NEW ACCOUNTING STANDARDS

Revenue Recognition. In May 2014, FASB issued a new ASU related to revenue recognition. FCX adopted this standard effective January 1, 2018, under the modified retrospective approach applied to contracts that remain in force at the adoption date. The adoption of this standard did not result in any financial statement impacts or changes to FCX’s revenue recognition policies or processes as revenue is primarily derived from arrangements in which the transfer of control coincides with the fulfillment of performance obligations (refer to Note 1 of FCX’s annual report on Form 10-K for disclosure of FCX’s revenue recognition policy). In connection with the adoption of the standard and consistent with FCX’s policy prior to adoption of the standard, FCX has elected to account for shipping and handling activities performed after control of goods has been transferred to a customer as a fulfillment cost recorded in production and delivery costs on the consolidated statements of income.

FCX recognizes revenue for all of its products upon transfer of control in an amount that reflects the consideration it expects to receive in exchange for those products. Transfer of control is in accordance with the terms of customer contracts, which is generally upon shipment or delivery of the product. While payment terms vary by contract, terms generally include payment to be made within 30 days, but not longer than 60 days. Certain of FCX’s concentrate and cathode sales contracts also provide for provisional pricing, which is accounted for as an embedded derivative (refer to Note 6 for further discussion). For provisionally priced sales, 90 percent to 100 percent of the provisional payment is made upon shipment or within 20 days, and final balances are settled in a contractually specified future month (generally one to four months from the shipment date) based on quoted monthly average copper settlement prices on the LME or COMEX and quoted monthly average LBMA gold settlement prices. FCX’s product revenues are also recorded net of treatment charges, royalties and export duties. Refer to Note 9 for a summary of revenue by product type.

Financial Instruments. In January 2016, FASB issued an ASU that amends the guidance on the classification and measurement of financial instruments. This ASU makes limited changes to prior guidance and amends certain disclosure requirements. FCX adopted this ASU effective January 1, 2018, and adoption did not have a material impact on its financial statements.

Leases. In February 2016, FASB issued an ASU that will require lessees to recognize most leases on the balance sheet. This ASU allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. For public entities, this ASU is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. In July 2018, FASB issued a practical expedient, which FCX expects to elect, allowing for entities to apply the provisions of the updated lease guidance at the January 1, 2019, effective date, without adjusting the comparative periods presented. FCX is completing an assessment of its lease portfolio and is in the process of implementing a new system, collecting data, and designing processes and controls to account for its leases in accordance with the new standard. Based on FCX’s efforts to date, it does not expect adoption of this ASU to have a material impact on its financial statements.

Statement of Cash Flows: Restricted Cash. In November 2016, FASB issued an ASU that changes the classification and presentation of restricted cash and restricted cash equivalents on the statement of cash flows. The ASU requires that a statement of cash flows include the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. FCX adopted this ASU effective January 1, 2018, and adjusted its consolidated statement of cash flows for the nine months ended September 30, 2017, to include restricted cash and restricted cash equivalents with cash and cash equivalents.

The impact of adopting this ASU for the nine months ended September 30, 2017, follows (in millions):



	Previously Reported			Impact of Adoption			Current Presentation
Accrued income taxes and changes in other tax payments included in cash flow from operating activities	$	399		$	(6	)	$	393
Net cash provided by operating activities	3,018			(6		)	3,012
Other, net included in cash flow from investing activities	(22		)	20			(2		)
Net cash used in investing activities	(974		)	20			(954		)
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents	757			14			771
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	4,245			158			4,403
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	4,957			172			5,129

Net Periodic Pension and Postretirement Benefit Cost. In March 2017, FASB issued an ASU that changes how entities with defined benefit pension or other postretirement benefit plans present net periodic benefit cost in the income statement. This ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item or items as other compensation costs for those employees who are receiving the benefit. In addition, only the service cost component is eligible for capitalization when applicable (i.e., as a cost of inventory or an internally constructed asset). The other components of net periodic benefit cost are required to be presented separately from the service cost component and outside of operating income. These other components of net periodic benefit cost are not eligible for capitalization, and FCX elected to include these other components in other income (expense), net. FCX adopted this ASU effective January 1, 2018, and adjusted its presentation in the consolidated statements of income for the three and nine months ended September 30, 2017, to conform with the new guidance. The impact of adopting this ASU for the three and nine months ended September 30, 2017, follows (in millions):



	Three Months Ended September 30, 2017
	Previously Reported		Impact of Adoption			Current Presentation
Production and delivery	$	2,802	$	(8	)	$	2,794
Total cost of sales	3,220		(8		)	3,212
Selling, general and administrative expenses	106		(2		)	104
Environmental obligations and shutdown costs	73		(1		)	72
Total costs and expenses	3,393		(11		)	3,382
Operating income	917		11			928
Other income (expense), net	2		(11		)	(9		)



	Nine Months Ended September 30, 2017
	Previously Reported		Impact of Adoption			Current Presentation
Production and delivery	$	7,497	$	(35	)	$	7,462
Total cost of sales	8,754		(35		)	8,719
Selling, general and administrative expenses	366		(4		)	362
Mining exploration and research expenses	61		(1		)	60
Environmental obligations and shutdown costs	81		(5		)	76
Total costs and expenses	9,196		(45		)	9,151
Operating income	2,166		45			2,211
Other income (expense), net	36		(45		)	(9		)

Tax Reform Reclassification. In February 2018, FASB issued an ASU that allows entities to elect to reclassify the stranded income tax effects caused by the Act in accumulated other comprehensive income (AOCI) to retained earnings. This election applies to the U.S. federal income tax rate change from 35 percent to 21 percent. FCX elected to early adopt this standard effective July 1, 2018, which resulted in a one-time reclassification totaling $79 million from AOCI to retained earnings in third-quarter 2018. FCX has not elected to reclassify other “indirect” income tax effects of the Act stranded in AOCI. Any additional income tax effects stranded in AOCI will continue to pass through earnings in future periods as specific classes of AOCI items are reversed in full.