintenance services. For transactions in which the Company retains ownership of the subscriber system asset, fees for monitoring and maintenance services are recognized on a straight-line basis over the contract term. Non-refundable fees received in connection with the initiation of a monitoring

contract, along with associated direct and incremental selling costs, are deferred and amortized over the estimated life of the customer relationship.

In all other cases, the Company recognizes revenue at the time title passes to the customer or as services are performed.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method based on management’s judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. In estimating the fair value, the Company uses multiples of earnings based on the average of ~~historical,~~ published multiples of earnings of comparable entities with similar operations and economic ~~characteristics.~~characteristics and applies to the Company's average of historical and future financial results. In certain instances, the Company uses discounted cash flow analyses or estimated sales price to further support the fair value estimates. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. During the fourth quarter of fiscal 2018, the Company changed the date of its annual goodwill impairment test from September 30 to July 31. The change was made to more closely align the impairment testing date with the Company’s long-term planning and forecasting process. The change in the annual impairment testing date did not delay, accelerate or avoid an impairment charge. The Company has determined this change in accounting principle is preferable and does not result in adjustments to the Company’s financial statements when applied retrospectively. Refer to Note 7, "Goodwill and Other Intangible Assets," of the notes to consolidated financial statements for information regarding the goodwill impairment testing performed in the fourth quarters of fiscal years 2018, 2017 ~~2016~~ and ~~2015.~~2016.

Indefinite-lived intangible assets are also subject to at least annual impairment testing. Indefinite-lived intangible assets consist of trademarks and tradenames and are tested for impairment using a relief-from-royalty method. A considerable amount of management judgment and assumptions are required in performing the impairment tests.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived ~~Assets"~~Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of software to be sold, leased, or marketed." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. ASC 350-30 requires intangible assets acquired in a business combination that are used in research and development activities be considered indefinite lived until the completion or abandonment of the associated research and development efforts. During the period that those assets are considered indefinite lived, they shall not be amortized but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If the carrying amount of an intangible asset exceeds its fair value, an entity shall recognize an impairment loss in an amount equal to that excess. ASC 985-20 requires the unamortized capitalized costs of a computer software product be compared to the net realizable value of that product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset shall be written off. Refer to Note 17, "Impairment of Long-Lived Assets," of the notes to consolidated financial statements for information regarding the impairment testing performed in fiscal years 2018, 2017 ~~2016~~ and ~~2015.~~2016.

Employee Benefit Plans

The Company provides a range of benefits to its employees and retired employees, including pensions and postretirement benefits. Plan assets and obligations are measured annually, or more frequently if there is a significant remeasurement event, based on the Company’s measurement date utilizing various actuarial assumptions such as discount rates, assumed rates of return, compensation increases, turnover rates and health care cost trend rates as of that date. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when appropriate.

The Company utilizes a mark-to-market approach for recognizing pension and postretirement benefit expenses, including measuring the market related value of plan assets at fair value and recognizing actuarial gains and losses in the fourth quarter of each fiscal year or at the date of a remeasurement event. Refer to Note 15, "Retirement Plans," of the notes to consolidated financial statements for disclosure of the Company's pension and postretirement benefit plans.

U.S. GAAP requires that companies recognize in the statement of financial position a liability for defined benefit pension and postretirement plans that are underfunded or unfunded, or an asset for defined benefit pension and postretirement plans that are overfunded. U.S. GAAP also requires that companies measure the benefit obligations and fair value of plan assets that determine a benefit plan’s funded status as of the date of the employer’s fiscal year end.

The Company considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates. As a result, the Company uses different discount rates for each plan depending on the plan jurisdiction, the demographics of participants and the expected timing of benefit payments. For the U.S. pension and postretirement plans, the Company uses a discount rate provided by an independent third party calculated based on an appropriate mix of high quality bonds. For the non-U.S. pension and postretirement plans, the Company consistently uses the relevant country specific benchmark indices for determining the various discount rates. The Company’s weighted average discount rate on U.S. pension plans was 4.10% and 3.80% at September 30, 2018 and 2017, respectively. The Company’s weighted average discount rate on postretirement plans was 3.80% and 3.70% at September 30, ~~2017~~2018 and ~~2016, respectively. The Company’s discount rate on postretirement plans was 3.70% and 3.30% at September 30,~~ 2017, ~~and 2016,~~ respectively. The Company’s weighted average discount rate on non-U.S. pension plans was ~~2.40%~~2.45% and ~~1.90%~~2.40% at September 30, ~~2017~~2018 and ~~2016~~2017, respectively.

In estimating the expected return on plan assets, the Company considers the historical returns on plan assets, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plans’ invested assets. Reflecting the relatively long-term nature of the plans’ obligations, approximately ~~45%~~35% of the plans’ assets are invested in equity securities and ~~44%~~56% in fixed income securities, with the remainder primarily invested in alternative investments. For the years ending September 30, ~~2017~~2018 and ~~2016~~2017, the Company’s expected long-term return on U.S. pension plan assets used to determine net periodic benefit cost was 7.50%. The actual rate of return on U.S. pension plans was below 7.50% in fiscal year 2018 and above 7.50% in ~~both~~ fiscal ~~years 2017 and 2016.~~year 2017. For the years ending September 30, ~~2017~~2018 and ~~2016,~~2017, the Company’s weighted average expected long-term return on non-U.S. pension plan assets was ~~4.60%~~5.35% and ~~4.50%~~4.60%, respectively. The actual rate of return on non-U.S. pension plans was below 5.35% in fiscal year 2018 and above 4.60% in fiscal year ~~2017 and above 4.50% in fiscal year 2016.~~2017. For the years ending September 30, ~~2017~~2018 and ~~2016,~~2017, the Company’s weighted average expected long-term return on postretirement plan assets was ~~5.60%~~5.65% and ~~5.45%~~5.60%, respectively. The actual rate of return on postretirement plan assets was below 5.65% in fiscal year 2018 and above 5.60% in fiscal year ~~2017 and above 5.45% in fiscal year 2016.~~2017.

Beginning in fiscal ~~2018~~2019, the Company believes the long-term rate of return will approximate ~~7.50%~~7.10%, ~~5.35%~~5.20% and 5.65% for U.S. pension, non-U.S. pension and postretirement plans, respectively. Any differences between actual investment results and the expected long-term asset returns will be reflected in net periodic benefit costs in the fourth quarter of each fiscal year or at the date of a significant remeasurement event. If the Company’s actual returns on plan assets are less than the Company’s expectations, additional contributions may be required.

In fiscal ~~2017,~~2018, total employer contributions to the defined benefit pension plans were ~~$342~~$53 million, of which ~~$49~~$18 million were voluntary contributions made by the Company. The Company expects to contribute approximately ~~$100~~$85 million in cash to its defined benefit pension plans in fiscal ~~2018.~~2019. In fiscal ~~2017,~~2018, total employer contributions to the postretirement plans were $5$4 million. The Company expects to contribute approximately $5$15 million in cash to its postretirement plans in fiscal ~~2018.~~2019.

Based on information provided by its independent actuaries and other relevant sources, the Company believes that the assumptions used are reasonable; however, changes in these assumptions could impact the Company’s financial position, results of operations or cash flows.

Loss Contingencies

Accruals are recorded for various contingencies including legal proceedings, environmental matters, self-insurance and other claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined estimates. Additionally, the Company records receivables from third party insurers when recovery has been determined to be probable.

The Company is subject to laws and regulations relating to protecting the environment. The Company provides for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Refer to Note ~~23,~~22, "Commitments and Contingencies," of the notes to consolidated financial statements.

The Company records liabilities for its workers' compensation, product, general and auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet reported are estimated by utilizing actuarial valuations based upon historical claims experience. The Company records receivables from third party insurers when recovery has been determined to be probable. The Company maintains captive insurance companies to manage its insurable liabilities.

Asbestos-Related Contingencies and Insurance Receivables

2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against Company affiliates). Asbestos related defense costs are included in the asbestos liability. The Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be made through 2068. Annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted.

In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable. The Company's estimate of asbestos-related insurance recoveries represents estimated amounts due to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims discounted to present value. In determining the amount of insurance recoverable, the Company considers available insurance, allocation methodologies, solvency and creditworthiness of the insurers. Refer to Note ~~23,~~22, "Commitments and Contingencies," of the notes to consolidated financial statements for a discussion on management's judgments applied in the recognition and measurement of asbestos-related assets and liabilities.

Product Warranties

The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that the Company replace defective products within a specified time period from the date of sale. The Company records an estimate of future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, the Company’s warranty provisions are adjusted as necessary. At September 30, ~~2017~~2018, the Company had recorded ~~$409~~$392 million of warranty reserves for continuing operations, including extended warranties for which deferred revenue is recorded. The Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates. Refer to Note 21, "Guarantees," of the notes to consolidated financial statements for disclosure of the Company's product warranty liabilities.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, "Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance that primarily represents non-U.S. operating and other loss carryforwards for which realization is uncertain. Management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against the Company’s net deferred tax assets. In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted as appropriate based upon the actual results as compared to those forecasted at the beginning of the fiscal year.

The Company reviews the realizability of its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary. At September 30, ~~2017,~~2018, the Company had a valuation allowance of ~~$3.8~~$5.2 billion for continuing operations, of which ~~$3.2~~$4.5 billion relates to net operating loss carryforwards primarily in Australia, Belgium, Brazil, China, France, Luxembourg, Spain, Switzerland ~~Luxembourg~~ and the United Kingdom for which sustainable taxable income has not been demonstrated; and ~~$610~~$700 million for other deferred tax assets.

The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Judgment is required in determining its worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities. At September 30, ~~2017,~~2018, the Company had unrecognized tax benefits of ~~$2.2 billion for continuing operations.~~

$2.4 billion.

The Company does not generally provide additional U.S. or non-U.S. income taxes on outside basis differences of consolidated subsidiaries included in shareholders’ equity attributable to Johnson Controls International plc, except in limited circumstances including anticipated taxation on planned divestitures. The reduction of the outside basis differences via the sale or liquidation of these subsidiaries and/or distributions could create taxable income. The Company’s intent is to reduce the outside basis differences only when it would be tax efficient. Refer to "Capitalization" within the "Liquidity and Capital Resources" section for discussion of U.S. and non-U.S. cash projections.

Refer to Note 18, "Income Taxes," of the notes to consolidated financial statements for the Company's income tax disclosures.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to the "New Accounting Pronouncements" section within Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements.

RISK MANAGEMENT

The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency, commodities, interest rates and stock-based compensation. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for speculative purposes. At the inception of the hedge, the Company assesses the effectiveness of the hedge instrument and designates the hedge instrument as either (1) a hedge of a recognized asset or liability or of a recognized firm commitment (a fair value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an unrecognized asset or liability (a cash flow hedge) or (3) a hedge of a net investment in a non-U.S. operation (a net investment hedge). The Company performs hedge effectiveness testing on an ongoing basis depending on the type of hedging instrument used. All other derivatives not designated as hedging instruments under ASC 815, "Derivatives and Hedging," are revalued in the consolidated statements of income.

For all foreign currency derivative instruments designated as cash flow hedges, retrospective effectiveness is tested on a monthly basis using a cumulative dollar offset test. The fair value of the hedged exposures and the fair value of the hedge instruments are revalued, and the ratio of the cumulative sum of the periodic changes in the value of the hedge instruments to the cumulative sum of the periodic changes in the value of the hedge is calculated. The hedge is deemed as highly effective if the ratio is between 80% and 125%. For commodity derivative contracts designated as cash flow hedges, effectiveness is tested using a regression calculation. Ineffectiveness is minimal as the Company aligns most of the critical terms of its derivatives with the supply contracts.

For net investment hedges, the Company assesses its net investment positions in the non-U.S. operations and compares it with the outstanding net investment hedges on a quarterly basis. The hedge is deemed effective if the aggregate outstanding principal of the hedge instruments designated as the net investment hedge in a non-U.S. operation does not exceed the Company’s net investment positions in the respective non-U.S. operation.

The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its fixed-rate bonds. At September 30, ~~2017,~~2018, the Company did not have any outstanding interest rate swaps. The Company assesses retrospective and prospective effectiveness and records any measured ineffectiveness in the consolidated statements of income on a monthly basis.

Equity swaps and any other derivative instruments not designated as hedging instruments under ASC 815 require no assessment of effectiveness.

A discussion of the Company’s accounting policies for derivative financial instruments is included in Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements, and further disclosure relating to derivatives and hedging activities is included in Note 10, "Derivative Instruments and Hedging Activities," and Note 11, "Fair Value Measurements," of the notes to consolidated financial statements.

Foreign Exchange

The Company has manufacturing, sales and distribution facilities around the world and thus makes investments and enters into transactions denominated in various foreign currencies. In order to maintain strict control and achieve the benefits of the Company’s global diversification, foreign exchange exposures for each currency are netted internally so that only its net foreign exchange exposures are, as appropriate, hedged with financial instruments.

The Company hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. The Company primarily enters into foreign currency exchange contracts to reduce the earnings and cash flow impact of the variation of non-functional currency denominated receivables and payables. Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items. The Company also selectively hedges anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with ASC 815.

The Company has entered into foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S. subsidiaries. The currency effects of debt obligations are reflected in the accumulated other comprehensive income ("AOCI") account within shareholders’ equity attributable to Johnson Controls ordinary shareholders where they offset gains and losses recorded on the Company’s net investments globally.

At September 30, ~~2017~~2018 and ~~2016,~~2017, the Company estimates that an unfavorable 10% change in the exchange rates would have decreased net unrealized gains by approximately ~~$330~~$212 million and ~~$297~~$330 million, respectively.

