What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-12-14 compared with 2022-11-15 · 464 added, 571 removed, 1416 unchanged (42% of the section changed)

10 unchanged sentences

Acquisitions and Divestitures

Assets and Liabilities Held for Sale & Discontinued Operations

Assets and Liabilities Held for Sale and Discontinued Operations

Revenue Recognition

8 unchanged sentences

Retirement Plans

Significant Restructuring and Impairment Costs

Restructuring and Related Costs

Segment Information

1 unchanged sentence

Subsequent Events

Schedule II - Valuation and Qualifying Accounts for the years ended September 30, 2022, 2021 and 2020

Report of Independent Registered Public Accounting Firm

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Johnson Controls International plc and its subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of shareholders' equity, and of cash flows for each of the three years in the period ended September 30, 2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated statements of financial position of Johnson Controls International plc and its subsidiaries (the “Company”) as of September 30, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended September 30, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of October 1, 2019.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to

ineffective design and maintenance of information technology controls to prevent or detect, on a timely basis, unauthorized access to certain of the Company's financial reporting systems.

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 the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness referred to above is described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management’s report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal

control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded FM:Systems from its assessment of internal control over financial reporting as of September 30, 2023 because it was acquired by the Company in a purchase business combination in July 2023.

We have also excluded FM:Systems from our audit of internal

control over financial reporting.

FM:Systems is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of each of the related consolidated financial statement amounts as of and for the year ended September 30, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

As described in Note 18 to the consolidated financial statements, the Company has recorded liabilities for uncertain tax positions totaling $2,537 million, primarily as a non-current liability, as of September 30, 2022.

The Company is subject to income taxes in the U.S.

and numerous non-U.S.

jurisdictions.

Judgment is required by management in determining the Company’s worldwide provision for income taxes and recording the related income tax assets and liabilities.

In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain.

As disclosed by management, a liability for the best estimate of the probable loss on certain of the Company's tax positions has been recorded by management.

The Company’s income tax filings for various fiscal years remain under various stages of audit by the IRS and respective non-U.S.

tax authorities.

The amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are (i) the significant judgment by management in identifying and recording the estimated probable loss for each uncertain tax position;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the identification and accurate measurement of uncertain tax positions, (iii) the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and resulted in significant auditor judgment as the nature of the evidence is often highly subjective, and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Revenue Recognition from Certain Contracts with Customers

As described in Notes 1 and 4 to the consolidated financial statements, the Company recognized $26,793 million of net sales for the year ended September 30, 2023, of which a majority relates to certain over time and point in time contracts with customers.

Revenue from certain long-term contracts to design, manufacture and install building products and systems as well as unscheduled repair or replacement services is recognized on an over time basis, with progress towards completion measured using a cost-to-cost input method based on the relationship between actual costs incurred and total estimated costs at completion.

The cost-to-cost input method is used as it best depicts the transfer of control to the customer that occurs as the Company incurs costs.

Changes to the original estimates may be required during the life of the contract and estimated losses are recorded when identified.

The Company enters into extended warranties and long-term service and maintenance agreements with certain customers.

For these arrangements, revenue is recognized over time on a straight-line basis over the respective contract term.

Revenue associated with the sale of equipment and related installations are recognized over time on a cost-to-cost input method, while the revenue for monitoring and maintenance services are recognized over time as services are rendered.

In other cases, the Company recognizes revenue at the point in time when control over the goods or services transfers to the customer.

The principal considerations for our determination that performing procedures relating to revenue recognition from certain contracts with customers is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the revenue recognized on certain of the Company's over time and point in time contracts with customers.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of uncertain tax positions, including controls over the identification and estimate of probable loss for uncertain tax positions.

These procedures also included, among others (i) for a sample of uncertain tax positions by jurisdiction, testing the information used in the calculation of the estimate of probable loss and testing the calculation of the estimate of probable loss;

(ii) testing the completeness of management’s assessment of the identification of uncertain tax positions;

and (iii) evaluating the status and results of income tax audits with the relevant tax authorities, as applicable.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s

uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, and the application of relevant tax laws.

