The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the consolidated financial statements and footnotes included in PACCAR Inc’s (PACCAR or the Company) Annual Report on Form 10‑K for the year ended December 31, 2021.

Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average number of common shares outstanding, plus the effect of any participating securities. Diluted earnings per common share are computed assuming that all potentially dilutive securities are converted into common shares under the treasury stock method. The dilutive and antidilutive options are shown separately in the table below.

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022		2021		2022		2021
Additional shares		463,000		519,900		485,600		678,000
Antidilutive options		1,091,300		580,400		1,100,300		583,600

Change in Accounting: In the first quarter of 2022, the Company changed the method of accounting for its U.S. inventories from last-in-first-out (LIFO) to first-in-first-out (FIFO). Inventories valued using the LIFO method comprised 41% of consolidated inventories before deducting the LIFO reserve at December 31, 2021. The Company believes the FIFO method is preferable because it better matches cost with revenues, it results in a more consistent method to value inventory with its foreign subsidiaries and it improves comparability with industry peers. This change increased Retained Earnings by $143.3 million to $11,148.5 million at January 1, 2021. The effects of the change in accounting principle have been retrospectively applied to all periods presented:

The effect of the changes made to the Company’s Consolidated Statements of Comprehensive Income was as follows:

Three Months Ended September 30, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE			AS ADJUSTED
Truck, Parts and Other
Cost of sales and revenues	$	4,180.1	$	(3.9	)	$	4,176.2
Income Taxes		105.6		1.1			106.7
Net Income		377.7		2.8			380.5

Nine Months Ended September 30, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE			AS ADJUSTED
Truck, Parts and Other
Cost of sales and revenues	$	13,533.5	$	(8.2	)	$	13,525.3
Income Taxes		386.9		2.1			389.0
Net Income		1,340.7		6.1			1,346.8

The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet was as follows:

December 31, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE		AS ADJUSTED
Truck, Parts and Other
Inventories, net	$	1,768.3	$	207.7	$	1,976.0
Other liabilities		1,436.5		51.1		1,487.6
Retained earnings		11,869.2		156.6		12,025.8

The change in accounting policy did not materially affect basic or diluted net income per share or income before income taxes within the Truck, Parts and Other segments for the three and nine months ended September 30, 2021. There was no impact on total net cash provided by operating activities.

The following table compares the amounts currently reported to amounts that would have been reported under LIFO in the Consolidated Statements of Comprehensive Income.

Three Months Ended September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Cost of sales and revenues	$	5,689.3	$	5,699.1	$	(9.8	)
Income Taxes		210.3		207.9		2.4
Net Income		769.4		762.0		7.4
Net Income Per Share
Basic	$	2.21	$	2.19	$	.02
Diluted	$	2.21	$	2.18	$	.03

Nine Months Ended September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Cost of sales and revenues	$	16,785.8	$	16,821.5	$	(35.7	)
Income Taxes		582.9		574.1		8.8
Net Income		2,090.3		2,063.4		26.9
Net Income Per Share
Basic	$	6.00	$	5.92	$	.08
Diluted	$	5.99	$	5.91	$	.08

The effect of the change to income before income taxes within the Truck, Parts and Other segments for the three months and nine months ended September 30, 2022 would not be material. In addition, there would be no material effect on the Consolidated Statements of Cash Flows.

The following table compares the amounts currently reported to amounts that would have been reported under LIFO in the Consolidated Balance Sheet.

September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Inventories, net	$	2,382.1	$	2,138.7	$	243.4
Accounts payable, accrued expenses and other		4,381.8		4,321.9		59.9
Retained earnings		13,760.8		13,577.3		183.5

New Accounting Pronouncements: The Company adopted the following standards on January 1, 2022, which had no material impact on the Company’s consolidated financial statements.

The Financial Accounting Standards Board (FASB) also issued the following standards, which are not expected to have a material impact on the Company’s consolidated financial statements.