Interest Rates

~~The~~From time to time, the Company ~~has used~~may use interest rate swaps to offset its exposure to interest rate movements. In accordance with ASC 815, these outstanding swaps qualify and are designated as fair value hedges. The Company had no outstanding interest rate swaps at September 30, 2018 and 2017, ~~and eight interest rates swaps totaling $850 million outstanding at September 30, 2016.~~respectively. A 10% increase in the average cost of the Company’s variable rate debt would have resulted in an unfavorable change in pre-tax interest expense of approximately ~~$13~~$5 million and ~~$11~~$13 million for the year ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

Commodities

The Company uses commodity hedge contracts in the financial derivatives market in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts. Commodity risks are systematically managed pursuant to policy guidelines. As a cash flow hedge, gains and losses resulting from the hedging instruments offset the gains or losses on purchases of the underlying commodities that will be used in the business. The maturities of the commodity hedge contracts coincide with the expected purchase of the commodities.

ENVIRONMENTAL, HEALTH AND SAFETY AND OTHER MATTERS

The Company’s global operations are governed by environmental laws and worker safety laws. Under various circumstances, these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance and require remediation at sites where Company-related substances have been released into the environment.

The Company has expended substantial resources globally, both financial and managerial, to comply with applicable environmental laws and worker safety laws and to protect the environment and workers. The Company believes it is in substantial compliance with such laws and maintains procedures designed to foster and ensure compliance. However, the Company has been, and in the future may become, the subject of formal or informal enforcement actions or proceedings regarding noncompliance with such laws or the remediation of Company-related substances released into the environment. Such matters typically are resolved with regulatory authorities through commitments to compliance, abatement or remediation programs and in some cases payment of penalties. Historically, neither such commitments nor penalties imposed on the Company have been material.

Refer to Note ~~23,~~22, "Commitments and Contingencies," of the notes to consolidated financial statements for additional information.

QUARTERLY FINANCIAL DATA


(in millions, except per share data) (quarterly amounts unaudited)	First Quarter		Second Quarter			Third Quarter		Fourth Quarter			Full Year			First Quarter		Second Quarter			Third Quarter		Fourth Quarter		Full Year

2017
2018
Net sales	$	7,086	$	7,267		$	7,683	$	8,136		$	30,172		$	7,435	$	7,475		$	8,120	$	8,370	$	31,400
Gross profit	2,114		2,281			2,431		2,513			9,339			2,169		2,220			2,472		2,519		9,380
Net income (loss) (1)	378		(115		)	629		927			1,819
Net income (loss) attributable to Johnson Controls	329		(148		)	555		875			1,611
Earnings (loss) per share (2)
Net income (1)														271		483			804		825		2,383
Net income attributable to Johnson Controls														230		438			723		771		2,162
Earnings per share (2)
Basic	0.35		(0.16		)	0.59		0.94			1.72			0.25		0.47			0.78		0.83		2.34
Diluted	0.35		(0.16		)	0.59		0.93			1.71			0.25		0.47			0.78		0.83		2.32

2016
2017
Net sales	$	4,696	$	4,733		$	5,154	$	6,254		$	20,837		$	7,086	$	7,267		$	7,683	$	8,136	$	30,172
Gross profit	1,257		1,287			1,422		1,688			5,654			2,114		2,281			2,431		2,513		9,339
Net income (loss) (3)	490		(469		)	459		(1,132		)	(652		)	378		(115		)	629		927		1,819
Net income (loss) attributable to Johnson Controls	450		(530		)	383		(1,171		)	(868		)	329		(148		)	555		875		1,611
Earnings (loss) per share ~~(4)~~(2)
Basic	0.69		(0.82		)	0.59		(1.61		)	(1.30		)	0.35		(0.16		)	0.59		0.94		1.72
Diluted	0.69		(0.81		)	0.59		(1.61		)	(1.29		)	0.35		(0.16		)	0.59		0.93		1.71

(1)

The fiscal 2018 first quarter net income includes a $114 million gain on sale of Scott Safety, $158 million of significant restructuring and impairment costs, and $50 million of transaction and integration costs. The fiscal 2018 second quarter net income includes $64 million of transaction and integration costs. The fiscal 2018 third quarter net income includes $51 million of transaction and integration costs. The fiscal 2018 fourth quarter net income includes $10 million of net mark-to-market gains on pension and postretirement plans, $105 million of significant restructuring and impairment costs, and $69 million of transaction and integration costs. The preceding amounts are stated on a pre-tax and pre-noncontrolling interest impact basis.


(2)	Due to the use of the weighted-average shares outstanding for each quarter for computing earnings per share, the sum of the quarterly per share amounts may not equal the per share amount for the year.

(3)

The fiscal 2017 first quarter net income includes $117 million of mark-to-market gains on pension plans, $78 million of significant restructuring and impairment costs, and $213 million of transaction, integration and separation costs. The fiscal 2017 second quarter net loss includes $18 million of mark-to-market gains on pension plans, $99 million of significant restructuring and impairment costs, and $138 million of transaction and integration costs. The fiscal 2017 third quarter net income includes $45 million of mark-to-market losses on pension plans, $49 million of significant restructuring and impairment costs, and $70 million of transaction and integration costs The fiscal 2017 fourth quarter net income includes $330 million of net mark-to-market gains on pension and postretirement plans, $141 million of significant restructuring and impairment costs, $90 million of integration costs and $50 million for an unfavorable arbitration award. The preceding amounts are stated on a pre-tax and pre-noncontrolling interest impact basis and include both continuing and discontinued operations activity.


~~(2)~~	~~Due to the use of the weighted-average shares outstanding for each quarter for computing earnings per share, the sum of the quarterly per share amounts may not equal the per share amount for the year.~~

~~(3)~~

The fiscal 2016 first quarter net income includes $101 million of transaction, integration and separation costs. The fiscal 2016 second quarter net loss includes $229 million of significant restructuring and impairment costs, and $131 million of transaction, integration and separation costs. The fiscal 2016 third quarter net income includes $167 million of transaction, integration, and separation costs, and $102 million of significant restructuring and impairment costs. The fiscal 2016 fourth quarter net loss includes $514 million of net mark-to-market and settlement losses on pension and postretirement plans, $296 million of significant restructuring and impairment costs, and $293 million of transaction, integration and separation costs. The preceding amounts are stated on a pre-tax and pre-noncontrolling interest impact basis and include both continuing and discontinued operations activity.


~~(4)~~	~~Basic and diluted earnings (loss) per share will not cross-foot due to the impact of the Tyco Merger on the weighted-average shares included within the earnings per share calculation.~~


ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Risk Management" included in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.


ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements



	Page

Report of Independent Registered Public Accounting Firm	5955

Consolidated Statements of Income for the years ended September 30, 2017,8, 2017 and 2016 ~~and 2015~~	6057

Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2018, 2017 ~~2016~~ and ~~2015~~2016	6158

Consolidated Statements of Financial Position as of September 30, 20178 and ~~2016~~2017	6259

Consolidated Statements of Cash Flows for the years ended September 30, 2017,8, 2017 and 2016 ~~and 2015~~	6360

Consolidated Statements of Shareholders' Equity Attributable to Johnson Controls Ordinary Shareholders for the years ended September 30, 2018, 2017 ~~2016~~ and ~~2015~~2016	6461

Notes to Consolidated Financial Statements	6562

Schedule II - Valuation and Qualifying Accounts for the years ended September 30, 2018, 2017 ~~2016~~ and ~~2015~~2016	~~137~~125

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Johnson Controls International plc

~~In our opinion,~~Opinions on the ~~consolidated financial statements listed in~~Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying ~~index present fairly, in all material respects, the~~consolidated statements of financial position of Johnson Controls International ~~plc.~~plc and its subsidiaries (the “Company”)as of September 30, ~~2017~~ 2018and ~~2016,~~ 2017,and the ~~results~~related consolidated statements of ~~theiroperations~~income, comprehensive income (loss), shareholders’ equity attributable to Johnson Controls ordinary shareholders, and ~~their~~ cash flows for each of the three years in the period ended September 30, 2018, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2018and 2017, and the results of theiroperations and theircash flows for each of the three years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America. ~~In addition, in our opinion, the financial statement schedule listed in the accompanying indexpresents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidatedfinancial statements.~~ Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, ~~2017,~~2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the ~~Committee of Sponsoring Organizations of the Treadway Commission (COSO).~~ COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, ~~and financial statement schedule,~~ for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in ~~Management's~~Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on ~~these~~ the Company’s consolidatedfinancial statements ~~on the financial statement schedule,~~ and on the Company's internal control over financial reporting based on our ~~integrated~~ audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the consolidatedfinancial ~~statements, assessing~~statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, ~~and~~as well as evaluating the overall presentation of the consolidatedfinancial ~~statement presentation.~~statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

November ~~21, 2017~~20, 2018

We have served as the Company’s auditor since 1957.

Johnson Controls International plc

Consolidated Statements of Income


	Year Ended September 30,									Year Ended September 30,
(in millions, except per share data)	2017			2016			2015			2018			2017			2016
Net sales
Products and systems*	$	24,099		$	18,084		$	14,733		$	25,332		$	24,099		$	18,084
Services*	6,073			2,753			2,367			6,068			6,073			2,753
	30,172			20,837			17,100			31,400			30,172			20,837
Cost of sales
Products and systems*	17,220			13,323			10,954			18,602			17,220			13,323
Services*	3,613			1,860			1,615			3,418			3,613			1,860
	20,833			15,183			12,569			22,020			20,833			15,183

Gross profit	9,339			5,654			4,531			9,380			9,339			5,654

Selling, general and administrative expenses	(6,158		)	(4,190		)	(3,191		)	(6,010		)	(6,158		)	(4,190		)
Restructuring and impairment costs	(367		)	(288		)	(215		)	(263		)	(367		)	(288		)
Net financing charges	(496		)	(289		)	(274		)	(441		)	(496		)	(289		)
Equity income	240			174			80			235			240			174

Income from continuing operations before income taxes	2,558			1,061			931			2,901			2,558			1,061

Income tax provision	705			197			71			518			705			197

Income from continuing operations	1,853			864			860			2,383			1,853			864

Income (loss) from discontinued operations, net of tax (Note 4)	(34		)	(1,516		)	819
Loss from discontinued operations, net of tax (Note 4)										—			(34		)	(1,516		)

Net income (loss)	1,819			(652		)	1,679			2,383			1,819			(652		)

Income from continuing operations attributable to noncontrolling interests	199			132			46			221			199			132
Income from discontinued operations attributable to noncontrolling interests	9			84			70			—			9			84

Net income (loss) attributable to Johnson Controls	$	1,611		$	(868	)	$	1,563		$	2,162		$	1,611		$	(868	)

Amounts attributable to Johnson Controls ordinary shareholders:
Income from continuing operations	$	1,654		$	732		$	814		$	2,162		$	1,654		$	732
Income (loss) from discontinued operations	(43		)	(1,600		)	749
Loss from discontinued operations										—			(43		)	(1,600		)
Net income (loss)	$	1,611		$	(868	)	$	1,563		$	2,162		$	1,611		$	(868	)

Basic earnings (loss) per share attributable to Johnson Controls
Continuing operations	$	1.77		$	1.10		$	1.24		$	2.34		$	1.77		$	1.10
Discontinued operations	(0.05		)	(2.40		)	1.14			—			(0.05		)	(2.40		)
Net income (loss) **	$	1.72		$	(1.30	)	$	2.39
Net income (loss)										$	2.34		$	1.72		$	(1.30	)

Diluted earnings (loss) per share attributable to Johnson Controls
Continuing operations	$	1.75		$	1.09		$	1.23		$	2.32		$	1.75		$	1.09
Discontinued operations	(0.05		)	(2.38		)	1.13			—			(0.05		)	(2.38		)
Net income (loss) **	$	1.71		$	(1.29	)	$	2.36		$	2.32		$	1.71		$	(1.29	)



*	Products and systems consist of Building Technologies & Solutions and Power Solutions products and systems. Services are Building Technologies & Solutions technical services.

2. MERGER TRANSACTION

As discussed in Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements, JCI Inc. and Tyco completed the Merger on September 2, 2016. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805, "Business Combinations." Based on the structure of the Merger and other activities contemplated by the Merger Agreement, relative outstanding share ownership, the composition of the Company's board of directors and the designation of certain senior management positions of the Company, JCI Inc. was the accounting acquirer for financial reporting purposes.

Immediately prior to the Merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to as shares of the Company, or “Company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the Merger, each outstanding share of common stock, par value $1.00 per share, of JCI Inc. (“JCI Inc. common stock”) (other than shares held by JCI Inc., Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes. The election to receive the cash consideration was undersubscribed. As a result, holders of shares of JCI Inc. common stock that elected to receive the share consideration and holders of shares of JCI Inc. common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of JCI Inc. common stock, $5.7293 in cash, without interest, and 0.8357 Company ordinary shares, subject to applicable withholding taxes. Holders of shares of JCI Inc. common stock that elected to receive the cash consideration became entitled to receive, for each such share of JCI Inc. common stock, $34.88 in cash, without interest, subject to applicable withholding taxes. In the Merger, JCI Inc. shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the Merger, former JCI Inc. shareholders owned approximately 56% of the issued and outstanding Company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding Company ordinary shares.

Tyco is a leading global provider of security products and services as well as fire detection and suppression products and ~~services, and life safety products.~~services. The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC and power solutions ~~and energy storage,~~ to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business and residential. The combination of the Tyco and JCI Inc. buildings platforms creates immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company also benefits by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and ~~analytics and connectivity between buildings and energy storage through infrastructure integration.~~analytics.

~~Fair Value of Consideration Transferred~~

The total fair value of consideration transferred was approximately $19.7 billion. Total consideration is comprised of the equity value of the Tyco shares that were outstanding as of September 2, 2016 and the portion of Tyco's share awards and share options earned as of September 2, 2016 ($224 million). Share awards and share options not earned ($101 million) as of September 2, 2016 will be expensed over the remaining future vesting period.

~~The following table summarizes the total fair value of consideration transferred:~~

(in millions, except for share consolidation ratio and share data)

Number of Tyco shares outstanding at September 2, 2016 427,181,743
Tyco share consolidation ratio 0.955
Tyco ordinary shares outstanding following the share consolidation
and immediately prior to the Merger 407,958,565
JCI Inc. converted share price (1) $ 47.67
Fair value of equity portion of the Merger consideration $ 19,447
Fair value of Tyco equity awards 224
Total fair value of consideration transferred $ 19,671


~~(1)~~	Amount equals JCI Inc. closing share price and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of JCI Inc. common stock for $34.88 per share.