These procedures included testing the effectiveness of controls relating to the revenue recognition process for the Company’s over time and point in time contracts with customers.

These procedures also included, among others, evaluating the appropriateness of the timing and amount of revenue recognized for a sample of over time and point in time contracts with customers.

Evaluating the appropriateness of the timing and amount of revenue recognized for certain over time contracts with customers involved (i) obtaining and inspecting source documents, such as contracts or service tickets, change orders, and evidence of progress towards completion or services delivered;

(ii) evaluating the appropriateness of the over time revenue recognition methods;

(iii) testing, on a sample basis for certain over time contracts, the costs incurred to date;

and (iv) performing a comparison of estimated gross margin in the prior year to gross margin at

completion of the arrangement in the current year for certain over time contracts with customers.

Evaluating the appropriateness of the timing and amount of revenue recognized for certain point in time contracts with customers involved (i) obtaining and inspecting source documents, such as contracts or purchase orders, evidence of goods delivered, and consideration received in exchange for those goods and (ii) evaluating the appropriateness of the point in time revenue recognition method.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

November 15, 2022

December 14, 2023

We have served as the Company’s auditor since 1957.

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Cash and cash equivalents $ 835 $ 2,031

Accounts receivable - net 5,528 5,613

Accounts receivable, less allowance for

expected credit losses of $ 90 and $ 66 , respectively

Inventories 2,776 2,665

Current assets held for sale 387 —

Other current assets 1,120 1,262

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Investments in partially-owned affiliates 1,056 963

Noncurrent assets held for sale 751 156

Other noncurrent assets 4,489 3,874

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Deferred revenue 1,996 1,804

Current liabilities held for sale 236 —

Other current liabilities 2,832 2,530

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Pension and postretirement benefit obligations 278 358

Noncurrent liabilities held for sale 62 —

Other noncurrent liabilities 5,368 5,733

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Operating Activities of Continuing Operations

Net income from continuing operations attributable to Johnson Controls $ 1,532 $ 1,513 $ 631

Income from continuing operations attributable to noncontrolling interests 191 233 164

Net income from continuing operations 1,723 1,746 795

Adjustments to reconcile net income from continuing operations to cash provided by operating activities:

Net income attributable to Johnson Controls $ 1,849 $ 1,532 $ 1,513

Income attributable to noncontrolling interests 184 191 233

Net income 2,033 1,723 1,746

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 848 830 845

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Acquisition of businesses, net of cash acquired ( 726 ) ( 269 ) ( 725 )

Business divestitures, net of cash divested 16 19 135

Other - net 49 41 63

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Financing Activities of Continuing Operations

Increase (decrease) in short-term debt - net 923 ( 17 ) ( 33 )

Increase in long-term debt 1,227 496 1,804

Repayment of long-term debt ( 184 ) ( 507 ) ( 1,386 )

Net proceeds (payments) from borrowings with maturities less than three months ( 51 ) 379 ( 18 )

Proceeds from debt 1,173 1,771 734

Repayments of debt ( 1,555 ) ( 184 ) ( 744 )

Stock repurchases and retirements ( 625 ) ( 1,441 ) ( 1,307 )

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Employee equity-based compensation withholding taxes ( 37 ) ( 51 ) ( 33 )

Cash paid to acquire a noncontrolling interest ( 1 ) ( 14 ) ( 132 )

Other - net 8 30 ( 37 )

Cash used by financing activities from continuing operations ( 2,174 ) ( 516 ) ( 2,131 )

Discontinued Operations

Cash used by operating activities ( 4 ) ( 64 ) ( 260 )

Cash used by financing activities — — ( 113 )

Cash used by discontinued operations ( 4 ) ( 64 ) ( 373 )

Discontinued Operations - Cash used by operating activities

— ( 4 ) ( 64 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5 ) ( 53 ) 116

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Repurchases and retirements of ordinary shares ( 625 ) ( 1,441 ) ( 1,306 )

Adoption of ASC 842 — — ( 5 )

Adoption of ASU 2016-13 — ( 4 ) —

Other — — ( 4 )

Ending balance 1,384 1,151 2,025

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When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values.

