Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Basis of Presentation

The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its most recent Annual Report on Form 10-K.

Effective in the first quarter of 2022, 3M made changes in the measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 16. 3M's disclosed disaggregated revenue was also updated as a result of the changes in segment reporting. See additional information in Note 2. Information provided herein reflects the impact of these changes for all periods presented.

Consolidation and foreign currency translation

Local currencies generally are considered the functional currencies outside the United States with the exception of 3M’s subsidiaries in Argentina, the economy of which is considered highly inflationary and, accordingly, the financial statements of these subsidiaries are remeasured as if their functional currency is that of their parent. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at average monthly currency exchange rates in effect during the period. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

3M has subsidiaries in Turkey. Based on underlying indices, Turkey’s cumulative three-year inflation rate exceeded 100 percent in the first quarter of 2022, thus being considered highly inflationary. As a result, the financial statements of the Turkish subsidiaries will be remeasured as if their functional currency were that of their parent, starting in the second quarter of 2022. The operating income and balances of underlying net monetary assets denominated in Turkish lira are not material to 3M.

Earnings Per Share

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect of 23.1 million average options for the three months ended March 31, 2022 and 8.7 million average options for the three months ended March 31, 2021. The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations


	Three months ended March 31,
(Amounts in millions, except per share amounts)	2022		2021
Numerator:
Net income attributable to 3M	$	1,299	$	1,624

Denominator:
Denominator for weighted average 3M common shares outstanding – basic	572.3		580.5
Dilution associated with the Company’s stock-based compensation plans	2.7		5.8
Denominator for weighted average 3M common shares outstanding – diluted	575.0		586.3

Earnings per share attributable to 3M common shareholders – basic	$	2.27	$	2.80
Earnings per share attributable to 3M common shareholders – diluted	$	2.26	$	2.77

New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements in 3M’s 2021 Annual Report on Form 10-K for a discussion of applicable standards issued and not yet adopted by 3M.