~~Fair Value of~~ Assets ~~Acquired~~ and Liabilities ~~Assumed~~Held for Sale

The Company ~~accounted~~classifies assets and liabilities (disposal groups) to be sold as held for sale in the ~~Merger with Tyco~~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 business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. Fair value estimates are based on a complex series of judgments about futurecompleted sale within one year, except if events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impactor circumstances beyond the Company's ~~results~~control extend the period of ~~operations.~~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.

In addition, the Company classifies disposal groups to be disposed of other than by sale (e.g. spin-off) as held for sale in the period the disposal occurs.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair ~~values~~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 ~~acquired~~ and liabilities ~~assumed are as follows (in millions):~~

Cash and cash equivalents $ 489
Accounts receivable 2,034
Inventories 807
Other current assets 617
Property, plant, and equipment - net 1,216
Goodwill 16,105
Intangible assets - net 6,384
Other noncurrent assets 536
   Total assets acquired $ 28,188

Short-term debt $ 462
Accounts payable 725
Accrued compensation and benefits 312
Other current liabilities 1,481
Long-term debt 6,416
Long-term deferred tax liabilities 718
Long-term pension and postretirement benefits 774
Other noncurrent liabilities 1,456
   Total liabilities acquired $ 12,344
Noncontrolling interests 37
Net assets acquired $ 15,807
Cash consideration paid to JCI Inc. shareholders 3,864
   Total fair value of consideration transferred $ 19,671

~~In connection with~~of the Merger, the Company recorded goodwill of $16.1 billion, which is attributable primarily to expected synergies, expanded market opportunities, and other benefits that the Company believes will result from combining its operations with the operations of Tyco. Goodwill has been allocated to the reporting units within Building Technologies & Solutions business based on the expected benefits from the Merger. The Company recorded a net reduction in goodwill of $258 million in fiscal 2017 related to purchase price allocations. The goodwill createddisposal group, if material, in the ~~Merger is not deductible~~line items assets held for ~~tax purposes.~~

~~The purchase price allocation to identifiable intangible assets acquired are as follows:~~

Fair Value (in millions) Weighted Average Life (in years)
Customer relationships $ 2,280
12
Completed technology 1,650
11
Other definite-lived intangibles 214
7
Indefinite-lived trademarks 2,080

Other indefinite-lived intangibles 90

In-process research and development 70

Total identifiable intangible assets $ 6,384

~~Actual and Pro Forma Impact~~

The Company's consolidated financial statements for the fiscal year ended September 30, 2016 include Tyco's results of operations from the acquisition date of September 2, 2016 through September 30, 2016. Net sales and net income (loss) from continuing operations attributable to Tyco during this period and included in the Company's consolidated financial statements for the fiscal year ended September 30, 2016 total $808 million and ~~($48) million, respectively.~~

The following unaudited pro forma information assumes the acquisition had occurred on October 1, 2014, and had been included in the Company's consolidated statements of income for fiscal years 2016 and 2015.

Year Ended September 30,
(in millions) 2016 2015

Pro forma net sales $ 29,647
$ 26,908
Pro forma net income from continuing operations 1,143
848

In order to reflect the occurrence of the acquisition on October 1, 2014 as required, the unaudited pro forma results include adjustments to reflect, among other things, the amortization of the inventory step-up, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset, the change in timing of defined benefit plans' mark-to-market gain or loss recognition, the change in timing of transaction and restructuring costs, and interest expense from debt financing obtained to fund the cash consideration paid to JCI Inc. shareholders. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. Additional information regarding fiscal 2016 pro forma information can be found in the Form 8-K filed by the Company with the SEC on November 8, 2016 under Item 7.01, “Regulation FD Disclosure.”

3.~~ACQUISITIONS AND DIVESTITURES~~

~~Fiscal Year 2017~~

During fiscal 2017, the Company completed three acquisitions for a combined purchase price, net of cash acquired, of $9 million, $6 million of which was paid as of September 30, 2017. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $2 million.

In the fourth quarter of fiscal 2017, the Company completed two divestitures for a combined selling price, net of cash divested, of $44 million, of which $40 million was received as of September 30, 2017. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company recorded a gain of $9 million within selling, general and administrative expenses on the consolidated statements of income and reduced goodwill by $19 million and $2 million in the Global Products segment and in the Building Solutions Asia Pacific segment, respectively.

In the second quarter of fiscal 2017, the Company signed a definitive agreement to sell its Scott Safety business to 3M Company for approximately $2.0 billion. The transaction closed on October 4, 2017. Net cash proceeds from the transaction of approximately $1.9 billion were used to repay a significant portion of the Tyco International Holding S.a.r.L.'s ("TSarl") $4.0 billion of merger-related debt. Scott Safety is a leader in high performance respiratory protection, gas and flame detection, thermal imaging and other critical products. The Scott Safety business is included in the Global Products segment and is reported within assetssale and liabilities held for sale in the consolidated statements of financial ~~position as of September 30, 2017.~~position. Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further ~~disclosure~~information.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

At September 30, 2018, the Company held restricted cash of approximately $15 million, of which $6 million was recorded within other current assets in the consolidated statements of financial position and $9 million was recorded within other noncurrent assets in the consolidated statements of financial position. At September 30, 2017, the Company held restricted cash of approximately $31 million, of which $22 million was recorded within other current assets in the consolidated statements of financial position and $9 million was recorded within other noncurrent assets in the consolidated statements of financial position.

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. The Company enters into supply chain financing programs to sell certain accounts receivable without recourse to third-party financial institutions. Sales of accounts receivable are reflected as a reduction of accounts receivable on the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out ("FIFO") method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. The estimated useful lives generally range from 3 to 40 years for buildings and improvements, subscriber systems up to 15 years, and from 3 to 15 years for machinery and equipment. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method based on management’s judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. In estimating the fair value, the Company uses multiples of earnings based on the average of published multiples of earnings of comparable entities with similar operations and economic characteristics and applies to the Company's average of historical and future financial results. In certain instances, the Company uses discounted cash flow analyses or estimated sales price to further support the fair value estimates. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. During the fourth quarter of fiscal 2018, the Company changed the date of its annual goodwill impairment test from September 30 to July 31. The change was made to more closely align the impairment testing date with the Company’s long-term planning and forecasting process. The change in the annual impairment testing date did not delay, accelerate or avoid an impairment charge. The Company has determined this change in accounting principle is preferable and does not result in adjustments to the Company’s financial statements when applied retrospectively. Refer to Note 7, "Goodwill and Other Intangible Assets," of the notes to consolidated financial statements for information regarding the goodwill impairment testing performed in the fourth quarters of fiscal years 2018, 2017 and 2016.

Indefinite-lived intangible assets are also subject to at least annual impairment testing. Indefinite-lived intangible assets primarily consist of trademarks and tradenames and are tested for impairment using a relief-from-royalty method. A considerable amount of management judgment and assumptions are required in performing the impairment tests.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of software to be sold, leased, or marketed." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. ASC 350-30 requires intangible assets acquired in a business combination that are used in research and development activities to be considered indefinite lived until the completion or abandonment of the associated research and development efforts. During the period that those assets are considered indefinite lived, they shall not be amortized but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If the carrying amount of an intangible asset exceeds its fair value, an entity shall recognize an impairment loss in an amount equal to that excess. ASC 985-20 requires the unamortized capitalized costs of a computer software product be compared to the net realizable value of that product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset shall be written off. Refer to Note 17, "Impairment of Long-Lived Assets," of the notes to consolidated financial statements for information regarding the impairment testing performed in fiscal years 2018, 2017 and 2016.

Revenue Recognition

The Building Technologies & Solutions business recognizes revenue from certain long-term contracts over the contractual period under the percentage-of-completion ("POC") method of accounting. This method of accounting recognizes sales and gross profit as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded primarily in accounts receivable. Likewise, contracts where billings to date have exceeded recognized revenues are recorded primarily in deferred revenue. Costs and earnings in excess of billings related to these contracts were $1,054 million and $908 million at September 30, 2018 and 2017, respectively. Billings in excess of costs and earnings related to these contracts were $535 million and $451 million at September 30, 2018 and 2017, respectively. Changes to the original estimates may be required during the life of the contract and such estimates are reviewed monthly. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values. Estimated contract losses are recorded when identified. Claims against customers are recognized as revenue upon settlement. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. The periodic reviews have not resulted in adjustments that were significant to the Company’s results of operations. The Company continually evaluates all of the assumptions, risks and uncertainties inherent with the application of the POC method of accounting.

The Building Technologies & Solutions business also sells certain HVAC and refrigeration products and services in bundled arrangements, where multiple products and/or services are involved. Significant deliverables within these arrangements include equipment, commissioning, service labor and extended warranties. Approximately four to twelve months separate the timing of the first deliverable until the last piece of equipment is delivered, and there may be extended warranty arrangements with duration of one to five years commencing upon the end of the standard warranty period. In addition, the Building Technologies & Solutions business sells security monitoring systems that may have multiple elements, including equipment, installation, monitoring services and maintenance agreements. Revenues associated with sale of equipment and related installations are recognized once delivery, installation and customer acceptance is completed, while the revenue for monitoring and maintenance services are recognized as services are rendered. In accordance with Accounting Standards Update ("ASU") No. 2009-13, "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force," the Company divides bundled arrangements into separate deliverables and revenue is allocated to each deliverable based on the relative selling price method. In order to estimate relative selling price, market data and transfer price studies are utilized. Revenue recognized for security monitoring equipment and installation is limited to the lesser of their allocated amounts under the estimated selling price hierarchy or the non-contingent up-front consideration received at the time of installation, since collection of future amounts under the arrangement with the customer is contingent upon the delivery of monitoring and maintenance services. For transactions in which the Company retains ownership of the subscriber system asset, fees for monitoring and maintenance services are recognized on a straight-line basis over the contract term. Non-refundable fees received in connection with the initiation of a monitoring

contract, along with associated direct and incremental selling costs, are deferred and amortized over the estimated life of the customer relationship.

In all other cases, the Company recognizes revenue at the time title passes to the customer or as services are performed.

Subscriber System Assets, Dealer Intangibles and Related Deferred Revenue Accounts

The Building Technologies & Solutions business considers assets related to the acquisition of new customers in its electronic security business in three asset categories: internally generated residential subscriber systems outside of North America, internally generated commercial subscriber systems (collectively referred to as subscriber system assets) and customer accounts acquired through the ADT dealer program, primarily outside of North America (referred to as dealer intangibles). Subscriber system assets include installed property, plant and equipment for which the Company retains ownership and deferred costs directly related to the customer acquisition and system installation. Subscriber system assets represent capitalized equipment (e.g. security control panels, touchpad, motion detectors, window sensors, and other equipment) and installation costs associated with electronic security monitoring arrangements under which the Company retains ownership of the security system assets in a customer's place of business, or outside of North America, residence. Installation costs represent costs incurred to prepare the asset for its intended use. The Company pays property taxes on the subscriber system assets and upon customer termination, may retrieve such assets. These assets embody a probable future economic benefit as they generate future monitoring revenue for the Company.

Costs related to the subscriber system equipment and installation are categorized as property, plant and equipment rather than deferred costs. Deferred costs associated with subscriber system assets represent direct and incremental selling expenses (such as commissions) related to acquiring the customer. Commissions related to up-front consideration paid by customers in connection with the establishment of the monitoring arrangement are determined based on a percentage of the up-front fees and do not exceed deferred revenue. Such deferred costs are recorded as other current and noncurrent assets within the consolidated statements of financial position.

Subscriber system assets and any deferred revenue resulting from the customer acquisition are accounted for over the expected life of the subscriber. In certain geographical areas where the Company has a large number of customers that behave in a similar manner over time, the Company accounts for subscriber system assets and related deferred revenue using pools, with separate pools for the components of subscriber system assets and any related deferred revenue based on the same month and year of acquisition. The Company depreciates its pooled subscriber system assets and related deferred revenue using a straight-line method with lives up to 12 years and considering customer attrition. The Company uses a straight-line method with a 15-year life for non-pooled subscriber system assets (primarily in Europe, Latin America and Asia) and related deferred revenue, with remaining balances written off upon customer termination.

Certain contracts and related customer relationships result from purchasing residential security monitoring contracts from an external network of independent dealers who operate under the ADT dealer program, primarily outside of North America. Acquired contracts and related customer relationships are recorded at their contractually determined purchase price.

During the first 6 months (12 months in certain circumstances) after the purchase of the customer contract, any cancellation of monitoring service, including those that result from customer payment delinquencies, results in a chargeback by the Company to the dealer for the full amount of the contract purchase price. The Company records the amount charged back to the dealer as a reduction of the previously recorded intangible asset.

Intangible assets arising from the ADT dealer program described above are amortized in pools determined by the same month and year of contract acquisition on a straight-line basis over the period of the customer relationship. The estimated useful life of dealer intangibles ranges from 12 to 15 years.

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged against income as incurred and included within selling, general and administrative expenses for continuing operations in the consolidated statements of income. Such expenditures for the years ended September 30, 2018, 2017 and 2016 were $380 million, $360 million and $158 million, respectively.

Earnings Per Share

The Company presents both basic and diluted earnings per share ("EPS") amounts. Basic EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of common shares outstanding during the reporting period.

Diluted EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of common shares and common equivalent shares outstanding during the reporting period that are calculated using the treasury stock method for stock options, unvested restricted stock and unvested performance share awards. See Note 13, "Earnings per Share," of the notes to consolidated financial statements for the calculation of earnings per share.

Foreign Currency Translation

Substantially all of the Company’s international operations use the respective local currency as the functional currency. Assets and liabilities of international entities have been translated at period-end exchange rates, and income and expenses have been translated using average exchange rates for the period. Monetary assets and liabilities denominated in non-functional currencies are adjusted to reflect period-end exchange rates. The aggregate transaction gains (losses), net of the impact of foreign currency hedges, included in net income for the years ended September 30, 2018, 2017 and 2016 were $(5) million, $94 million and $(95) million, respectively.