The purchase price of acquired businesses is allocated to the related identifiable assets and liabilities based on estimated fair values.

The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill.

In addition, any contingent consideration is recorded at the estimated fair value as of the date of the acquisition and is recorded as part of the purchase price.

This estimate is updated in future periods and any changes in the estimate, which are not considered an adjustment to the purchase price, are recorded in our consolidated statements of operations.

Payments for contingent earn-out liabilities that are less than or equal to estimates on the acquisition date are reflected as financing cash outflows.

Amounts paid in excess of the estimated contingent earn-out liabilities on the acquisition date are reflected as operating cash outflows.

All available information is used to estimate fair values.

External valuation specialists are typically engaged to assist in the fair value determination of identifiable intangible assets and any other significant assets or liabilities.

The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date as more information is obtained regarding assets acquired and liabilities assumed based on facts and circumstances that existed as of the acquisition date.

The purchase price allocation methodology contains uncertainties because it requires the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and assumed liabilities.

The fair value of assets and liabilities is estimated based upon the carrying value of the acquired assets and assumed liabilities and widely accepted valuation techniques, including discounted cash flows.

Unanticipated events or circumstances may occur which could affect the accuracy of fair value estimates, including assumptions regarding industry economic factors and business strategies.

Other estimates used in determining fair value include, but are not limited to, future cash flows or income related to intangibles, market rate assumptions and discount rates.

Fair value estimates are based upon assumptions believed to be reasonable, but that are inherently uncertain, and therefore, may not be realized.

Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could differ materially.

Assets and Liabilities Held for Sale

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• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets." The carrying amount of any assets, including goodwill, that are part of the disposal group, but not in the scope of ASC 360-10, are tested for impairment under the relevant guidance prior to measuring the disposal group at fair value, less cost to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

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Restricted Cash

Restricted cash relates to amounts restricted for payment of asbestos liabilities and certain litigation and environmental matters.

Restricted cash is recorded within other current assets in the consolidated statements of financial position and totaled $ 35 million and $ 6 million at September 30, 2022 and 2021, respectively.

Receivables consist of amounts billed and currently due from customers and unbilled costs and accrued profits related to revenues on long-term contracts that have been recognized for accounting purposes but not yet billed to customers.

Restricted cash relates to amounts restricted for payment of asbestos liabilities and certain litigation and environmental matters and is recorded within other current assets in the consolidated statements of financial position.

Receivables consist of billed receivables which are currently due from customers and unbilled receivables where the Company has satisfied its performance obligations, but has not yet issued the invoice to the customer.

Incentives are periodically offered to customers, including early payment discounts and extended payment terms of certain receivables.

The Company extends credit to customers in the normal course of business and maintains an allowance for expected credit losses resulting from the inability or unwillingness of customers to make required payments.

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The Company enters into various factoring agreements to sell certain accounts receivable to third-party financial institutions.

For the majority of these agreements, for ease of administration, the Company collects customer payments related to the factored receivables on behalf of the financial institutions but otherwise maintains no continuing involvement with respect to the factored receivables.

The Company collects the majority of the factored receivables on behalf of the financial institutions, but maintains no other continuing involvement with the factored receivables.

Sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

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Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes.

The estimated useful lives generally range from 3 to 40 years for buildings and improvements, up to 15 years for subscriber systems, and from 3 to 15 years for machinery and equipment.

Estimated useful lives generally range from 3 to 40 years for buildings and improvements, up to 15 years for subscriber systems, and from 3 to 15 years for machinery and equipment.

Interest on borrowings is capitalized during the active construction period of major capital projects, added to the cost of the underlying assets and amortized over the useful lives of the assets.

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Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired.

Goodwill is reviewed for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired.

