Quarterly report pursuant to Section 13 or 15(d)

RECENT ACCOUNTING PRONOUNCEMENTS

v3.10.0.1
RECENT ACCOUNTING PRONOUNCEMENTS
6 Months Ended
Jun. 30, 2018
Accounting Changes and Error Corrections [Abstract]  
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") that changes the revenue recognition for companies that enter into contracts with customers to transfer goods or services ("Revenue from Contracts with Customers"). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner depicting the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The FASB has also issued a number of updates to this standard. Effective January 1, 2018, we adopted the requirements of this ASU using the full retrospective method. See note 3 for required disclosures pertaining to the new ASU.
In November 2016, the FASB issued an ASU that is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows ("Restricted Cash"). As a result of this update, restricted cash is included within cash and cash equivalents on our statements of consolidated cash flows. Effective January 1, 2018, we adopted the requirements of this ASU retrospectively.
In March 2017, the FASB issued an ASU to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost ("Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost"). The update requires employers to report the current service cost component in the same line item as other compensation costs arising from services rendered by employees during the period. The other components of net benefit cost are required to be presented separately from service cost and outside of income from operations. As a result of this update, the net amount of interest cost, prior service cost and expected return on plan assets is now presented as other income. Effective January 1, 2018, we adopted the requirements of this ASU retrospectively, as required.
We have recast our consolidated financial statements from amounts previously reported due to the adoption of new revenue recognition, pension and restricted cash standards. Impacted consolidated balance sheet line items, which reflect the adoption of the new ASUs, are as follows (in millions):
 
December 31, 2017
 
As previously reported
 
Adjustments (a)
 
Adjustments (b)
 
Adjustments (c)
 
As Recast
Assets:
 
 
 
 
 
 
 
 
 
Other current assets
$
1,133

 
$
170

 
$

 
$

 
$
1,303

Total current assets
15,548

 
170

 

 

 
15,718

Deferred income tax assets
265

 
1

 

 

 
266

Total Assets
$
45,403

 
$
171

 
$

 
$

 
$
45,574

Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
3,872

 
$
62

 
$

 
$

 
$
3,934

Accrued wages and withholdings
2,521

 
87

 

 

 
2,608

Other current liabilities(1)
905

 
29

 

 

 
934

Total current liabilities
12,708

 
178

 

 

 
12,886

Deferred income tax liabilities
757

 
(1
)
 

 

 
756

Shareowners' Equity:
 
 
 
 
 
 
 
 
 
Retained earnings
5,858

 
(6
)
 

 

 
5,852

Total Shareowners' Equity
1,030

 
(6
)
 

 

 
1,024

Total Liabilities and Shareowners' Equity
$
45,403

 
$
171

 
$

 
$

 
$
45,574

(1) The caption "Other current liabilities" was presented separately from "Hedge margin liabilities" of $17 million in the Form 10-K at December 31, 2017. These captions have been collapsed in the consolidated balance sheets as of June 30, 2018 and December 31, 2017 included within this Form 10-Q.  
(a) Recast to reflect the adoption of Revenue from Contracts with Customers. 
(b) Recast to reflect the adoption of Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. 
(c) Recast to reflect the adoption of Restricted Cash. 
 
The unaudited consolidated statement of operations, which reflects the adoption of the new ASUs, is as follows (in millions):
 
Three months ended June 30, 2017
 
As previously reported
 
Adjustments (a)
 
Adjustments (b)
 
Adjustments (c)
 
As Recast
Revenue
$
15,750

 
$
177

 
$

 
$

 
$
15,927

Operating Expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits
8,105

 

 
179

 

 
8,284

Repairs and maintenance
392

 

 

 

 
392

Depreciation and amortization
562

 

 

 

 
562

Purchased transportation
2,443

 
171

 

 

 
2,614

Fuel
616

 

 

 

 
616

Other occupancy
264

 

 

 

 
264

Other expenses
1,152

 
6

 

 

 
1,158

Total Operating Expenses
13,534

 
177

 
179

 

 
13,890

Operating Profit
2,216

 

 
(179
)
 

 
2,037

Other Income and (Expense):
 
 
 
 
 
 
 
 
 
Investment income and other
14

 

 
179

 

 
193

Interest expense
(111
)
 

 

 

 
(111
)
Total Other Income and (Expense)
(97
)
 

 
179

 

 
82

Income Before Income Taxes
2,119

 

 

 

 
2,119

Income Tax Expense
735

 

 

 

 
735

Net Income
$
1,384

 
$

 
$

 
$

 
$
1,384

Basic earnings per share
$
1.59

 
$

 
$

 
$

 
$
1.59

Diluted earnings per share
$
1.58

 
$

 
$

 
$

 
$
1.58

(a) Recast to reflect the adoption of Revenue from Contracts with Customers. 
(b) Recast to reflect the adoption of Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. 
(c) Recast to reflect the adoption of Restricted Cash. 