Derivative Financial Instruments

The Company has written policies and procedures that place all financial instruments under the direction of Corporate treasury and restrict all derivative transactions to those intended for hedging purposes. The use of financial instruments for speculative purposes is strictly prohibited. The Company selectively uses financial instruments to manage the market risk from changes in foreign exchange rates, commodity prices, stock-based compensation liabilities and interest rates.

The fair values of all derivatives are recorded in the consolidated statements of financial position. The change in a derivative’s fair value is recorded each period in current earnings or accumulated other comprehensive income ("AOCI"), depending on whether the derivative is designated as part of a hedge transaction and if so, the type of hedge transaction. See Note 10, "Derivative Instruments and Hedging Activities," and Note 11, "Fair Value Measurements," of the notes to consolidated financial statements for disclosure of the Company’s derivative instruments and hedging activities.

Investments

The Company invests in debt and equity securities which are classified as available for sale and are marked to market at the end of each accounting period. Unrealized gains and losses on these securities, other than the deferred compensation plan assets, are recognized in AOCI within the consolidated statement of shareholders' equity unless an unrealized loss is deemed to be other than temporary, in which case such loss is charged to earnings. The deferred compensation plan assets are marked to market at the end of each accounting period and all unrealized gains and losses are recorded in the consolidated statements of income.

Pension and Postretirement Benefits

Loss Contingencies

Accruals are recorded for ~~sale.~~various contingencies including legal proceedings, environmental matters, self-insurance and other claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined estimates. Additionally, the Company records receivables from third party insurers when recovery has been determined to be probable.

The Company is subject to laws and regulations relating to protecting the environment. The Company provides for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements.

Asbestos-Related Contingencies and Insurance Receivables

The Company and certain of its subsidiaries along with numerous other companies are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. The Company's estimate of the liability and corresponding insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against Company affiliates). Asbestos related defense costs are included in the asbestos liability. The Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be made through 2068. Annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted.

In connection with the ~~second quarter~~recognition of ~~fiscal 2017,~~liabilities for asbestos-related matters, the Company ~~completed~~records asbestos-related insurance recoveries that are probable. The Company's estimate of asbestos-related insurance recoveries represents estimated amounts due to the ~~sale~~Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims discounted to present value. In determining the amount of ~~its ADT security business~~insurance recoverable, the Company considers available insurance, allocation methodologies, solvency and creditworthiness of the insurers. Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements for a discussion on management's judgments applied in ~~South Africa within~~ the ~~Building Solutions EMEA/LA segment. The selling price, net~~recognition and measurement of ~~cash divested, was $129 million,~~asbestos-related assets and liabilities.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the carrying or book value of deferred tax assets if, based upon the available evidence, including consideration of tax planning strategies, it is more-likely-than-not that some or all of ~~which was received~~the deferred tax assets will not be realized. Refer to Note 18, "Income Taxes," of the notes to consolidated financial statements.

Retrospective Changes

Certain amounts as of September 30, ~~2017.~~ 2017 and 2016 have been revised to conform to the current year's presentation.

In ~~connection with~~March 2016, the ~~sale,~~FASB issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. During the quarter ended December 31, 2017, the Company ~~reduced goodwill~~adopted ASU No. 2016-09. As a result, the Company recognized deferred tax assets of $179 million in ~~assets held~~the consolidated statements of financial position related to certain operating loss carryforwards resulting from the exercise of employee stock options and vested restricted stock on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of October 1, 2017. Additionally, employee withholding taxes paid to taxing authorities for ~~sale by $92 million.~~equity-based compensation transactions, previously classified as cash flows from operating activities, were reclassified to financing activities in the consolidated statements of cash flows for the fiscal years ended September 30, 2017 and 2016 for comparative purposes. The ~~divestiture was~~remaining provisions of ASU No. 2016-09 did not have a material toimpact on the Company's consolidated financial statements.

In the first quarter of fiscal 2017, the Company completed one additional divestiture for a sales price of $4 million, all of which was received as of September 30, 2017. The divestiture decreased the Company's ownership from a controlling to noncontrollingNew Accounting Pronouncements

~~interest, and as a result, the Company deconsolidated cash of $5 million. The divestiture was not material to the Company's consolidated financial statements.~~

~~During fiscal 2017, the Company received $52 million in net cash proceeds related to prior year business divestitures.~~

~~Fiscal Year 2016~~Recently Adopted Accounting Pronouncements

On ~~October 1, 2015,~~August 17, 2018, the ~~Company formed~~U.S. Securities and Exchange Commission ("SEC") issued the final rule under SEC Release No. 33-10532, "Disclosure Update and Simplification," that amends certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. The amendments include removing the requirement to disclose the historical and pro forma

ratio of earnings to fixed charges (Exhibit 12) and replacing the requirement to disclose the high and low trading prices of entity's ordinary shares with a ~~joint venture with Hitachi~~requirement to ~~expand~~disclose the ticker symbol of its ~~Building Technologies & Solutions product offerings.~~shares. Additionally, the final rule extends to interim periods the annual disclosure requirement of presenting changes in each caption of stockholders' equity and the amount of dividends per share. These disclosures are required to be provided for the current and comparative year-to-date interim periods. The final rule is effective for all filings on or after November 5, 2018. The Company ~~acquired a 60% ownership interest in~~has adopted all relevant disclosure requirements for its annual report on Form 10-K for the ~~new entity for approximately $208 million ($638 million purchase price less cash acquired of $430 million), $133 million of which was paid as of~~year ended September 30, ~~2016 and $75 million was paid as of September 30, 2017. In connection with the acquisition, the Company recorded goodwill of $253 million related to purchase price allocations.~~

Also during fiscal 2016, the Company completed two additional acquisitions for a combined purchase price, net of cash acquired, of $6 million, $3 million of which was paid as of September 30, 2016. The acquisitions in aggregate were not material to the Company's consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $6 million. One of the acquisitions increased the Company's ownership from a noncontrolling to controlling interest. As a result, the Company recorded a non-cash gain of $4 million in equity income for the Global Products segment to adjust the Company's existing equity investment in the partially-owned affiliate to fair value.2018.

In March 2018, the ~~fourth quarter~~FASB issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118," to add various SEC paragraphs pursuant to the issuance of ~~fiscal 2016,~~SEC Staff Accounting Bulletin No. 118 ("SAB 118") to ASC 740 "Income Taxes." SAB 118 was issued by the ~~Company completed two divestitures~~SEC in December 2017 to provide immediate guidance for accounting implications of U.S. Tax Reform under the "Tax Cuts and Jobs Act" in the period of enactment. SAB 118 provides for a ~~combined sales price of $39 million, net of cash divested of $13 million. None of the sales proceeds were received as of September 30, 2016. The divestitures were not material~~provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the ~~Company's~~"Tax Cuts and Jobs Act." The Company applied this guidance to its consolidated financial ~~statements. In connection with the divestitures, the Company recorded a gain of $12 million within selling, general~~statements and ~~administrative expenses on the consolidated statements of income and reduced goodwill by $16 million~~related disclosures beginning in the ~~Global Products segment.~~

~~In the third~~ quarter of fiscal 2016, the Company completed a divestiture for a sales price of $16 million, all of which was received as of September 30, 2016. The divestiture was not material to the Company's consolidated financial statements. In connection with the divestiture, the Company recorded a gain of $14 million within selling, general and administrative expenses on the consolidated statements of income and reduced goodwill by $3 million in the Building Solutions North America segment.

~~During fiscal 2016, the Company received $29 million in net cash proceeds related to prior year business divestitures.~~

~~Fiscal Year 2015~~

During fiscal 2015, the Company completed three acquisitions for a combined purchase price, net of cash acquired, of $47 million, $18 million of which was paid as of September 30, 2015. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill in assets held for sale of $9 million.

In the fourth quarter of fiscal 2015, the Company completed the sale of its Global Workplace Solutions ("GWS") business to CBRE Group Inc. ("CBRE"). The selling price, net of cash divested, was $1.4 billion, all of which was received as of September 30, 2015. In connection with the sale, the Company recorded a $940 million gain, $643 million net of tax, within income (loss) from discontinued operations, net of tax, on the consolidated statements of income and reduced goodwill in assets held for sale by $220 million. At Marchended December 31, ~~2015, the Company determined that the GWS segment met the criteria to be classified as a discontinued operation.~~2017. Refer to Note ~~4, "Discontinued Operations,~~18, "Income Taxes," of the notes to consolidated financial statements for further ~~disclosure related to the Company's discontinued operations.~~information.

In August 2017, the ~~fourth~~FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The ASU more closely aligns the results of hedge accounting with risk management activities through amendments to the designation and measurement guidance to better reflect a Company's hedging strategy and effectiveness. During the quarter ~~of fiscal 2015,~~ended December 31, 2017, the Company ~~completed its global automotive interiors joint venture~~early adopted ASU 2017-12. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The ASU requires the service cost component of net periodic benefit cost to be presented with ~~Yanfeng Automotive Trim Systems. In connection with~~other compensation costs. The other components of net periodic benefit cost are required to be presented in the ~~divestiture~~income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The ASU also allows only the service cost component of net periodic benefit cost to be eligible for capitalization. The guidance will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted as of the ~~Interiors business,~~beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance will be effective retrospectively except for the capitalization of the service cost component which should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements as the Company ~~recorded~~does not present a ~~$145 million gain, $38 million net~~subtotal of ~~tax~~income from operations within ~~income (loss) from discontinued operations, net~~its consolidated statements of ~~tax,~~income.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." The ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The impact of this guidance for the Company will depend on the levels of restricted cash balances in the periods presented. As of September 30, 2016, the Company had approximately $2.0 billion of restricted cash related to restricted proceeds deposited into escrow from the issuance of $2.0 billion aggregate principal of unsecured, unsubordinated notes by Adient Global Holdings Ltd., that were released upon the completion of the Adient spin-off in October 2016. Upon adoption of ASU 2016-18, the restricted proceeds will be presented in the fiscal 2016 consolidated statements of cash flow as a financing activity inflow, and the release of the restricted proceeds will be presented in the fiscal 2017 consolidated statements of cash flow as a financing activity outflow. The impact of adoption of this standard on fiscal 2018 consolidated statements of cash flow is not expected to be material as the restricted cash balance at September 30, 2018 is $15 million.

In October 2016, the FASB issued ASU No. 2016-16, "Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory." The ASU requires the tax effects of all intra-entity sales of assets other than inventory to be recognized in the period in which the transaction occurs. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted but only in the first interim period of a fiscal year. The changes are required to be applied by means of a cumulative-effect adjustment recorded in retained earnings as of the beginning of the fiscal year of adoption. The Company expects that the cumulative effect of the adoption of ASU 2016-16 will result in a reduction to retained earnings of approximately $550 million.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 provides clarification guidance on eight specific cash flow presentation issues in order to reduce the diversity in practice. ASU No. 2016-15 will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The guidance should be applied retrospectively to all periods presented, unless deemed impracticable, in which case prospective application is permitted. The adoption of this guidance is expected to have an impact on the presentation of equity swap funding and settlement activities since the activity will change from an operating activity to an investing activity. The Company does not expect any other significant impacts as a result of adopting this standard.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires recognition of operating leases as lease assets and liabilities on the balance sheet, and disclosure of key information about leasing arrangements. The original standard was effective retrospectively for the Company for the quarter ending December 31, 2019 with early adoption permitted; however in July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides an additional transition method that permits changes to be applied by means of a cumulative-effect adjustment recorded in retained earnings as of the beginning of the fiscal year of adoption. The Company has elected this transition method at the adoption date of October 1, 2019. The Company has started the assessment process by evaluating the population of leases under the revised definition of what qualifies as a leased asset. The Company is the lessee under various agreements for facilities and equipment that are currently accounted for as operating leases. The new guidance will require the Company to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. Additionally in January 2018, the FASB issued ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842," which provides an optional transition practical expedient for existing or expired land easements that were not previously recorded as leases. The Company expects the new guidance will have a material impact on its consolidated statements of financial position for the addition of right-of-use assets and lease liabilities, but the Company does not expect it to have a material impact on its consolidated statements of income and ~~reduced goodwill in assets held for sale by $21 million.~~

Also during fiscal 2015, the Company completed four additional divestitures for a combined sales price of $119 million, $86 million of which was received as of September 30, 2015. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company recorded a gain of $38 million within selling, general and administrative expenses on theits consolidated statements of income and reduced goodwill by $14 million in the Global Products segment, recorded a gain of $10 million within income (loss) from discontinued operations, net of tax, on the consolidated statements of income and reduced goodwill in assets held for sale by $4 million, and recorded a gain of $7 million within selling, general and administrative expenses on the consolidated statements of income and reduced goodwill by $2 million in the Building Solutions North America segment.cash flows.

