New Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

Pension and Other Postretirement Benefit Plans

In March 2017, the FASB issued authoritative guidance intended to improve the consistency, transparency and usefulness of financial information related to defined benefit pension or other postretirement plans. Under the new guidance, an employer must disaggregate the service cost component from the other components of net benefit cost within the statements of operations. Specifically, the new guidance requires us to report only the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period; while the other components of net benefit cost are now presented in the unaudited condensed consolidated statements of operations separately from the service cost component and outside of operating income. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. We have also determined that only service cost will be reported within each operating segment and all other components will be reported within the Corporate segment. The guidance related to the income statement presentation of service costs and other pension and postretirement benefit costs is applied retrospectively, while the capitalization of service costs component is applied prospectively. We adopted this guidance as of January 1, 2018, which was a classification adjustment only and had no impact to our consolidated net income. The adoption of this guidance resulted in the following retrospective adjustments within our unaudited condensed consolidated results of operations:



	Three Months Ended March 31, 2017
	As Adjusted - Pension Methodology⁽¹⁾			As Adjusted - Accounting Standard Update
	(In millions)
Unaudited Condensed Consolidated Statement of Operations:
Cost of goods sold	$	(1,367.7	)	$	(1,372.3	)
Marketing, general and administrative expenses	$	(699.5	)	$	(705.3	)
Special items, net	$	(3.8	)	$	(6.7	)
Operating income (loss)	$	377.7		$	364.4
Other pension and postretirement benefits (costs), net	$	—		$	13.3

(1)

As discussed in detail within Note 1, "Basis of Presentation and Summary of Significant Accounting Policies", our historical unaudited condensed consolidated financial statements have been revised to reflect the retrospective application of our change in accounting policy for calculating the market-related value of pension plan assets used to determine net periodic pension cost. The change was effective in the fourth quarter of 2017.

The following table shows the (increase) decrease for the respective line item within the unaudited condensed consolidated statement of operations for segment reporting for the three months ended March 31, 2017:



	Corporate		Europe			U.S.			Canada
Cost of goods sold	$	—	$	(6.6	)	$	1.8		$	0.2
Marketing, general and administrative expenses	—		(4.7		)	(0.8		)	(0.3		)
Special items, net	—		—			—			(2.9		)
Other pension and postretirement benefits (costs), net	13.3		—			—			—
Total	$	13.3	$	(11.3	)	$	1.0		$	(3.0	)

Revenue Recognition

In May 2014, the FASB issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services.

We adopted this guidance and related amendments as of January 1, 2018, applying the modified retrospective transition approach to all contracts. Based on our comprehensive assessment of the new guidance, including our evaluation of the five-step approach outlined within the guidance, we concluded that the adoption did not have a significant impact to our core revenue generating activities. However, the adoption resulted in a change in presentation of certain cash payments made to customers as well as the timing of recognition of certain promotional discounts. Specifically, certain cash payments to customers were previously recorded within marketing, general and administrative expenses in the unaudited condensed consolidated statements of operations. Upon the adoption of the new guidance, many of these cash payments did not meet the specific criteria within the new guidance of providing a “distinct” good or service, and therefore, were required to be presented as a reduction of revenue. Based on foreign exchange rates as of March 31, 2018, we currently anticipate that the impact of this change will result in a reduction of revenue and marketing, general and administrative expenses by approximately $70 million to $90 million during 2018, primarily within our Canada segment, with no impact to net income. However, actual results may differ from these estimates. Furthermore, upon adoption of the new guidance, certain of our promotional discounts which are deemed variable consideration under the new guidance, are now recognized at the time of the related shipment of product, which is earlier than recognized under historical guidance. We anticipate that this change in recognition timing will shift financial statement recognition primarily amongst quarters, however, do not anticipate that the full-year impact will be significant to our financial results. We also evaluated the requirements of the new guidance on our other revenue generating activities such as contract brewing and license arrangements, and concluded that no changes to our historical accounting treatment was required.

