PPG Annual Report and 10K 2019

2019 PPG ANNUAL REPORT AND FORM 10-K 31 Defined Benefit Pension and Other Postretirement Benefit Plans Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, we make extensive use of assumptions about inflation, investment returns, mortality, turnover, medical costs and discount rates. The Company has established a process by which management reviews and selects these assumptions annually. See Note 13, “Employee Benefit Plans” under Item 8 of this Form 10-K for information on these plans and the assumptions used. Business Combinations In accordance with the accounting guidance for business combinations, the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed will be recognized as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. In addition to using management estimates and negotiated amounts, the Company uses a variety of information sources to determine the estimated fair values of acquired assets and liabilities including: third- party appraisals for the estimated value and lives of identifiable intangible assets and property, plant and equipment; third- party actuaries for the estimated obligations of defined benefit pension plans and similar benefit obligations; and legal counsel or other experts to assess the obligations associated with legal, environmental and other contingent liabilities. The business and technical judgment of management was used in determining which intangible assets have indefinite lives and in determining the useful lives of finite-lived intangible assets in accordance with the accounting guidance for goodwill and other intangible assets. Goodwill and Intangible Assets The Company tests indefinite-lived intangible assets and goodwill for impairment by either performing a qualitative evaluation or a quantitative test at least annually, or more frequently if an indication of impairment arises. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than its carrying amount. In the quantitative test, fair values are estimated using a discounted cash flow model. Key assumptions and estimates used in the discounted cash flow model include discount rates, tax rates, future revenues, operating cash flows and capital expenditures. For more information on these matters, see Note 1, “Summary of Significant Accounting Policies” under Item 8 of this Form 10-K. We believe that the amounts recorded in the financial statements under Item 8 of this Form10-K related to these contingencies, pensions, other postretirement benefits, business combinations, goodwill and other identifiable intangible assetswith indefinite lives are based on the best estimates and judgments of the appropriate PPG management, although actual outcomes could differ from our estimates. Currency Comparing spot exchange rates at December 31, 2018 and at December 31, 2019, the U.S. dollar weakened against certain currencies in the countries where PPG operates, most notably the British pound, Canadian dollar, and the Mexican peso. As a result, consolidated net assets at December 31, 2019 increased by $106 million from December 31, 2018. Comparing spot exchange rates at December 31, 2017 and at December 31, 2018, the U.S. dollar strengthened against certain other major currencies associated with countries in which PPG operates, most notably the Australian dollar, British pound, Chinese yuan, euro and South Korean won. As a result, consolidated net assets at December 31, 2018 decreased by approximately $167 million from December 31, 2017. Comparing average exchange rates during 2019 to those of 2018, the U.S. dollar strengthened against currencies of the countries within the regions PPG operates, including EMEA, Asia Pacific, and Latin America. This had an unfavorable impact of approximately $50 million on full year 2019 income before income taxes from the translation of this foreign income into U.S. dollars. Comparing average exchange rates during 2018 to those of 2017, in the countries in which PPG operates, there was a favorable impact of $21 million on full year 2018 income before income taxes from the translation of this foreign income into U.S. dollars. Forward-Looking Statements Management’s Discussion and Analysis and other sections of this Annual Report contain forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. You can identify forward-looking statements by the fact that they do not relate strictly to current or historic facts. Forward- looking statements are identified by the use of the words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward looking

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