In January 2016, the ~~first nine months~~FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of ~~fiscal 2015,~~Financial Assets and Financial Liabilities." ASU No. 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including marketable securities. ASU No. 2016-01 will be effective for the Company ~~adjusted~~for the ~~purchase price allocation~~quarter ending December 31, 2018, and early adoption is not permitted, with certain exceptions. The changes are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal ~~2014 acquisition~~year of ~~Air Distribution Technologies Inc. ("ADTi").~~adoption. Additionally in February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which provides additional clarification on certain topics addressed in ASU No. 2016-01. ASU No. 2018-01 will be effective for the Company when ASU No. 2016-01 is adopted. The ~~adjustment was made~~impact of this guidance for the Company will depend on the magnitude of the unrealized gains and losses on the Company's marketable securities investments. The impact to beginning retained earnings as a result of the adoption of this guidance is not expected to be material.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a ~~true-up~~contract with customers to transfer goods or services or enters into a contract for the ~~purchase price~~transfer of non-financial assets. The original standard was effective retrospectively for the Company for the quarter ending December 31, 2017; however in August 2015, the ~~amount~~FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of ~~$4 million,~~the Effective Date," which defers the effective date of ASU No. 2014-09 by one-year for all entities. The new standard will become effective retrospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted, but not before the original effective date. Additionally, in March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," in April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," in May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," all of which ~~was paid~~provide additional clarification on certain topics addressed in ASU No. 2014-09. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 follow the same implementation guidelines as ASU No. 2014-09 and ASU No. 2015-14. The Company has elected to adopt the new revenue guidance as of ~~September 30, 2015. Also, in connection with this acquisition,~~October 1, 2018 using the modified retrospective approach. The Company ~~recorded additional goodwill~~has completed its evaluation of ~~$34 million in fiscal 2015 related~~the new revenue recognition standard and has assessed the impact on its consolidated financial statements. Based on the Company’s evaluation of current contracts and significant revenue streams, revenue recognition is expected to be mostly consistent under both the ~~final purchase price allocations.~~

In the second quarter of fiscal 2015, the Company completed the sale of its interests in two GWS joint ventures to Brookfield Asset Management, Inc. The selling price, net of cash divested, was $141 million, all of which was received as of September 30, 2015. In connectioncurrent and new standard, with the ~~sale,~~exception of the Power Solutions business. Within the Power Solutions business, certain customers return battery cores which will be included in the transaction price as noncash consideration under the new revenue standard. This change is expected to result in an increase to annual Power Solutions revenue of approximately 10% - 15% and an immaterial impact to gross profit. The Company ~~recorded~~does not expect the new revenue standard will have a ~~$200 million gain, $127 million net of tax, within income (loss) from discontinued operations, net of tax,~~material impact on ~~the~~its consolidated statements of ~~income and reduced goodwill in assets held~~financial position or its consolidated statements of cash flows. Upon adoption of the new revenue recognition guidance, the Company expects to record approximately

$35 million to beginning retained earnings, which relates primarily to deferred revenue recorded for ~~sale by $20 million.~~certain battery core returns that represent a material right provided to customers.

Other recently issued accounting pronouncements are not expected to have a material impact on the Company's consolidated

financial statements.

~~4. DISCONTINUED OPERATIONS~~

~~Adient~~2. MERGER TRANSACTION

As discussed in Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements, ~~on October 31, 2016, the Company~~JCI Inc. and Tyco completed the ~~spin-off~~Merger on September 2, 2016. The Merger was accounted for as a reverse acquisition using the acquisition method of ~~its Automotive Experience business by way~~accounting in accordance with ASC 805, "Business Combinations." Based on the structure of the transfer of the Automotive Experience Business from Johnson Controls to Adient plc. The Company did not retain any equity interest in Adient plc. During the first quarter of fiscal 2017, the Company determined that Adient met the criteria to be classified as a discontinued operation and, as a result, Adient’s historical financial results are reflected in the Company’s consolidated financial statements as a discontinued operation, and assets and liabilities are classified as assets and liabilities held for sale. The Company did not allocate any general corporate overhead to discontinued operations.

The following table summarizes the results of Adient, reclassified as discontinued operations for the fiscal years ended September 30, 2017, 2016 and 2015 (in millions). As the Adient spin-off occurred on October 31, 2016, there is only one month of Adient results included in the year ended September 30, 2017.

Year Ended September 30,
2017 2016 2015

Net sales $ 1,434
$ 16,837
$ 20,079

Income from discontinued operations before income taxes 1
525
1,220
Provision for income taxes on discontinued operations 35
2,041
529
Income from discontinued operations attributable to noncontrolling interests, net of tax 9
84
66
Income (loss) from discontinued operations $ (43 ) $ (1,600 ) $ 625

For the fiscal year ended September 30, 2017, the income from discontinued operations before income taxes included separation costs of $79 million. For the fiscal year ended September 30, 2016, the income from discontinued operations before income taxes included separation costs ($418 million), significant restructuring and impairment costs ($332 million), and net mark-to market losses on pension and postretirement plans ($110 million). For the fiscal year ended September 30, 2015, the income from discontinued operations before income taxes included significant restructuring and impairment costs ($182 million), a net gain on a business divestiture ($155 million), transaction and separation costs ($52 million), and net mark-to market losses on pension and postretirement plans ($6 million).

For the fiscal year ended September 30, 2017, the effective tax rate was more than the U.S. federal statutory rate of 35% primarily due to the tax impacts of separation costs and Adient spin-off related tax expense, partially offset by non-U.S. tax rate differentials.

In preparation for the spin-off of the Automotive Experience business in the first quarter of fiscal 2017, the Company incurred incremental tax expense of $95 million in fiscal 2016. The Company also completed substantial business reorganizations which resulted in total tax charges of $1,891 million in fiscal 2016. Included in this amount is the tax charge provided for in the third quarter of fiscal 2016 of $85 million for changes in entity tax status and the charge provided for in the second quarter of fiscal 2016 of $780 million for income tax expense on foreign undistributed earnings of certain non-U.S. subsidiaries.

to complete the final steps of Automotive Experience restructuring and, as a result, the Company provided deferred taxes of $24 million for the U.S. income tax expense on outside basis differences that reversed upon the completion of the restructuring.

In the fourth quarter of fiscal 2015, the Company completed its global automotive interiors joint venture with Yanfeng Automotive Trim Systems. Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for additional information. In connection with the divestiture of the Interiors business, the Company recorded a pre-tax gain on divestiture of $145 million, $38 million net of tax. The tax impact of the gain is due to the jurisdictional mix of gains and losses on the divestiture, which resulted in non-benefited expenses in certain countries and taxable gains in other countries. In addition, in the third and fourth quarters of fiscal 2015, the Company provided income tax expense for repatriation of cashMerger and other ~~tax reserves associated with~~activities contemplated by the ~~Automotive Experience Interiors joint venture transaction, which resulted in a tax charge of $75 million and $223 million, respectively.~~

~~GWS~~

~~On March 31, 2015,~~Merger Agreement, relative outstanding share ownership, the Company announced that it had reached a definitive agreement to sell the remainder of the GWS business to CBRE, subject to regulatory and other approvals. The sale closed on September 1, 2015. The agreement includes a 10-year strategic relationship between the Company and CBRE. The Company is the preferred provider of HVAC equipment, building automation systems and related services to the portfolio of real estate and corporate facilities managed globally by CBRE and GWS. The Company also engages GWS for facility management services. The annual cash flows resulting from these activities with the legacy GWS business are not currently significant nor are they expected to become significant in the future.

At March 31, 2015, the Company determined that its GWS segment met the criteria to be classified as a discontinued operation, The Company did not allocate any general corporate overhead to discontinued operations.

There were no amounts related to the GWS business classified as discontinued operations for the fiscal years ended September 30, 2017 and 2016. The following table summarizes the results of GWS, reclassified as discontinued operations for the fiscal year ended September 30, 2015 (in millions):

Year Ended September 30,
2015

Net sales $ 3,025

Income from discontinued operations before income taxes 1,203
Provision for income taxes on discontinued operations 1,075
Income from discontinued operations attributable to noncontrolling interests, net of tax 4
Income from discontinued operations $ 124

For the fiscal year ended September 30, 2015, the income from discontinued operations before income taxes included a $940 million gain on divestiture for the remainder of the GWS business, a $200 million gain on divestiturecomposition of the Company's ~~interest in two GWS joint ventures~~board of directors and ~~transaction costs~~the designation of ~~$87 million.~~certain senior management positions of the Company, JCI Inc. was the accounting acquirer for financial reporting purposes.

~~The effective tax rate is different than~~Immediately prior to the ~~U.S. statutory rate for fiscal 2015 primarily due~~Merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to ~~$680 million tax expense for repatriation of cash and other tax reserves, and the tax consequences~~as shares of the ~~sale~~Company, or “Company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the Merger, each outstanding share of common stock, par value $1.00 per share, of JCI Inc. (“JCI Inc. common stock”) (other than shares held by JCI Inc., Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the ~~GWS joint ventures ($73 million)~~holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes. The election to receive the ~~remaining~~cash consideration was undersubscribed. As a result, holders of shares of JCI Inc. common stock that elected to receive the share consideration and holders of shares of JCI Inc. common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of JCI Inc. common stock, $5.7293 in cash, without interest, and 0.8357 Company ordinary shares, subject to applicable withholding taxes. Holders of shares of JCI Inc. common stock that elected to receive the cash consideration became entitled to receive, for each such share of JCI Inc. common stock, $34.88 in cash, without interest, subject to applicable withholding taxes. In the Merger, JCI Inc. shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the Merger, former JCI Inc. shareholders owned approximately 56% of the issued and outstanding Company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding Company ordinary shares.

Tyco is a leading global provider of security products and services as well as fire detection and suppression products and services. The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC and power solutions to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business ~~($297 million).~~and residential. The combination of the Tyco and JCI Inc. buildings platforms creates immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company also benefits by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and analytics.

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.

In addition, the Company classifies disposal groups to be disposed of other than by sale (e.g. spin-off) as held for sale in the period the disposal occurs.

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 in the consolidated statements of financial position. Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further information.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

Receivables

Inventories

Property, Plant and Equipment

Goodwill and Indefinite-Lived Intangible Assets

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method based on management’s judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. In estimating the fair value, the Company uses multiples of earnings based on the average of published multiples of earnings of comparable entities with similar operations and economic characteristics and applies to the Company's average of historical and future financial results. In certain instances, the Company uses discounted cash flow analyses or estimated sales price to further support the fair value estimates. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. During the fourth quarter of fiscal 2018, the Company changed the date of its annual goodwill impairment test from September 30 to July 31. The change was made to more closely align the impairment testing date with the Company’s long-term planning and forecasting process. The change in the annual impairment testing date did not delay, accelerate or avoid an impairment charge. The Company has determined this change in accounting principle is preferable and does not result in adjustments to the Company’s financial statements when applied retrospectively. Refer to Note 7, "Goodwill and Other Intangible Assets," of the notes to consolidated financial statements for information regarding the goodwill impairment testing performed in the fourth quarters of fiscal years 2018, 2017 and 2016.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of software to be sold, leased, or marketed." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. ASC 350-30 requires intangible assets acquired in a business combination that are used in research and development activities to be considered indefinite lived until the completion or abandonment of the associated research and development efforts. During the period that those assets are considered indefinite lived, they shall not be amortized but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If the carrying amount of an intangible asset exceeds its fair value, an entity shall recognize an impairment loss in an amount equal to that excess. ASC 985-20 requires the unamortized capitalized costs of a computer software product be compared to the net realizable value of that product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset shall be written off. Refer to Note 17, "Impairment of Long-Lived Assets," of the notes to consolidated financial statements for information regarding the impairment testing performed in fiscal years 2018, 2017 and 2016.

Revenue Recognition

The Building Technologies & Solutions business recognizes revenue from certain long-term contracts over the contractual period under the percentage-of-completion ("POC") method of accounting. This method of accounting recognizes sales and gross profit as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded primarily in accounts receivable. Likewise, contracts where billings to date have exceeded recognized revenues are recorded primarily in deferred revenue. Costs and earnings in excess of billings related to these contracts were $1,054 million and $908 million at September 30, 2018 and 2017, respectively. Billings in excess of costs and earnings related to these contracts were $535 million and $451 million at September 30, 2018 and 2017, respectively. Changes to the original estimates may be required during the life of the contract and such estimates are reviewed monthly. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values. Estimated contract losses are recorded when identified. Claims against customers are recognized as revenue upon settlement. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. The periodic reviews have not resulted in adjustments that were significant to the Company’s results of operations. The Company continually evaluates all of the assumptions, risks and uncertainties inherent with the application of the POC method of accounting.

contract, along with associated direct and incremental selling costs, are deferred and amortized over the estimated life of the customer relationship.

In all other cases, the Company recognizes revenue at the time title passes to the customer or as services are performed.

Subscriber System Assets, Dealer Intangibles and Related Deferred Revenue Accounts

Research and Development Costs

Earnings Per Share

Foreign Currency Translation

Derivative Financial Instruments

Investments

Pension and Postretirement Benefits

Loss Contingencies

The Company is subject to laws and regulations relating to protecting the environment. The Company provides for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements.

Asbestos-Related Contingencies and Insurance Receivables

In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable. The Company's estimate of asbestos-related insurance recoveries represents estimated amounts due to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims discounted to present value. In determining the amount of insurance recoverable, the Company considers available insurance, allocation methodologies, solvency and creditworthiness of the insurers. Refer to Note 22, "Commitments and Contingencies," of the notes to consolidated financial statements for a discussion on management's judgments applied in the recognition and measurement of asbestos-related assets and liabilities.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the carrying or book value of deferred tax assets if, based upon the available evidence, including consideration of tax planning strategies, it is more-likely-than-not that some or all of the deferred tax assets will not be realized. Refer to Note 18, "Income Taxes," of the notes to consolidated financial statements.

Retrospective Changes

Certain amounts as of September 30, 2017 and 2016 have been revised to conform to the current year's presentation.

In March 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. During the quarter ended December 31, 2017, the Company adopted ASU No. 2016-09. As a result, the Company recognized deferred tax assets of $179 million in the consolidated statements of financial position related to certain operating loss carryforwards resulting from the exercise of employee stock options and vested restricted stock on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of October 1, 2017. Additionally, employee withholding taxes paid to taxing authorities for equity-based compensation transactions, previously classified as cash flows from operating activities, were reclassified to financing activities in the consolidated statements of cash flows for the fiscal years ended September 30, 2017 and 2016 for comparative purposes. The remaining provisions of ASU No. 2016-09 did not have a material impact on the Company's consolidated financial statements.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On August 17, 2018, the U.S. Securities and Exchange Commission ("SEC") issued the final rule under SEC Release No. 33-10532, "Disclosure Update and Simplification," that amends certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. The amendments include removing the requirement to disclose the historical and pro forma

ratio of earnings to fixed charges (Exhibit 12) and replacing the requirement to disclose the high and low trading prices of entity's ordinary shares with a requirement to disclose the ticker symbol of its shares. Additionally, the final rule extends to interim periods the annual disclosure requirement of presenting changes in each caption of stockholders' equity and the amount of dividends per share. These disclosures are required to be provided for the current and comparative year-to-date interim periods. The final rule is effective for all filings on or after November 5, 2018. The Company has adopted all relevant disclosure requirements for its annual report on Form 10-K for the year ended September 30, 2018.

