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Evaluation of Disclosure Controls and Procedures
−Removed: Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of September 30, 2020.
−Removed: Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer, concluded that, as of September 30, 2020, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
−Removed: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
−Removed: We did not maintain effective controls over the accounting for certain foreign exchange gains and losses.
−Removed: Specifically, we previously did not have controls in place to monitor and quantify the difference between the foreign exchange gains and losses that we reported and the foreign exchange gains and losses that we would have reported using exchange rates determined in accordance with U.S.
−Removed: Additionally, our policies and controls related to approvals and monitoring of intra-company transactions were insufficient to prevent or detect intra-company transactions undertaken solely for the purpose of generating foreign exchange gains or avoiding losses under our historical exchange rate convention.
−Removed: This material weakness resulted in the restatement of our consolidated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017 and each of the quarterly and year-to-date periods in the year ended December 31, 2018 and the first two quarters and related year-to-date interim period in the year ended December 31, 2019.
−Removed: Additionally, this material weakness could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Remediation of the Material Weakness
−Removed: Management has implemented changes to strengthen our internal controls over the accounting for foreign exchange gains and losses.
−Removed: These changes are intended to address the identified material weakness and enhance our overall control environment and include the ongoing activities described below.
−Removed: • Exchange Rate Policy – We have discontinued the use of our historical exchange rate convention and are using the exchange rates determined in accordance with U.S.
−Removed: GAAP for purposes of measuring foreign currency transactions and remeasuring monetary assets and liabilities denominated in a foreign currency.
−Removed: • Automated Feed – We have implemented an automated feed that extracts foreign exchange rates on a daily basis from a recognized third-party exchange rate source.
−Removed: • Daily Rate Comparison – We have implemented a daily rate comparison control that extracts foreign exchange rates from (a) a third-party exchange rate source, (b) our treasury application, and (c) our enterprise resource planning (ERP) system and compares those rates in order to identify any potential differences and provide assurance that the correct rates were captured and are being used in our financial systems.
−Removed: • Intra-company Transaction Approvals – We have updated our policies to require additional approvals of intra-company transactions and implemented a requirement that such transactions be supported by a documented business purpose.
−Removed: • Personnel - We have made personnel changes including hiring a new treasurer from outside Baxter with more than thirty years of treasury experience and responsibility, including at four publicly traded companies.
−Removed: We have also hired another experienced treasury professional in a newly created director role responsible for treasury governance and controls.
−Removed: Additionally, we have created a treasury controller role within our accounting function and are continuing to add resources as appropriate to improve our financial reporting controls related to treasury activities.
−Removed: We have made significant progress to remediate the material weakness and have fully implemented the above remediation actions.
−Removed: However, while we believe that those actions will remediate the material weakness, we intend to
−Removed: continue to monitor their operating effectiveness for a sufficient period of time prior to reaching a determination that the material weakness has been remediated.
−Removed: Notwithstanding the identified material weakness, management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented in accordance with U.S.
+Added: Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of March 31, 2021.
+Added: Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2021.
Chan g es in Internal Control over Financial Reporting
−Removed: In the third quarter of 2020, we completed an upgrade to our ERP software.
−Removed: In connection with the ERP upgrade, we updated the processes that constitute our internal control over financial reporting, as necessary.
−Removed: This normal course of business ERP upgrade was implemented to remain current with the latest release of the software.
−Removed: As previously disclosed, since 2017, we have been implementing a long-term business transformation project within the finance, human resources, purchasing and information technology functions which will further centralize and standardize business processes and systems across the company.
−Removed: We are transitioning some processes to our shared services centers while others have been moved to outsourced providers.
−Removed: This multi-year initiative is being conducted in phases and includes modifications to the design and operation of controls over financial reporting.
−Removed: As a result of COVID-19, our global accounting and financial reporting function has shifted to a primarily work from home environment and that change was rapid.
−Removed: While our internal controls over financial reporting were not specifically designed for our current work from home operating environment, we believe that those internal controls are continuing to function effectively, with the exception of the material weakness identified above, while primarily being performed remotely in the current environment.
−Removed: Other than as described in the three preceding paragraphs and in the Remediation of Material Weakness section above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
−Removed: Review by Independent Registered Public Accounting Firm
−Removed: A review of the interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020 and 2019 has been performed by PricewaterhouseCoopers LLP, our independent registered public accounting firm.
−Removed: Its report on the interim condensed consolidated financial information follows.
−Removed: This report is not considered a report within the meaning of Sections 7 and 11 of the Securities Act of 1933 and, therefore, the independent accountants’ liability under Section 11 does not extend to it.
−Removed: Report of Independent Registered Public Accounting Firm
−Removed: To the Board of Directors and Stockholders of Baxter International Inc.
−Removed: Results of Review of Interim Financial Statements
−Removed: We have reviewed the condensed consolidated balance sheet of Baxter International Inc.
−Removed: and its subsidiaries (the “Company”) as of September 30, 2020, and the related condensed consolidated statements of income, comprehensive income and changes in equity for the three-month and nine-month periods ended September 30, 2020 and 2019, and the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2020 and 2019, including the related notes, appearing under Part I, Item 1 of this Quarterly Report on Form 10-Q (collectively referred to as the “interim financial statements”).
−Removed: Based on our reviews, we are not aware of any material modifications that should be made to the interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
−Removed: We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended (not presented herein), and in our report dated March 17, 2020, which included a paragraph regarding the correction of misstatements in the 2018 and 2017 financial statements and a paragraph describing a change in the manner of accounting for leases in 2019, we expressed an unqualified opinion on those consolidated financial statements.
−Removed: In our opinion, the information set forth in the condensed consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
−Removed: Basis for Review Results
−Removed: These interim financial statements are the responsibility of the Company’s management.
−Removed: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
−Removed: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our review in accordance with the standards of the PCAOB.
−Removed: A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.
−Removed: It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.
−Removed: Accordingly, we do not express such an opinion.
−Removed: /s/ PricewaterhouseCoopers LLP
−Removed: Chicago, Illinois
−Removed: October 29, 2020
+Added: There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
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The information in Part I, Item 1, Note 6 is incorporated herein by reference.
+Added: We do not believe that there have been any material changes to the risk factors previously disclosed in our 2020 Annual Report.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.