As a result of the cumulative impact of adopting the new guidance, we recorded a reduction to opening retained earnings of $27.8 million as of January 1, 2018, with an offsetting increase primarily within accounts payable and other current liabilities and the related tax effects, related primarily to the accelerated recognition of certain promotional discounts. Results for reporting periods beginning after January 1, 2018, are presented under the new guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with historical accounting guidance. The following tables provide a comparison of our current period results of operations and financial position under the new guidance, versus our financial statements if the historical guidance had continued to be applied:



	Three Months Ended March 31, 2018
	Under Historical Guidance			As Reported Under New Guidance			Effect of Change
	(In millions, except per share data)
Unaudited Condensed Consolidated Statement of Operations:
Sales	$	2,884.1		$	2,868.0		$	(16.1	)
Excise taxes	(536.5		)	(536.5		)	—
Net sales	2,347.6			2,331.5			(16.1		)
Cost of goods sold	(1,535.7		)	(1,535.7		)	—
Gross profit	811.9			795.8			(16.1		)
Marketing, general and administrative expenses	(694.2		)	(681.1		)	13.1
Special items, net	314.8			314.8			—
Operating income (loss)	432.5			429.5			(3.0		)
Interest income (expense), net	(82.4		)	(83.2		)	(0.8		)
Other pension and postretirement benefits (costs), net	10.0			10.0			—
Other income (expense), net	1.1			1.1			—
Income (loss) before income taxes	361.2			357.4			(3.8		)
Income tax benefit (expense)	(75.7		)	(74.9		)	0.8
Net income (loss)	285.5			282.5			(3.0		)
Net (income) loss attributable to noncontrolling interests	(4.4		)	(4.4		)	—
Net income (loss) attributable to MCBC	$	281.1		$	278.1		$	(3.0	)
Basic net income (loss) attributable to MCBC per share	$	1.30		$	1.29		$	(0.01	)
Diluted net income (loss) attributable to MCBC per share	$	1.30		$	1.28		$	(0.02	)



	As of March 31, 2018
	Under Historical Guidance		As Reported Under New Guidance		Effect of Change
	(In millions)
Unaudited Condensed Consolidated Balance Sheet:
Assets
Accounts receivable, net	$	779.2	$	779.3	$	0.1
Other current assets, net	$	321.4	$	326.2	$	4.8
Liabilities and equity
Accounts payable and other current liabilities	$	2,491.6	$	2,537.1	$	45.5
Deferred tax liabilities	$	1,698.5	$	1,688.7	$	(9.8	)
Retained earnings	$	7,398.7	$	7,367.9	$	(30.8	)

These changes are primarily driven by the reclassification of certain cash payments to customers from marketing, general and administrative expenses to a reduction of revenue, as well as the change in the timing of recognition of certain promotional discounts and cash payments to customers. This adoption had no impact to our cash flows from operating, investing or financing activities. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further details on our significant accounting policies for revenue recognition pursuant to the new guidance.

New Accounting Pronouncements Not Yet Adopted

In February 2018, the FASB issued authoritative guidance intended to improve the usefulness of financial information related to the enactment of the 2017 U.S. Tax Cuts and Jobs Act (the "2017 Tax Act"). This guidance provides an option to reclassify from accumulated other comprehensive income to retained earnings the stranded tax effects resulting from the change in the U.S. federal corporate income tax rate as a result of the 2017 Tax Act. This guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial statements in order to determine whether to elect to make this reclassification upon adoption of this guidance.

In August 2017, the FASB issued authoritative guidance intended to refine and expand hedge accounting for both financial and commodity risks. The revised guidance will create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. In addition, this guidance makes certain targeted improvements to simplify the application of hedge accounting guidance. This guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial position and results of operations upon adoption of this guidance, and do not anticipate that such impact will be significant.

In February 2016, the FASB issued authoritative guidance intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance will require disclosures to help investors and other financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The guidance should be applied under a modified retrospective transition approach. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial position and results of operations upon adoption of this guidance. This guidance will result in our existing operating leases, for certain real estate and equipment, to be recognized on our balance sheet. We will further analyze our lease arrangements as we complete our assessment and implementation of this new guidance.

Other than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, to our unaudited condensed consolidated interim financial statements.