In March 2018, the FASB issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118," to add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 ("SAB 118") to ASC 740 "Income Taxes." SAB 118 was issued by the SEC in December 2017 to provide immediate guidance for accounting implications of U.S. Tax Reform under the "Tax Cuts and Jobs Act" in the period of enactment. SAB 118 provides for a provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the "Tax Cuts and Jobs Act." The Company applied this guidance to its consolidated financial statements and related disclosures beginning in the quarter ended December 31, 2017. Refer to Note 18, "Income Taxes," of the notes to consolidated financial statements for further information.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The ASU more closely aligns the results of hedge accounting with risk management activities through amendments to the designation and measurement guidance to better reflect a Company's hedging strategy and effectiveness. During the quarter ended December 31, 2017, the Company early adopted ASU 2017-12. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The ASU requires the service cost component of net periodic benefit cost to be presented with other compensation costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The ASU also allows only the service cost component of net periodic benefit cost to be eligible for capitalization. The guidance will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance will be effective retrospectively except for the capitalization of the service cost component which should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements as the Company does not present a subtotal of income from operations within its consolidated statements of income.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." ASU No. 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including marketable securities. ASU No. 2016-01 will be effective for the Company for the quarter ending December 31, 2018, and early adoption is not permitted, with certain exceptions. The changes are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. Additionally in February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which provides additional clarification on certain topics addressed in ASU No. 2016-01. ASU No. 2018-01 will be effective for the Company when ASU No. 2016-01 is adopted. The impact of this guidance for the Company will depend on the magnitude of the unrealized gains and losses on the Company's marketable securities investments. The impact to beginning retained earnings as a result of the adoption of this guidance is not expected to be material.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The original standard was effective retrospectively for the Company for the quarter ending December 31, 2017; however in August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers the effective date of ASU No. 2014-09 by one-year for all entities. The new standard will become effective retrospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted, but not before the original effective date. Additionally, in March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," in April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," in May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," all of which provide additional clarification on certain topics addressed in ASU No. 2014-09. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 follow the same implementation guidelines as ASU No. 2014-09 and ASU No. 2015-14. The Company has elected to adopt the new revenue guidance as of October 1, 2018 using the modified retrospective approach. The Company has completed its evaluation of the new revenue recognition standard and has assessed the impact on its consolidated financial statements. Based on the Company’s evaluation of current contracts and significant revenue streams, revenue recognition is expected to be mostly consistent under both the current and new standard, with the exception of the Power Solutions business. Within the Power Solutions business, certain customers return battery cores which will be included in the transaction price as noncash consideration under the new revenue standard. This change is expected to result in an increase to annual Power Solutions revenue of approximately 10% - 15% and an immaterial impact to gross profit. The Company does not expect the new revenue standard will have a material impact on its consolidated statements of financial position or its consolidated statements of cash flows. Upon adoption of the new revenue recognition guidance, the Company expects to record approximately

$35 million to beginning retained earnings, which relates primarily to deferred revenue recorded for certain battery core returns that represent a material right provided to customers.

Other recently issued accounting pronouncements are not expected to have a material impact on the Company's consolidated

financial statements.

2. MERGER TRANSACTION

Tyco is a leading global provider of security products and services as well as fire detection and suppression products and services. The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC and power solutions to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business and residential. The combination of the Tyco and JCI Inc. buildings platforms creates immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company also benefits by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and analytics.

Fair Value of Consideration Transferred

The following table summarizes the total fair value of consideration transferred:



(in millions, except for share consolidation ratio and share data)

Number of Tyco shares outstanding at September 2, 2016	427,181,743
Tyco share consolidation ratio	0.955
Tyco ordinary shares outstanding following the share consolidation and immediately prior to the Merger	407,958,565
JCI Inc. converted share price (1)	$	47.67
Fair value of equity portion of the Merger consideration	$	19,447
Fair value of Tyco equity awards	224
Total fair value of consideration transferred	$	19,671


(1)	Amount equals JCI Inc. closing share price and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of JCI Inc. common stock for $34.88 per share.

Fair Value of Assets Acquired and Liabilities Assumed

The Company accounted for the Merger with Tyco as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations.

The fair values of the assets acquired and liabilities assumed are as follows (in millions):



Cash and cash equivalents	$	489
Accounts receivable	2,034
Inventories	807
Other current assets	617
Property, plant, and equipment - net	1,216
Goodwill	16,105
Intangible assets - net	6,384
Other noncurrent assets	536
Total assets acquired	$	28,188

Short-term debt	$	462
Accounts payable	725
Accrued compensation and benefits	312
Other current liabilities	1,481
Long-term debt	6,416
Long-term deferred tax liabilities	718
Long-term pension and postretirement benefits	774
Other noncurrent liabilities	1,456
Total liabilities acquired	$	12,344
Noncontrolling interests	37
Net assets acquired	$	15,807
Cash consideration paid to JCI Inc. shareholders	3,864
Total fair value of consideration transferred	$	19,671

In connection with the Merger, the Company recorded goodwill of $16.1 billion, which is attributable primarily to expected synergies, expanded market opportunities, and other benefits that the Company believes will result from combining its operations with the operations of Tyco. Goodwill has been allocated to the reporting units within Building Technologies & Solutions business based on the expected benefits from the Merger. The Company recorded a net reduction in goodwill of $258 million in fiscal 2017 related to purchase price allocations. The goodwill created in the Merger is not deductible for tax purposes.

The purchase price allocation to identifiable intangible assets acquired are as follows:



	Fair Value (in millions)		Weighted Average Life (in years)
Customer relationships	$	2,280	12
Completed technology	1,650		11
Other definite-lived intangibles	214		7
Indefinite-lived trademarks	2,080
Other indefinite-lived intangibles	90
In-process research and development	70
Total identifiable intangible assets	$	6,384

Actual and Pro Forma Impact

The following unaudited pro forma information assumes the acquisition had occurred on October 1, 2014, and had been included in the Company's consolidated statement of income for fiscal year 2016.



	Year Ended September 30,
(in millions)	2016

Pro forma net sales	$	29,647
Pro forma net income from continuing operations	1,143

3.ACQUISITIONS AND DIVESTITURES

Fiscal Year 2018

During fiscal 2018, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $21 million, all of which was paid as of September 30, 2018. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $14 million within the Global Products segment and $1 million within the Building Solutions EMEA/LA segment.

In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. The selling price, net of cash divested, was $2.0 billion, all of which was received as of September 30, 2018. In connection with the sale, the Company

recorded a pre-tax gain of $114 million within selling, general and administrative expenses in the consolidated statements of income and reduced goodwill in assets held for sale by $1.2 billion. The gain, net of tax, recorded was $84 million. Net cash proceeds from the transaction of approximately $1.9 billion were used to repay a significant portion of the Tyco International Holding S.a.r.L.'s ("TSarl") $4.0 billion of merger-related debt. The Scott Safety business is included in the Global Products segment and was reported within assets and liabilities held for sale in the consolidated statements of financial position as of September 30, 2017. Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further disclosure related to the Company's net assets held for sale.

Also during fiscal 2018, the Company completed certain divestitures primarily within the Global Products business. The combined selling price was $204 million, all of which was received as of September 30, 2018. In connection with the divestitures, the Company reduced goodwill by $35 million. The divestitures were not material to the Company's consolidated financial statements.

Fiscal Year 2017

In the second quarter of fiscal 2017, the Company completed the sale of its ADT security business in South Africa within the Building Solutions EMEA/LA segment. The selling price, net of cash divested, was $129 million, all of which was received as of September 30, 2017. In connection with the sale, the Company reduced goodwill in assets held for sale by $92 million. The divestiture was not material to the Company's consolidated financial statements.

During fiscal 2017, the Company completed two divestitures for a combined selling price, net of cash divested, of $44 million, of which $40 million was received as of September 30, 2017. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company reduced goodwill by $19 million and $2 million in the Global Products segment and in the Building Solutions Asia Pacific segment, respectively.

During fiscal 2017, the Company completed one additional divestiture for a sales price of $4 million, all of which was received as of September 30, 2017. The divestiture decreased the Company's ownership from a controlling to noncontrolling interest, and as a result, the Company deconsolidated cash of $5 million. The divestiture was not material to the Company's consolidated financial statements.

During fiscal 2017, the Company received $52 million in net cash proceeds related to prior year business divestitures and paid $75 million related to prior year business acquisitions.

Fiscal Year 2016

On October 1, 2015, the Company formed a joint venture with Hitachi to expand its Building Technologies & Solutions product offerings. The Company acquired a 60% ownership interest in the new entity for approximately $208 million ($638 million purchase price less cash acquired of $430 million), $133 million of which was paid as of September 30, 2016. In connection with the acquisition, the Company recorded goodwill of $253 million related to purchase price allocations.

In the fourth quarter of fiscal 2016, the Company completed two divestitures for a combined sales price of $39 million, net of cash divested of $13 million. None of the sales proceeds were received as of September 30, 2016. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company reduced goodwill by $16 million in the Global Products segment.

In the third quarter of fiscal 2016, the Company completed a divestiture for a sales price of $16 million, all of which was received as of September 30, 2016. The divestiture was not material to the Company's consolidated financial statements. In connection with the divestiture, the Company reduced goodwill by $3 million in the Building Solutions North America segment.

During fiscal 2016, the Company received $29 million in net cash proceeds related to prior year business divestitures.

4. DISCONTINUED OPERATIONS

As discussed in Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements, on October 31, 2016, the Company completed the spin-off of its Automotive Experience business by way of the transfer of the Automotive Experience business from Johnson Controls to Adient plc. The Company did not retain any equity interest in Adient plc. During the first quarter of fiscal 2017, the Company determined that Adient met the criteria to be classified as a discontinued operation and, as a result, Adient’s historical financial results are reflected in the Company’s consolidated financial statements as a discontinued operation, and assets and liabilities are classified as assets and liabilities held for sale. The Company did not allocate any general corporate overhead to discontinued operations.

The following table summarizes the results of Adient, reclassified as discontinued operations for the fiscal years ended September 30, 2017 and 2016 (in millions). As the Adient spin-off occurred on October 31, 2016, there is only one month of Adient results included in the year ended September 30, 2017.



	Year Ended September 30,
	2017			2016

Net sales	$	1,434		$	16,837

Income from discontinued operations before income taxes	1			525
Provision for income taxes on discontinued operations	35			2,041
Income from discontinued operations attributable to noncontrolling interests, net of tax	9			84
Loss from discontinued operations	$	(43	)	$	(1,600	)

For the fiscal year ended September 30, 2017, the effective tax rate was more than the Irish statutory rate of 12.5% primarily due to the tax impacts of separation costs and Adient spin-off related tax expense, partially offset by non-U.S. tax rate differentials.

In fiscal 2016, the Company did provide U.S. income tax expense related to the restructuring and repatriation of cash for certain non-U.S. subsidiaries in connection with the Automotive Experience planned spin-off. At September 30, 2016 the Company needed to complete the final steps of Automotive Experience restructuring and, as a result, the Company provided deferred taxes of $24 million for the U.S. income tax expense on outside basis differences that reversed upon the completion of the restructuring.

The following table summarizes depreciation and amortization, capital expenditures, and significant operating and investing non-cash items related to Adient for the fiscal years ended September 30, 2017 and 2016 (in millions):



	Year Ended September 30,
	2017			2016

Depreciation and amortization	$	29		$	331
Pension and postretirement benefit expense	—			113
Equity in earnings of partially-owned affiliates	(31		)	(357		)
Deferred income taxes	562			(476		)
Non-cash restructuring and impairment costs	—			87
Equity-based compensation	1			16
Accrued income taxes	(808		)	—
Other	—			(2		)
Capital expenditures	(91		)	(395		)

Assets and Liabilities Held for Sale

During the second quarter of fiscal 2017, the Company signed a definitive agreement to sell its Scott Safety business of the Global Products segment to 3M Company. The transaction closed on October 4, 2017. The assets and liabilities of this business are presented as held for sale in the consolidated statements of financial position as of September 30, 2017. The business did not meet the criteria to be classified as a discontinued operation as the divestiture of the Scott Safety business ~~will~~did not have a major effect on the Company’s operations and financial results.

The following table summarizes the carrying value of the Scott Safety assets and liabilities held for sale at September 30, 2017 (in millions):



	September 30, 2017

Cash	$	9
Accounts receivable - net	100
Inventories	75
Other current assets	5
Assets held for sale	$	189

Property, plant and equipment - net	$	79
Goodwill	1,248
Other intangible assets - net	592
Other noncurrent assets	1
Noncurrent assets held for sale	$	1,920

Accounts payable	$	37
Accrued compensation and benefits	10
Other current liabilities	25
Liabilities held for sale	$	72

Other noncurrent liabilities	$	173
Noncurrent liabilities held for sale	$	173

~~The following table summarizes the carrying value of Adient, classified as assets and liabilities held for sale at September 30, 2016 (in millions):~~

September 30, 2016

Cash $ 105
Cash in escrow related to Adient debt 2,034
Accounts receivable - net 2,071
Inventories 672
Other current assets 756
   Assets held for sale $ 5,638

Property, plant and equipment - net $ 2,240
Goodwill 2,385
Other intangible assets - net 113
Investments in partially-owned affiliates 1,745
Other noncurrent assets 891
   Noncurrent assets held for sale $ 7,374

Short-term debt $ 41
Current portion of long-term debt 38
Accounts payable 2,764
Accrued compensation and benefits 430
Other current liabilities 975
   Liabilities held for sale $ 4,248

Long-term debt $ 3,441
Pension and postretirement benefits 188
Other noncurrent liabilities 259
   Noncurrent liabilities held for sale $ 3,888

Year Ended September 30,
2017 2016 2015

Depreciation and amortization $ 29
$ 331
$ 333
Pension and postretirement benefit expense —
113
15
Equity in earnings of partially-owned affiliates (31 ) (357 ) (295 )
Deferred income taxes 562
(476 ) (50 )
Non-cash restructuring and impairment costs —
87
27
Gain on divestitures —
—
(155 )
Equity-based compensation 1
16
16
Accrued income taxes (808 ) —
—
Other —
(2 ) (4 )
Capital expenditures (91 ) (395 ) (455 )

During the second quarter of fiscal 2017, the Company completed the divestiture of its ADT security business in South Africa within the Building Solutions EMEA/LA segment. The assets and liabilities of this business were presented as held for sale in the consolidated statements of financial position as of September 30, 2016. The business did not meet the criteria to be classified as a discontinued operation.