 
Six months ended June 30, 2017
 
As previously reported
 
Adjustments (a)
 
Adjustments (b)
 
Adjustments (c)
 
As Recast
Revenue
$
31,065

 
$
372

 
$

 
$

 
$
31,437

Operating Expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits
16,236

 

 
359

 

 
16,595

Repairs and maintenance
782

 

 

 

 
782

Depreciation and amortization
1,116

 

 

 

 
1,116

Purchased transportation
4,809

 
350

 

 

 
5,159

Fuel
1,237

 

 

 

 
1,237

Other occupancy
563

 

 

 

 
563

Other expenses
2,322

 
9

 

 

 
2,331

Total Operating Expenses
27,065

 
359

 
359

 

 
27,783

Operating Profit
4,000

 
13

 
(359
)
 

 
3,654

Other Income and (Expense):
 
 
 
 
 
 
 
 
 
Investment income and other
29

 

 
359

 

 
388

Interest expense
(213
)
 

 

 

 
(213
)
Total Other Income and (Expense)
(184
)
 

 
359

 

 
175

Income Before Income Taxes
3,816

 
13

 

 

 
3,829

Income Tax Expense
1,274

 
5

 

 

 
1,279

Net Income
$
2,542

 
$
8

 
$

 
$

 
$
2,550

Basic earnings per share
$
2.91

 
$
0.01

 
$

 
$

 
$
2.92

Diluted earnings per share
$
2.90

 
$
0.01

 
$

 
$

 
$
2.91

 
 
 
 
 
 
 
 
 
 
(a) Recast to reflect the adoption of Revenue from Contracts with Customers. 
(b) Recast to reflect the adoption of Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. 
(c) Recast to reflect the adoption of Restricted Cash. 

The unaudited impacted consolidated statement of cash flows line items, which reflect the adoption of the new ASUs, are as follows (in millions):
 
Six months ended June 30, 2017
 
As previously reported
 
Adjustments (a)
 
Adjustments (b)
 
Adjustments (c)
 
As Recast
Net Income
$
2,542

 
$
8

 
$

 
$

 
$
2,550

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
 
 
 
 
 
Deferred tax (benefit) expense
175

 
5

 

 

 
180

Other assets
440

 
(20
)
 

 

 
420

Accounts payable
(534
)
 
4

 

 

 
(530
)
Accrued wages and withholdings
(18
)
 
5

 

 

 
(13
)
Other liabilities
(456
)
 
(2
)
 

 

 
(458
)
Cash flows from operating activities
2,621

 

 

 

 
2,621

Purchase of marketable securities
(1,084
)
 

 

 
2

 
(1,082
)
Net cash used in investing activities
(2,027
)
 

 

 
2

 
(2,025
)
Net decrease in cash, cash equivalents and restricted cash
68

 

 

 
2

 
70

Cash, cash equivalents and restricted cash at the beginning of period
3,476

 

 

 
445

 
3,921

Cash, cash equivalents and restricted cash at the end of period
$
3,544

 
$

 
$

 
$
447

 
$
3,991

(a) Recast to reflect the adoption of Revenue from Contracts with Customers. 
(b) Recast to reflect the adoption of Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. 
(c) Recast to reflect the adoption of Restricted Cash. 
In February 2018, the FASB issued an ASU that allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act"). Effective January 1, 2018, we early adopted this ASU and elected to reclassify the income tax effects of the Tax Act from AOCI to retained earnings. This resulted in a $735 million increase to retained earnings and a $735 million decrease to AOCI. Our current accounting policy for releasing income tax effects from other comprehensive income is based on a portfolio approach.
Other accounting pronouncements adopted during the periods covered by the consolidated financial statements did not have a material impact on our consolidated financial position, results of operations or cash flows.
Accounting Standards Issued But Not Yet Effective
In August 2017, the FASB issued an ASU to enhance recognition of the economic results of hedging activities in the financial statements. In addition, this update makes certain targeted improvements to simplify the application of the hedge accounting guidance and increase transparency regarding the scope and results of hedging activities. The guidance will generally be applied prospectively and becomes effective for us in the first quarter of 2019, but early adoption is permitted. We are currently evaluating this update to determine the full impact of its adoption but do not expect this ASU to have a material impact on our consolidated financial position, results of operations or cash flows.
In March 2017, the FASB issued an ASU to require the premium on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount would not be impacted by the proposed update. Under U.S. GAAP, premiums on callable debt securities are generally amortized over the contractual life of the security. Only in cases when an entity has a large number of similar securities is it allowed to consider estimates of principal prepayments. Amortization of the premium over the contractual life of the instrument can result in losses being recorded for the unamortized premium if the issuer exercises the call feature prior to maturity. The standard will be effective for us in the first quarter of 2019, but early adoption is permitted. We are currently evaluating this update to determine the full impact of its adoption but do not expect this ASU to have a material impact on our consolidated financial position, results of operations or cash flows.
In January 2017, the FASB issued an ASU to simplify the accounting for goodwill impairment. The update removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard will be effective for us in the first quarter of 2020, but early adoption is permitted. We are currently evaluating this update to determine the full impact of its adoption but do not expect this ASU to have a material impact on our consolidated financial position, results of operations or cash flows.
In February 2016, the FASB issued an ASU that requires lessees to recognize a right-of-use asset and lease liability on their balance sheet for all leases with terms beyond twelve months. Although the distinction between operating and finance leases will continue to exist under the new standard, the recognition and measurement of expenses and cash flows will not change significantly from the current treatment. This new guidance requires modified retrospective application and becomes effective for us in the first quarter of 2019, but early adoption is permitted. We are currently evaluating this update and subsequent amendments to the original update to determine the full impact of its adoption on our consolidated financial position, results of operations, cash flows and related disclosures, as well as the impact of adoption on policies, practices and systems. We have reviewed and selected a new lease accounting system and are currently accumulating and processing lease data into the system. In addition, we are currently analyzing our internal control framework to determine if controls should be added or modified as a result of adopting this standard. Based on the preliminary evaluation of our lease portfolio, we believe the largest impact will be accounting for leases for real estate, as we have a large portfolio of leased properties that are currently accounted for as operating leases. As of December 31, 2017, we had $1.637 billion of future minimum operating lease commitments that are not currently recognized on our consolidated balance sheets. We expect material changes to our consolidated balance sheets as a result of the new standard.
Other accounting pronouncements issued, but not effective until after June 30, 2018, are not expected to have a material impact on our consolidated financial position, results of operations or cash flows.