Goodwill is reviewed for impairment during the fourth fiscal quarter (as of July 31) or more frequently if events or changes in circumstances indicate the asset might be impaired.

The Company performs impairment reviews for its reporting units, which have been determined to be the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method based on management’s judgments and assumptions or third party valuations.

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The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value.

Indefinite-lived intangible assets are also subject to at least annual impairment testing.

Indefinite-lived intangible assets are also subject to at least annual impairment testing in the fourth fiscal quarter or as events occur or circumstances change that indicate the assets may be impaired.

Indefinite-lived intangible assets primarily consist of trademarks and trade names and are tested for impairment using a relief-from-royalty method.

A considerable amount of management judgment and assumptions are required in performing the impairment tests.

The Company considers the implications of both external (e.g., market growth, competition and local economic conditions) and internal (e.g., product sales and expected product growth) factors and their potential impact on cash flows related to the intangible asset in both the near- and long-term.

The Company also considers the profitability of the business, among other factors, to determine the royalty rate for use in the impairment assessment.

While the Company believes that the estimates and assumptions underlying the valuation methodologies are reasonable, different estimates and assumptions could result in different outcomes.

Lessee arrangements

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The Company determines whether an arrangement contains a lease at contract inception based on whether the arrangement involves the use of a physically distinct identified asset and whether the Company has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period as well as the right to direct the use of the asset.

The Company adopted ASU 2016-02, "Leases (Topic 842)" and the related amendments using a modified-retrospective approach as of October 1, 2019.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

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Impairment of Long-Lived Assets

Long-lived assets, including right-of-use assets under operating leases, other tangible assets and intangible assets with definitive lives, are reviewed for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.

Long-lived assets, including right-of-use assets under operating leases, other tangible assets and intangible assets with definite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.

The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of Software to be Sold, Leased, or Marketed."

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The cost-to-cost input method is used as it best depicts the transfer of control to the customer that occurs as the Company incurs costs.

Changes to the original estimates may be required during the life of the contract and such estimates are

reviewed monthly.

Changes to the original estimates may be required during the life of the contract and such estimates are reviewed monthly.

If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Company entered into a new contract.

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Estimated losses are recorded when identified.

The Company does not adjust the promised amount of consideration for the effects of a significant financing component as at contract inception the Company expects to receive the payment within twelve months of transfer of goods or services.

The Company does not adjust the promised amount of consideration for the effects of a significant financing component because at contract inception it expects to receive the payment within twelve months of transfer of goods or services.

The Company enters into extended warranties and long-term service and maintenance agreements with certain customers.

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The Company also sells certain HVAC and refrigeration products and services in bundled arrangements with multiple performance obligations, such as equipment, commissioning, service labor and extended warranties.

Approximately four to twelve months separate the timing of the first deliverable until the last piece of equipment is delivered, and there may be extended warranty arrangements with duration of one to five years commencing upon the end of the standard warranty period.

Approximately four to twelve months separate the timing of the first deliverable until the last piece of equipment is delivered.

There may also be extended warranty arrangements with durations of one to five years commencing upon the end of the standard warranty period.

In addition, the Company sells security monitoring systems that may have multiple performance obligations, including equipment, installation, monitoring services and maintenance agreements.

Revenues associated with the sale of equipment and related installations are recognized over time on a cost-to-cost input method, while the revenue for monitoring and maintenance services are recognized over time as services are rendered.

The transaction price is allocated to each performance obligation based on the relative selling price method.

In order to estimate relative selling price, market data and transfer price studies are utilized.

The transaction price is allocated to each performance obligation based on the relative standalone selling price method.

In order to estimate relative standalone selling price, market data and transfer price studies are utilized.

If the standalone selling price is not directly observable, the Company estimates the standalone selling price using an adjusted market assessment approach or expected cost plus margin approach.

For transactions in which the Company retains ownership of the subscriber system asset, fees for monitoring and maintenance services are recognized over time on a straight-line basis over the contract term.

If the Company retains ownership of the subscriber system asset, fees for monitoring and maintenance services are recognized over the contract term on a straight-line basis.