~~The following table summarizes the carrying value of ADT security business in South Africa assets and liabilities at September 30, 2016 (in millions):~~

September 30, 2016

Accounts receivable - net $ 9
Inventories 7
Other current assets 3
Property, plant and equipment - net 15
Goodwill 89
Other intangible assets - net 30
Other noncurrent assets 4
Assets held for sale $ 157

Accounts payable $ 9
Other current liabilities 19
Liabilities held for sale $ 28

~~At September 30, 2016, $17 million of certain Corporate assets were classified as held for sale. The assets were sold during the second quarter of fiscal 2017.~~

5. INVENTORIES

Inventories consisted of the following (in millions):


	September 30,				September 30,
	2017		2016		2018		2017

Raw materials and supplies	$	919	$	852	$	990	$	919
Work-in-process	567		503		545		567
Finished goods	1,723		1,533		1,689		1,723
Inventories	$	3,209	$	2,888	$	3,224	$	3,209



Ireland		98-0390500
(Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)

One Albert Quay Cork, Ireland
(Address of principal executive offices)
353-21-423-5000
(Registrant's telephone number)



Title of Each Class		Name of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01		New York Stock Exchange



Large accelerated filer	Rþ	Accelerated filer	¨

Non-accelerated filer	¨	~~(Do not check if a smaller reporting company)~~

Emerging growth company	¨	Smaller reporting company	¨



		Page
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION		3

PART I.

ITEM 1.	BUSINESS	3

ITEM 1A.	RISK FACTORS	7

ITEM 1B.	UNRESOLVED STAFF COMMENTS	22

ITEM 2.	PROPERTIES	22

ITEM 3.	LEGAL PROCEEDINGS	23

ITEM 4.	MINE SAFETY DISCLOSURES	2723

	EXECUTIVE OFFICERS OF THE REGISTRANT	2723

PART II.

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	2825

ITEM 6.	SELECTED FINANCIAL DATA	3128

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3229

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5753

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	5854

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	~~137~~125

ITEM 9A.	CONTROLS AND PROCEDURES	~~138~~126

ITEM 9B.	OTHER INFORMATION	~~138~~126

PART III.

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	~~138~~126

ITEM 11.	EXECUTIVE COMPENSATION	~~139~~127

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	~~139~~127

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	~~139~~127

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	~~139~~127

PART IV.

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	~~140~~128

ITEM 16.	FORM 10-K SUMMARY	~~141~~129

	SIGNATURES	~~141~~129

	INDEX TO EXHIBITS	~~142~~130



Title of Class	Number of Record Holders as of September 30, ~~2017~~2018
Ordinary Shares, $0.01 par value	~~40,260~~37,836



Rþ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



	Ordinary Shares Price Range		Dividends
	2017	2016	2017		2016
First Quarter	$ 38.38 - 46.17	$ 32.29 - 39.38	$	0.25	$	0.205
Second Quarter	40.44 - 44.70	30.30 - 38.67	0.25		0.205
Third Quarter	40.36 - 43.71	36.29 - 46.05	0.25		0.205
Fourth Quarter	36.74 - 44.37	42.22 - 48.97	0.25		0.435
Year	$ 36.74 - 46.17	$ 30.30 - 48.97	$	1.00	$	1.05



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased under the Programs
7/1/17 - 7/31/17
Purchases by Company	2,400,200	$	43.61	2,400,200	$	469,275,694
8/1/17 - 8/31/17
Purchases by Company	3,110,953	38.82		3,110,953	348,504,285
9/1/17 - 9/30/17
Purchases by Company	—	—		—	348,504,285
7/1/17 - 7/31/17
Purchases by affiliated purchaser	—	—		—	NA
8/1/17 - 8/31/17
Purchases by affiliated purchaser	—	—		—	NA
9/1/17 - 9/30/17
Purchases by affiliated purchaser	—	—		—	NA


(2)	Return on average shareholders’ equity attributable to Johnson Controls ~~("ROE")~~ represents income from continuing operations attributable to Johnson Controls divided by average shareholders’ equity attributable to Johnson Controls.


(3)	Working capital is defined as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, and the current ~~portion~~portions of assets and liabilities held for sale.


(4)	Total debt to total capitalization represents total debt divided by the sum of total debt and shareholders’ equity attributable to Johnson Controls.


(5)	Net book value per share represents shareholders’ equity attributable to Johnson Controls divided by the number of shares outstanding at the end of the period.


ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Year ended September 30,															Year ended September 30,
	2017			2016			2015			2014			2013			2018			2017			2016			2015			2014
OPERATING RESULTS
Net sales	$	30,172		$	20,837		$	17,100		$	16,717		$	16,684		$	31,400		$	30,172		$	20,837		$	17,100		$	16,717
Segment EBITA (1)	4,258			2,754			2,327			2,084			1,989			4,555			4,258			2,754			2,327			2,084
Income from continuing operations attributable to Johnson Controls (6)	1,654			732			814			906			1,146			2,162			1,654			732			814			906
Net income (loss) attributable to Johnson Controls	1,611			(868		)	1,563			1,215			1,178			2,162			1,611			(868		)	1,563			1,215
Earnings per share from continuing operations (6)
Basic	$	1.77		$	1.10		$	1.24		$	1.36		$	1.68		$	2.34		$	1.77		$	1.10		$	1.24		$	1.36
Diluted	1.75			1.09			1.23			1.34			1.66			2.32			1.75			1.09			1.23			1.34
Return on average shareholders’ equity attributable to Johnson Controls (2) (6)	7		%	4		%	8		%	8		%	10		%	10		%	7		%	4		%	8		%	8		%
Capital expenditures	$	1,343		$	1,249		$	1,135		$	1,199		$	1,377		$	1,030		$	1,343		$	1,249		$	1,135		$	1,199
Depreciation and amortization	1,188			953			860			955			952			1,085			1,188			953			860			955
Number of employees	121,000			209,000			139,000			168,000			170,000			122,000			121,000			209,000			139,000			168,000

FINANCIAL POSITION
Working capital (as defined) (3)	$	1,608		$	369		$	550		$	989		$	875		$	1,714		$	1,608		$	369		$	550		$	989
Total assets	51,884			63,179			29,590			32,777			31,646			48,797			51,884			63,179			29,590			32,777
Long-term debt	11,964			11,053			5,367			5,887			4,361			9,654			11,964			11,053			5,367			5,887
Total debt	13,572			12,759			6,208			6,100			5,218			10,995			13,572			12,759			6,208			6,100
Shareholders' equity attributable to Johnson Controls	20,447			24,118			10,335			11,270			12,273			21,164			20,447			24,118			10,335			11,270
Total debt to capitalization (4)	40		%	35		%	38		%	35		%	30		%	34		%	40		%	35		%	38		%	35		%
Net book value per share (5)	$	22.03		$	25.77		$	15.96		$	16.93		$	17.93		$	22.88		$	22.03		$	25.77		$	15.96		$	16.93

ORDINARY SHARE INFORMATION
Dividends per share	$	1.00		$	1.16		$	1.04		$	0.88		$	0.76		$	1.04		$	1.00		$	1.16		$	1.04		$	0.88
Market prices
High	$	46.17		$	48.97		$	54.52		$	52.50		$	43.49		$	42.60		$	46.17		$	48.97		$	54.52		$	52.50
Low	36.74			30.30			38.48			39.42			24.75			32.89			36.74			30.30			38.48			39.42
Weighted average shares (in millions)
Basic	935.3			667.4			655.2			666.9			683.7			925.7			935.3			667.4			655.2			666.9
Diluted	944.6			672.6			661.5			674.8			689.2			931.7			944.6			672.6			661.5			674.8
Number of shareholders	40,260			41,299			35,425			36,687			38,067			37,836			40,260			41,299			35,425			36,687


	Year Ended September 30,						Year Ended September 30,
(in millions)	2017		2016		Change		2018		2017		Change
Net sales	$	30,172	$	20,837	45	%	$	31,400	$	30,172	4	%


	Net Sales for the Year Ended September 30,						Segment EBITA for the Year Ended September 30,						Net Sales for the Year Ended September 30,						Segment EBITA for the Year Ended September 30,
(in millions)	2017		2016		Change		2017		2016		Change		2018		2017		Change		2018		2017		Change
Building Solutions North America	$	8,341	$	4,687	78	%	$	1,039	$	494	*		$	8,679	$	8,341	4	%	$	1,109	$	1,039	7	%
Building Solutions EMEA/LA	3,595		1,613		*		290		74		*		3,696		3,595		3	%	344		290		19	%
Building Solutions Asia Pacific	2,444		1,736		41	%	323		222		45	%	2,553		2,444		4	%	347		323		7	%
Global Products	8,455		6,148		38	%	1,179		637		85	%	8,472		8,455		—	%	1,338		1,179		13	%
	$	22,835	$	14,184	61	%	$	2,831	$	1,427	98	%	$	23,400	$	22,835	2	%	$	3,138	$	2,831	11	%



	September 30, 2017			September 30, 2016
(in millions)	September 30, 2017			September 30, 2016			Change
Current assets	$	12,292		$	17,109
Current liabilities	(11,854		)	(16,331		)
	438			778			-44	%

Less: Cash	(321		)	(579		)
Add: Short-term debt	1,214			1,078
Add: Current portion of long-term debt	394			628
Less: Assets held for sale	(189		)	(5,812		)
Add: Liabilities held for sale	72			4,276
Working capital (as defined)	$	1,608		$	369		*

Accounts receivable	$	6,666		$	6,394		4	%
Inventories	3,209			2,888			11	%
Accounts payable	4,271			4,000			7	%



	September 30, 2018			September 30, 2017
(in millions)	September 30, 2018			September 30, 2017			Change
Current assets	$	11,823		$	12,292
Current liabilities	(11,250		)	(11,854		)
	573			438			31	%

Less: Cash	(200		)	(321		)
Add: Short-term debt	1,315			1,214
Add: Current portion of long-term debt	26			394
Less: Assets held for sale	—			(189		)
Add: Liabilities held for sale	—			72
Working capital (as defined)	$	1,714		$	1,608		7	%

Accounts receivable	$	7,065		$	6,666		6	%
Inventories	3,224			3,209			—	%
Accounts payable	4,644			4,271			9	%


	Total		2018		2019-2020		2021-2022		2023 and Beyond		Total		2019		2020-2021		2022-2023		2024 and Beyond
Contractual Obligations
Long-term debt (including capital lease obligations)*	$	12,403	$	394	$	4,228	$	1,305	$	6,476	$	9,724	$	26	$	2,489	$	1,973	$	5,236
Interest on long-term debt (including capital lease obligations)*	5,731		413		752		503		4,063		5,399		317		560		476		4,046
Operating leases	954		315		397		157		85		1,200		348		492		263		97
Purchase obligations	2,334		1,830		373		125		6		2,506		1,490		731		262		23
Pension and postretirement contributions	447		64		76		79		228		476		100		75		76		225
Tax indemnification liabilities**	301		—		—		—		—		255		—		—		—		—
Total contractual cash obligations	$	22,170	$	3,016	$	5,826	$	2,169	$	10,858	$	19,560	$	2,281	$	4,347	$	3,050	$	9,627


	September 30,						September 30,
(in millions, except par value and share data)	2017			2016			2018			2017

Assets

Cash and cash equivalents	$	321		$	579		$	200		$	321
Accounts receivable, less allowance for doubtful accounts of $182 and $173, respectively	6,666			6,394
Accounts receivable, less allowance for doubtful accounts of $177 and $182, respectively							7,065			6,666
Inventories	3,209			2,888			3,224			3,209
Assets held for sale	189			5,812			—			189
Other current assets	1,907			1,436			1,334			1,907
Current assets	12,292			17,109			11,823			12,292

Property, plant and equipment - net	6,121			5,632			6,171			6,121
Goodwill	19,688			21,024			19,473			19,688
Other intangible assets - net	6,741			7,540			6,348			6,741
Investments in partially-owned affiliates	1,191			990			1,301			1,191
Noncurrent assets held for sale	1,920			7,374			—			1,920
Other noncurrent assets	3,931			3,510			3,681			3,931
Total assets	$	51,884		$	63,179		$	48,797		$	51,884

Liabilities and Equity

Short-term debt	$	1,214		$	1,078		$	1,315		$	1,214
Current portion of long-term debt	394			628			26			394
Accounts payable	4,271			4,000			4,644			4,271
Accrued compensation and benefits	1,071			1,333			1,146			1,071
Deferred revenue	1,279			1,228			1,326			1,279
Liabilities held for sale	72			4,276			—			72
Other current liabilities	3,553			3,788			2,793			3,553
Current liabilities	11,854			16,331			11,250			11,854

Long-term debt	11,964			11,053			9,654			11,964
Pension and postretirement benefits	947			1,550			717			947
Noncurrent liabilities held for sale	173			3,888			—			173
Other noncurrent liabilities	5,368			5,033			4,718			5,368
Long-term liabilities	18,452			21,524			15,089			18,452

Commitments and contingencies (Note 23)
Commitments and contingencies (Note 22)

