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Basis of Presentation of the Consolidated and Combined Financial Statements
12 Months Ended
Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation of the Consolidated and Combined Financial Statements
BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated balance sheets of Axalta at December 31, 2017 and 2016 and the related consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated statements of cash flows and consolidated statements of changes in shareholders' equity for the years ended December 31, 2017, 2016 and 2015 included herein are audited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the financial position of Axalta. All intercompany balances and transactions have been eliminated.
The annual audited consolidated financial statements include the accounts of Axalta and its subsidiaries, and entities in which a controlling interest is maintained. Certain of our joint ventures are accounted for on a one-month lag basis, the effect of which is not material.
Venezuela Deconsolidation
During the year ended December 31, 2017, we deconsolidated our Venezuelan subsidiary from our consolidated financial statements and began accounting for our investment in our 100% owned Venezuelan subsidiary using the cost method of accounting. See Note 25 for additional information.
Correction of Immaterial Errors to Prior Period Financial Statements
During the year ended December 31, 2017, the Company identified and corrected errors that affected previously-issued consolidated financial statements. Based on an analysis of Accounting Standards Codification (“ASC”) 250 - Accounting Changes and Error Corrections (“ASC 250”), Staff Accounting Bulletin 99 - Materiality (“SAB 99”) and Staff Accounting Bulletin 108 - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), the Company determined that these corrections were immaterial to the previously-issued financial statements. However, given the significance of the cumulative adjustments on the financial results, we have revised our historical presentation of certain amounts in the consolidated financial statements which are described further below.
Revenue Corrections
The Company recognizes revenue from the sale of products to its customers when risk of loss and ownership of the product transfers to the customer. Ownership transfers either upon shipment of the product or when the product is delivered. In regard to our refinish end-market, risk of loss passes upon the sale to its distribution customers. Subsequent to the sale to distribution customers, when the distribution customers sell the products to collision repair body shops, additional rebates or further pricing concessions can be given to our distribution customers and certain collision repair body shops. The Company previously recorded these additional rebates and pricing concessions at the time of sale from the distributor to the collision repair body shops. The Company has concluded those rebates and pricing concessions should have been estimated and recorded as a reduction to net sales upon the sale to our distribution customers.
The Company concluded that its accounting policy for the sale to distributors is appropriate as the sales price is fixed or determinable at the time ownership transfers to these distributors, based on the Company’s ability to make a reasonable estimate of future certain pricing or rebates concessions at the time of shipment.
The Company has corrected the errors in the timing of revenue recognition by estimating those additional rebates and pricing concessions at the time of sale to distribution customers and reducing net sales by $4.7 million ($3.0 million after tax) and $3.3 million ($2.1 million after tax) for the years ended December 31, 2016 and 2015, respectively. Diluted earnings per share was reduced by $0.01 for each of these years. The after-tax impacts noted above had the equivalent impacts on our consolidated statements of comprehensive income (loss) for the respective periods. The cumulative impact on the consolidated balance sheet at December 31, 2016 resulted in increases of $22.4 million$3.1 million$8.3 million and $11.0 million to other accrued liabilities, goodwill, other assets and accumulated deficit, respectively, as a result of these prior period corrections. Amounts had no impact on the Company’s total cash flows from operations as reported within the historical consolidated statements of cash flows.