Non-refundable fees received in connection with the initiation of a monitoring contract, along with associated direct and incremental selling costs, are deferred and amortized over the estimated life of the contract.

In all other cases, the Company recognizes revenue at the point in time when control over the goods or services transfers to the customer.

The Company considers the contractual consideration payable by the customer and assesses variable consideration that may affect the total transaction price, including discounts, rebates, refunds, credits or other similar sources of variable consideration, when determining the transaction price of each contract.

The Company assesses variable consideration that may affect the total transaction price, including discounts, rebates, refunds, credits or other similar sources of variable consideration, when determining the transaction price of each contract.

The Company includes variable consideration in the estimated transaction price when it is probable that significant reversal of revenue recognized would not occur when the uncertainty associated with variable consideration is subsequently resolved.

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• Internally generated residential subscriber systems outside of North America;

• Internally generated commercial subscriber systems (collectively referred to as subscriber system assets)

• Internally generated commercial subscriber systems;

• Customer accounts acquired through the ADT dealer program, primarily outside of North America (referred to as dealer intangibles).

1 unchanged sentence

Subscriber system assets represent capitalized equipment (e.g.

security control panels, touch pad, motion detectors, window sensors, and other equipment) and installation costs associated with electronic security monitoring arrangements under which the Company retains ownership of the security system assets in a customer's place of business, or outside of North America, residence.

Installation costs represent costs incurred to prepare the asset for its intended use.

The Company pays property taxes on the subscriber system assets and upon

customer termination, may retrieve such assets.

The Company pays property taxes on the subscriber system assets and may retrieve such assets when the agreement is terminated.

These assets embody a probable future economic benefit as they generate future monitoring revenue for the Company.

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Subscriber system assets and any deferred revenue resulting from the customer acquisition are accounted for over the expected life of the subscriber.

In certain geographical areas where the Company has a large number of customers that behave in a similar manner over time, the Company accounts for subscriber system assets and related deferred revenue using pools, with separate pools for the components of subscriber system assets and any related deferred revenue based on the same month and year of acquisition.

In certain geographical areas which have a large number of customers that behave in a similar manner over time, the Company accounts for subscriber system assets and related deferred revenue using pools, with separate pools for

the components of subscriber system assets and any related deferred revenue based on the same month and year of acquisition.

Pooled subscriber system assets and related deferred revenue are depreciated using a straight-line method with lives up to 12 years and considering customer attrition.

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Treasury yield curve in effect at the time of grant.

• Expected volatility is based on the historical volatility of the Company's stock since October 2016 blended with the historical volatility of certain peer companies' stock prior to October 2016 over the most recent period corresponding to the expected life as of the grant date.

• For grants in fiscal 2023, expected volatility is based on the historical volatility of the Company's stock corresponding to the expected life as of the grant date.

For grants in fiscal 2022 and fiscal 2021, expected volatility is based on the historical volatility of the Company's stock since October 2016 and certain peer companies' stock prior to October 2016 over the most recent period corresponding to the expected life as of the grant date.

• The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the Company’s ordinary shares as of the grant date.

The Company uses historical data to estimate option exercises and employee terminations within the valuation model.

Stock Appreciation Rights

SARs vest under the same terms and conditions as stock option awards, but are settled in cash for the difference between the market price on the date of exercise and the exercise price.

As a result, SARs are recorded in the Company’s consolidated statements of financial position as a liability until the date of exercise.

The fair value of each SAR award is estimated using a similar method to that used for stock options.

The fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense are adjusted based on the new fair value.

Amounts related to SARs are not material.

Earnings Per Share

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Diluted EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of ordinary shares and ordinary equivalent shares outstanding during the reporting period that are calculated using the treasury stock method for stock options, unvested restricted stock and unvested performance share awards.

The treasury stock method

assumes that the Company uses the proceeds from the exercise of stock option awards to repurchase ordinary shares at the average market price during the period.

