Consolidation and Presentation

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation and Presentation

Consolidation and Presentation

As you read the accompanying financial statements you should also read our Annual Report on Form 10-K for the year ended December 31, 2016.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly Tenneco Inc.’s results of operations, comprehensive income, financial position, cash flows, and changes in shareholders’ equity for the periods indicated. We have prepared the unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (U.S. GAAP) for annual financial statements.

Our condensed consolidated financial statements include all majority-owned subsidiaries. We carry investments in 20 percent to 50 percent owned companies in which the Company does not have a controlling interest, as equity method investments, at cost plus equity in undistributed earnings since the date of acquisition and cumulative translation adjustments. We have eliminated all intercompany transactions.

Revision of Previously Issued Financial Statements

For the periods from April 1, 2013 through March 31, 2017, we identified approximately $34 million in lump sum payments from our suppliers that were incorrectly recorded upon receipt as a reduction to cost of sales. The errors resulted from the intentional mischaracterization by certain purchasing and accounting personnel at the Company’s China subsidiaries of the nature of the accounting transactions related to the payments received from suppliers. These payments should have been deferred and amortized over the life of the underlying supplier agreements. The deferred amount related to these payments was $29 million at March 31, 2017 and recorded within deferred credit and other liabilities. In addition, we identified an unrelated error of approximately $7 million of substrate liabilities that should have been accrued during the periods from January 1, 2016 through March 31, 2017, understating cost of sales in each of these periods. We evaluated the impact of these items on prior periods under the guidance of SEC Staff Accounting Bulletin (SAB) No. 99, “Materiality” and determined that the amounts were not material to previously issued financial statements. As a result, we have revised and will revise for annual and interim periods in future filings, for certain amounts in the consolidated financial statements in order to correct these errors. See Note 14 in our notes to condensed consolidated financial statements located in Part I Item 1 of this Form 10-Q/A.

Prepayments and Other

Prepayments and other included $126 million and $97 million at March 31, 2017 and December 31, 2016, respectively, for in-process tools and dies that we are building for our original equipment customers.

Accounts Payable

Accounts payable included $88 million and $99 million at March 31, 2017 and December 31, 2016, respectively, for accrued compensation and $30 million and $27 million at March 31, 2017 and December 31, 2016, respectively, for bank overdrafts at our European subsidiaries.