Allowance for doubtful accounts, increase

[Table of Contents](#ia72a687f7b8a4bb1b43219ab5b663314_7)customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required. The Company does not believe that trade accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas. On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, using the modified retrospective transition method and recorded a net increase to the allowance for doubtful accounts of $10 million due to the cumulative impact of adoption. The Company’s allowance for doubtful accounts as of December 31, 2021 reflects the Company’s best estimate of the expected future losses for its accounts receivables; however, these estimates may change and future actual losses may differ from the Company’s estimates. The Company will continue to monitor economic conditions and will revise the estimates of the expected future losses for accounts receivable as necessary. The Company recorded $31 million, $31 million and $30 million of expense associated with doubtful accounts for the years ended December 31, 2021, 2020 and 2019, respectively. Included in the Company’s trade accounts receivable and other long-term assets as of December 31, 2021 and 2020 are $247 million and $254 million of net aggregate financing receivables, respectively. All financing receivables are evaluated for impairment based on individual customer credit profiles.Inventories—Inventories include the costs of material, labor and overhead. Inventories are stated at the lower of cost and net realizable value primarily using the first-in, first-out (“FIFO”) method. The classes of inventory as of December 31 are summarized as follows ($ in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |
| Finished goods | $ | 1,343  |  |  | $ | 1,232  |  |
| Work in process | 473  |  |  | 369  |  |
| Raw materials | 951  |  |  | 691  |  |
| Total | $ | 2,767  |  |  | $ | 2,292  |  |

Prepaid Expenses and Other Current Assets—Prepaid expenses and other current assets primarily result from advance payments to vendors for good and services and are capitalized until the related goods are received or services are performed. Included in the Company’s prepaid expenses and other current assets as of December 31, 2021 and 2020 are prepaid expenses of $770 million and $659 million, respectively, and taxes receivable for income and other taxes of $812 million and $700 million, respectively. Property, Plant and Equipment—Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:

|  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |
| Category |  | Useful Life |
| Buildings |  | 30 years |
| Leased assets and leasehold improvements |  | Amortized over the lesser of the economic life of the asset orthe term of the lease |
| Machinery and equipment |  | 3 – 10 years |
| Customer-leased instruments |  | 5 – 7 years |

Estimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively.The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |
| Land and improvements | $ | 203  |  |  | $ | 192  |  |
| Buildings | 1,676  |  |  | 1,522  |  |
| Machinery and equipment | 3,610  |  |  | 2,881  |  |
| Customer-leased equipment | 1,766  |  |  | 1,849  |  |
| Gross property, plant and equipment | 7,255  |  |  | 6,444  |  |
| Less: accumulated depreciation | (3,465) |  |  | (3,182) |  |
| Property, plant and equipment, net | $ | 3,790  |  |  | $ | 3,262  |  |

68