The treasury stock method assumes that the Company uses the proceeds from the exercise of stock option awards to repurchase ordinary shares at the average market price during the period.

The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized.

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Monetary assets and liabilities denominated in non-functional currencies are adjusted to reflect period-end exchange rates.

Aggregate transaction gains (losses), net of the impact of foreign currency hedges, for the years ended September 30, 2022, 2021 and 2020 were $ 49 million, $ 56 million and $( 32 ) million, respectively.

Aggregate transaction gains, net of the impact of foreign currency hedges, for the years ended September 30, 2023, 2022 and 2021 were $ 28 million, $ 49 million and $ 56 million, respectively.

Derivative Financial Instruments

The Company has written policies and procedures that place all financial instruments under the direction of Corporate treasury and restrict all derivative transactions to those intended for hedging purposes.

The use of financial instruments for speculative purposes is strictly prohibited.

The Company selectively uses financial instruments to manage the market risk from changes in foreign exchange rates, commodity prices, stock-based compensation liabilities and interest rates.

The Company has written policies and procedures that place all derivative financial instruments under the direction of Corporate treasury and restrict all derivative transactions to those intended for hedging purposes.

The use of derivatives for speculative purposes is strictly prohibited.

The Company selectively uses derivatives to manage the market risk from changes in foreign exchange rates, commodity prices, stock-based compensation liabilities and interest rates.

The fair values of all derivatives are recorded in the consolidated statements of financial position.

The change in a derivative’s fair value is recorded each period in current earnings or accumulated other comprehensive income ("AOCI"), depending on whether the derivative is designated as part of a hedge transaction and if so, the type of hedge transaction.

Investments in debt and equity securities are are marked to market at the end of each accounting period.

Unrealized gains and losses on these securities are recognized in the Company's consolidated statements of income.

The deferred compensation plan assets are marked to market at the end of each accounting period and all unrealized gains and losses are recorded in the consolidated statements of income.

Investments in debt and equity securities and deferred compensation plan assets are marked to market at the end of each accounting period.

Unrealized gains and losses are recognized in the consolidated statements of income.

Pension and Postretirement Benefits

The Company utilizes a mark-to-market approach for recognizing pension and postretirement benefit expenses, including measuring the market related value of plan assets at fair value and recognizing actuarial gains and losses in the fourth quarter of each fiscal year or at the date of a remeasurement event.

The Company utilizes a mark-to-market approach for recognizing pension and postretirement benefit expenses, including measuring plan assets at fair value and recognizing actuarial gains and losses in the fourth quarter of each fiscal year or at the date of a remeasurement event.

The Company records an estimate for future warranty-related costs based on actual historical return rates and other known factors.

Based on analysis of return rates and other factors, the Company’s warranty provisions are adjusted as necessary.

The Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates.

The Company’s product warranty liability is recorded in the consolidated statements of financial position in other current liabilities if the warranty is less than one year and in other noncurrent liabilities if the warranty extends longer than one year .

Loss Contingencies

Accruals are recorded for various contingencies including legal proceedings, environmental matters, self-insurance and other claims that arise in the normal course of business.

The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined estimates.

Accruals are recorded for various contingencies including legal proceedings, environmental matters, self-insurance and other claims that arise in the normal course of business when it is probable a liability has been incurred and the amount of the liability is reasonably estimable.

The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarial determined estimates.

Additionally, the Company records receivables from third party insurers when recovery has been determined to be probable.

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The Company and certain of its subsidiaries, along with numerous other companies, are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials.

(which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against its affiliates).

The estimated liability and corresponding insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068 (which is the Company's reasonable best estimate of the actuarial determined time period through which asbestos-related claims will be filed against its affiliates).

Estimated asbestos-related defense costs are included in the asbestos liability.

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In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable.

Estimated asbestos-related insurance recoveries represents estimated amounts due to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims discounted to present value.

Estimated asbestos-related insurance recoveries represent estimated amounts due to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims discounted to present value.