Redeemable noncontrolling interests	211			234			—			211

Ordinary shares - par value $0.01, $0.01; 2.0 billion, 2.0 billion shares authorized; 945,055,276, 936,247,911 shares issued, respectively	9			9
Ordinary A shares - par value €1.00; 40,000 shares authorized, none outstanding as of September 30, 2017 and 2016	—			—
Preferred shares - par value $0.01; 200,000,000 shares authorized, none outstanding as of September 30, 2017 and 2016	—			—
Ordinary shares held in treasury, at cost (2017 - 17,080,302; 2016 - 452,083 shares)	(710		)	(20		)
Ordinary shares - par value $0.01, $0.01; 2.0 billion, 2.0 billion shares authorized; 950,969,965, 945,055,276 shares issued, respectively							10			9
Ordinary A shares - par value €1.00; 40,000 shares authorized, none outstanding as of September 30, 2018 and 2017							—			—
Preferred shares - par value $0.01; 200,000,000 shares authorized, none outstanding as of September 30, 2018 and 2017							—			—
Ordinary shares held in treasury, at cost (2018 - 25,963,004; 2017 - 17,080,302 shares)							(1,053		)	(710		)
Capital in excess of par value	16,390			16,105			16,549			16,390
Retained earnings	5,231			9,177			6,604			5,231
Accumulated other comprehensive loss	(473		)	(1,153		)	(946		)	(473		)
Shareholders’ equity attributable to Johnson Controls	20,447			24,118			21,164			20,447
Noncontrolling interests	920			972			1,294			920
Total equity	21,367			25,090			22,458			21,367
Total liabilities and equity	$	51,884		$	63,179		$	48,797		$	51,884


(in millions, except per share data)	Total			Ordinary Shares		Capital in Excess of Par Value		Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)			Total			Ordinary Shares		Capital in Excess of Par Value		Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)
At September 30, 2014	$	11,270		$	7	$	3,369	$	9,915		$	(1,784	)	$	(237	)
Comprehensive income (loss)	743			—		—		1,563			—			(820		)
Cash dividends Common ($1.04 per share)	(681		)	—		—		(681		)	—			—
Repurchases of common stock	(1,362		)	—		—		—			(1,362		)	—
Other, including options exercised	365			—		371		—			(6		)	—
At September 30, 2015	10,335			7		3,740		10,797			(3,152		)	(1,057		)	$	10,335		$	7	$	3,740	$	10,797		$	(3,152	)	$	(1,057	)
Comprehensive loss	(964		)	—		—		(868		)	—			(96		)	(964		)	—		—		(868		)	—			(96		)
Result of contribution of Johnson Controls, Inc. to Johnson Controls International plc	15,808			2		12,157		—			3,649			—			15,808			2		12,157		—			3,649			—
Cash dividends Common ($1.16 per share)	(752		)	—		—		(752		)	—			—			(752		)	—		—		(752		)	—			—
Repurchases of common stock	(501		)	—		—		—			(501		)	—			(501		)	—		—		—			(501		)	—
Other, including options exercised	192			—		208		—			(16		)	—			192			—		208		—			(16		)	—
At September 30, 2016	24,118			9		16,105		9,177			(20		)	(1,153		)	24,118			9		16,105		9,177			(20		)	(1,153		)
Comprehensive income	1,710			—		—		1,611			—			99			1,710			—		—		1,611			—			99
Cash dividends Ordinary ($1.00 per share)	(938		)	—		—		(938		)	—			—			(938		)	—		—		(938		)	—			—
Repurchases of ordinary shares	(651		)	—		—		—			(651		)	—			(651		)	—		—		—			(651		)	—
Spin-off of Adient	(4,038		)	—		—		(4,619		)	—			581			(4,038		)	—		—		(4,619		)	—			581
Other, including options exercised	246			—		285		—			(39		)	—			246			—		285		—			(39		)	—
At September 30, 2017	$	20,447		$	9	$	16,390	$	5,231		$	(710	)	$	(473	)	20,447			9		16,390		5,231			(710		)	(473		)
Comprehensive income (loss)																	1,689			—		—		2,162			—			(473		)
Cash dividends Ordinary ($1.04 per share)																	(968		)	—		—		(968		)	—			—
Repurchases of ordinary shares																	(300		)	—		—		—			(300		)	—
Adoption of ASU 2016-09																	179			—		—		179			—			—
Other, including options exercised																	117			1		159		—			(43		)	—
At September 30, 2018																	$	21,164		$	10	$	16,549	$	6,604		$	(1,053	)	$	(946	)



	September 30, 2016

Cash	$	105
Cash in escrow related to Adient debt	2,034
Accounts receivable - net	2,071
Inventories	672
Other current assets	756
Assets held for sale	$	5,638

Property, plant and equipment - net	$	2,240
Goodwill	2,385
Other intangible assets - net	113
Investments in partially-owned affiliates	1,745
Other noncurrent assets	891
Noncurrent assets held for sale	$	7,374

Short-term debt	$	41
Current portion of long-term debt	38
Accounts payable	2,764
Accrued compensation and benefits	430
Other current liabilities	975
Liabilities held for sale	$	4,248

Long-term debt	$	3,441
Pension and postretirement benefits	188
Other noncurrent liabilities	259
Noncurrent liabilities held for sale	$	3,888



	September 30, 2015		Business Acquisitions			Business Divestitures			Currency Translation and Other			September 30, 2016
Building Technologies & Solutions
Building Solutions North America	$	930	$	8,829		$	(3	)	$	(22	)	$	9,734
Building Solutions EMEA/LA	195		1,787			—			(1		)	1,981
Building Solutions Asia Pacific	310		968			—			(18		)	1,260
Global Products	1,943		5,038			(16		)	(2		)	6,963
Power Solutions	1,082		—			—			4			1,086
Total	$	4,460	$	16,622		$	(19	)	$	(39	)	$	21,024

	September 30, 2016		Business Acquisitions			Business Divestitures			Currency Translation and Other			September 30, 2017
Building Technologies & Solutions
Building Solutions North America	$	9,734	$	(147	)	$	—		$	50		$	9,637
Building Solutions EMEA/LA	1,981		(37		)	—			68			2,012
Building Solutions Asia Pacific	1,260		(14		)	(2		)	11			1,255
Global Products	6,963		(58		)	(1,267		)	49			5,687
Power Solutions	1,086		—			—			11			1,097
Total	$	21,024	$	(256	)	$	(1,269	)	$	189		$	19,688


	September 30, 2017							September 30, 2016							September 30, 2018							September 30, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets
Technology	$	1,328	$	(137	)	$	1,191	$	1,528	$	(24	)	$	1,504	$	1,334	$	(266	)	$	1,068	$	1,328	$	(137	)	$	1,191
Customer relationships	3,168		(486		)	2,682		3,168		(226		)	2,942		3,078		(664		)	2,414		3,168		(486		)	2,682
Miscellaneous	389		(147		)	242		519		(130		)	389		496		(200		)	296		389		(147		)	242
Total amortized intangible assets	4,885		(770		)	4,115		5,215		(380		)	4,835		4,908		(1,130		)	3,778		4,885		(770		)	4,115
Unamortized intangible assets
Trademarks/trade names	2,483		—			2,483		2,555		—			2,555
Trademarks/tradenames															2,448		—			2,448		2,483		—			2,483
Miscellaneous	143		—			143		150		—			150		122		—			122		143		—			143
	2,626		—			2,626		2,705		—			2,705		2,570		—			2,570		2,626		—			2,626
Total intangible assets	$	7,511	$	(770	)	$	6,741	$	7,920	$	(380	)	$	7,540	$	7,478	$	(1,130	)	$	6,348	$	7,511	$	(770	)	$	6,741


	Capital Leases			Operating Leases		Capital Leases			Operating Leases
2018	$	4		$	315
2019	3			237		$	5		$	348
2020	3			160		6			284
2021	2			96		6			208
2022	2			61		15			152
After 2022	9			85
2023						2			111
After 2023						9			97
Total minimum lease payments	23			$	954	43			$	1,200
Interest	(4		)			(7		)
Present value of net minimum lease payments	$	19				$	36



Adient - Term Loan A - LIBOR plus 1.005% due in 2021	—		1,500
Capital lease obligations	19		24

Other foreign-denominated debt
Euro	43		61
Japanese Yen	311		367
Other	47		39
Gross long-term debt	12,403		15,234
Less: current portion	394		628
Less: debt issuance costs	45		74
Less: current portion - liabilities held for sale	—		38
Less: long-term debt - noncurrent liabilities held for sale	—		3,441
Net long-term debt	$	11,964	$	11,053


		Volume Outstanding as of		Volume Outstanding as of
Commodity	Units	September 30, 2017	September 30, 2016	September 30, 2018	September 30, 2017
Copper	Metric Tons	1,962	2,653	3,175	1,962
Polypropylene	Metric Tons	19,563	—	15,868	19,563
Lead	Metric Tons	24,705	5,185	49,066	24,705
Aluminum	Metric Tons	2,169	2,620	3,381	2,169
Tin	Metric Tons	1,715	185	3,076	1,715


	Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815				Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815				Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815				Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Other current assets
Foreign currency exchange derivatives	$	27	$	41	$	—	$	49	$	6	$	27	$	10	$	—
Commodity derivatives	9		4		—		—		1		9		—		—
Other noncurrent assets
Interest rate swaps	—		1		—		—
Equity swap	—		—		55		—		—		—		63		55
Total assets	$	36	$	46	$	55	$	49	$	7	$	36	$	73	$	55

Other current liabilities
Foreign currency exchange derivatives	$	21	$	48	$	25	$	18	$	10	$	21	$	2	$	25
Commodity derivatives	1		—		—		—		14		1		—		—
Liabilities held for sale
Foreign currency exchange derivatives	—		—		—		5
Current portion of long-term debt
Fixed rate debt swapped to floating	—		551		—		—
Long-term debt
Foreign currency denominated debt	2,058		938		—		—		3,149		2,058		—		—
Fixed rate debt swapped to floating	—		301		—		—
Noncurrent liabilities held for sale
Foreign currency denominated debt	—		1,119		—		—
Total liabilities	$	2,080	$	2,957	$	25	$	23	$	3,173	$	2,080	$	2	$	25


	Fair Value of Assets						Fair Value of Liabilities						Fair Value of Assets						Fair Value of Liabilities
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Gross amount recognized	$	91		$	95		$	2,105		$	2,980		$	80		$	91		$	3,175		$	2,105
Gross amount eligible for offsetting	(16		)	(21		)	(16		)	(21		)	(12		)	(16		)	(12		)	(16		)
Net amount	$	75		$	74		$	2,089		$	2,959		$	68		$	75		$	3,163		$	2,089


Derivatives in ASC 815 Cash Flow Hedging Relationships	Year Ended September 30,									Year Ended September 30,
Derivatives in ASC 815 Cash Flow Hedging Relationships	2017			2016			2015			2018			2017			2016
Foreign currency exchange derivatives	$	(1	)	$	(18	)	$	(5	)	$	2		$	(1	)	$	(18	)
Commodity derivatives	14			3			(19		)	(14		)	14			3
Total	$	13		$	(15	)	$	(24	)	$	(12	)	$	13		$	(15	)


Derivatives in ASC 815 Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,								Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,
Derivatives in ASC 815 Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	2017		2016			2015			Location of Gain (Loss) Recognized in Income on Derivative	2018		2017		2016
Foreign currency exchange derivatives	Cost of sales	$	25	$	9		$	25		Cost of sales	$	4	$	25	$	9
Foreign currency exchange derivatives	Income (loss) from discontinued operations	—		(30		)	(24		)	Loss from discontinued operations	—		—		(30		)
Commodity derivatives	Cost of sales	8		(12		)	(11		)	Cost of sales	12		8		(12		)
Forward treasury locks	Net financing charges	—		$	1		$	1		Net financing charges	—		—		1
Total		$	33	$	(32	)	$	(9	)		$	16	$	33	$	(32	)


Derivatives in ASC 815 Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,									Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,
Derivatives in ASC 815 Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	2017			2016			2015			Location of Gain (Loss) Recognized in Income on Derivative	2018		2017			2016
Interest rate swap	Net financing charges	$	(1	)	$	(5	)	$	7		Net financing charges	$	—	$	(1	)	$	(5	)
Fixed rate debt swapped to floating	Net financing charges	2			5			(7		)	Net financing charges	—		2			5
Total		$	1		$	—		$	—			$	—	$	1		$	—


Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,									Location of Gain (Loss) Recognized in Income on Derivative	Year Ended September 30,
	Location of Gain (Loss) Recognized in Income on Derivative	2017			2016			2015			Location of Gain (Loss) Recognized in Income on Derivative	2018			2017			2016
Foreign currency exchange derivatives	Cost of sales	$	(1	)	$	(20	)	$	2		Cost of sales	$	5		$	(1	)	$	(20	)
Foreign currency exchange derivatives	Net financing charges	44			21			(37		)	Net financing charges	33			44			21
Foreign currency exchange derivatives	Income tax provision	(3		)	4			—			Income tax provision	(3		)	(3		)	4
Foreign currency exchange derivatives	Income (loss) from discontinued operations	5			(30		)	20			Loss from discontinued operations	—			5			(30		)
Equity swap	Selling, general and administrative	(3		)	14			(9		)	Selling, general and administrative	(8		)	(3		)	14
Total		$	42		$	(11	)	$	(24	)		$	27		$	42		$	(11	)


	Fair Value Measurements Using:								Fair Value Measurements Using:
	Total as of September 30, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total as of September 30, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	27	$	—	$	27	$	—	$	16	$	—	$	16	$	—
Commodity derivatives	9		—		9		—		1		—		1		—
Exchange traded funds (fixed income)¹	14		14		—		—		14		14		—		—
Other noncurrent assets
Investments in marketable common stock	10		10		—		—		4		4		—		—
Deferred compensation plan assets	92		92		—		—		100		100		—		—
Exchange traded funds (fixed income)¹	155		155		—		—		148		148		—		—
Exchange traded funds (equity)¹	100		100		—		—		119		119		—		—
Equity swap	55		—		55		—		63		—		63		—
Total assets	$	462	$	371	$	91	$	—	$	465	$	385	$	80	$	—
Other current liabilities
Foreign currency exchange derivatives	$	46	$	—	$	46	$	—	$	12	$	—	$	12	$	—
Commodity derivatives	1		—		1		—		14		—		14		—
Total liabilities	$	47	$	—	$	47	$	—	$	26	$	—	$	26	$	—