In determining the amount of insurance recoverable, the Company considers available insurance, allocation methodologies, solvency and creditworthiness of the insurers.

Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements.

Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards, using tax rates in effect for the years in which the differences are expected to reverse.

Deferred tax asset and liabilities are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards, using tax rates in effect for the years in which the differences are expected to reverse.

A valuation allowance is provided to reduce the carrying or book value of deferred tax assets if, based upon the available evidence, including consideration of tax planning strategies, it is more-likely-than-not that some or all of the deferred tax assets will not be realized.

Retrospective Changes

Effective October 1, 2021, the Company's marine businesses, which were previously included in the Building Solutions Asia Pacific and Global Products segments, became part of the Building Solutions EMEA/LA segment.

Historical information has been re-cast to present the comparative periods on a consistent basis.

This change was not material to the segment presentation.

Prior Period Revision – Statement of Cash Flows

The Company revised the amounts previously reported as net proceeds from borrowings with maturities less than three months and proceeds from debt for certain short-term debt transactions that were incorrectly presented on a net basis within the financing activities section of the consolidated statements of cash flows for the years ended September 30, 2022 and 2021.

Cash provided by financing activities and the total increase (decrease) in cash, cash equivalents and restricted cash were unchanged for all affected periods.

The Company does not believe the impact of the incorrect presentation was material to any period.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities (e.g.

deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting.

The guidance is applied prospectively to acquisitions occurring on or after the effective date.

The Company early adopted ASU No.

2021-08 at the beginning of fiscal 2022.

The adoption of the new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

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ACQUISITIONS AND DIVESTITURES

During fiscal 2022, the Company acquired several businesses for a combined purchase price, net of cash acquired, of $ 323 million, of which $ 269 million was paid as of September 30, 2022.

Intangible assets associated with these acquisitions totaled $ 123 million and primarily relate to customer relationships and technology.

In connection with these acquisitions, the Company recorded goodwill of $ 194 million, of which $ 68 million was assigned to the Building Solutions EMEA/LA segment, $ 45 million was assigned to the Global Products segment, $ 44 million was assigned to the Building Solutions APAC segment and $ 36 million was assigned to the Building Solutions North America segment.

Silent-Aire Acquisition

In May 2021, the Company completed its acquisition of Silent-Aire, a global leader in hyperscale data center cooling and modular critical infrastructure solutions, for approximately $ 755 million, net of cash acquired, which was comprised of an upfront net cash payment of approximately $ 661 million, the estimated fair value at the acquisition date of contingent earn-out liabilities of approximately $ 86 million and a working capital adjustment of $ 8 million.

The contingent earn-out liabilities are based upon the achievement of certain defined operating results in each of the three years following the acquisition, with a maximum payout of approximately $ 250 million.

The fair value of contingent earn-out liabilities is reassessed on a quarterly basis and could differ materially from the initial estimates.

Subsequent changes in the estimated fair value of contingent earn-out liabilities are recorded in the consolidated statements of income when incurred.

Earn-out payments that are less than or equal to the contingent earn-out liabilities on the acquisition date are reflected as financing cash outflows and amounts paid in excess of the contingent earn-out liabilities on the acquisition date are reflected as operating cash outflows.

During the year ended September 30, 2022, the Company recorded a reduction in the fair value of the contingent earn-out liability of $ 43 million.

No earn-out payments were made for the first twelve-month earn-out period ended April 30, 2022 as the performance measures for the period were not achieved.

In connection with the acquisition, the Company recorded goodwill of $ 244 million in the Global Products segment.

Goodwill is attributable primarily to expected synergies, expanded market opportunities and other benefits that the Company believes will result from combining its operations with the operations of Silent-Aire.

FM:Systems Acquisition

In July 2023, the Company completed its acquisition of FM:Systems, a leading digital workplace management and Internet of Things ("IoT") solutions provider for facilities and real estate professionals, for $ 540 million, net of cash acquired, which was comprised of an upfront cash payment of $ 465 million, net of cash acquired, and the estimated fair value at the acquisition date of contingent earn-out liabilities of $ 75 million.

The contingent earn-out liabilities are primarily based upon the achievement of certain defined operating results in the two years following the acquisition, with a maximum payout of $ 155 million.

In connection with the acquisition, the Company recorded goodwill of $ 399 million in the Building Solutions North America segment.

Goodwill is attributable primarily to expected synergies, expanded market opportunities and other benefits that the Company believes will result from integrating the products and capabilities of FM:Systems into its operations.

The goodwill created in the acquisition is not deductible for tax purposes.

The original fair values of the assets acquired and liabilities assumed related to Silent-Aire are as follows (in millions):

The preliminary fair values of the assets acquired and liabilities assumed related to FM:Systems are as follows (in millions):

Cash and cash equivalents $ 8

Accounts receivable 15

Inventories 60

Other current assets 4

Property, plant, and equipment - net 33

Intangible assets - net 497

Other noncurrent assets 84

All other current assets 9

Intangible assets 194

All other noncurrent assets 7

Total assets acquired 632

Accounts payable 62

Accrued compensation and benefits 6

Deferred revenue 24

Other current liabilities 12

All other current liabilities 49

Other noncurrent liabilities 11

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Net assets acquired $ 548

The purchase price allocation to identifiable intangible assets acquired related to Silent-Aire is as follows:

The purchase price allocation to identifiable intangible assets acquired is as follows:

(in millions) Weighted Average Life (in years)

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Technology 74 10

Other definite-lived intangibles 23 1

Indefinite-lived trademarks 67

Trademarks and other definite-lived intangibles 3 4

Total identifiable intangible assets $ 194

Other acquisitions and divestitures were not material individually or in the aggregate in fiscal 2021 and 2020.

ASSETS AND LIABILITIES HELD FOR SALE & DISCONTINUED OPERATIONS

Silent-Aire Acquisition

In May 2021, the Company completed its acquisition of Silent-Aire, a global leader in hyperscale data center cooling and modular critical infrastructure solutions, for approximately $ 755 million, net of cash acquired, which was comprised of an upfront net cash payment of approximately $ 661 million, the estimated fair value of contingent earn-out liabilities at the acquisition date of approximately $ 86 million and a working capital adjustment of $ 8 million.

The Company recorded reductions in the fair value of the contingent earn-out liability of $ 30 million and $ 43 million during the years ended September 30, 2023 and 2022, respectively.

No earn-out payments were made for the twelve-month earn-out periods ended April 30, 2023 and 2022, as the performance measures for the periods were not achieved.

Other Acquisitions

During fiscal 2023, the Company acquired several other businesses for a combined purchase price, net of cash acquired, of $ 306 million, of which $ 260 million was paid as of September 30, 2023.

Intangible assets associated with these acquisitions totaled $ 116 million and primarily relate to customer relationships and technology.

The Company recorded goodwill associated with these acquisitions of $ 119 million in the Global Products segment, $ 55 million in the Building Solutions Asia Pacific segment and $ 13 million in the Building Solutions EMEA/LA segment.

During fiscal 2022, the Company acquired several businesses for a combined purchase price, net of cash acquired, of $ 323 million, of which $ 269 million was paid as of September 30, 2022.

Intangible assets associated with these acquisitions totaled $ 123 million and primarily relate to customer relationships and technology.

The Company recorded goodwill associated with these acquisitions of $ 194 million, of which $ 68 million was assigned to the Building Solutions EMEA/LA segment, $ 45 million was assigned to the Global Products segment, $ 44 million was assigned to the Building Solutions Asia Pacific segment and $ 36 million was assigned to the Building Solutions North America segment.

Other acquisitions were not material individually or in the aggregate in fiscal 2023 and 2022.

Refer to Note 3, "Assets and Liabilities Held for Sale & Discontinued Operations," of the notes to the consolidated financial statements for disclosure of a business in the Building Solutions Asia Pacific segment that was sold on August 1, 2023.

No divestitures were material individually or in the aggregate in fiscal 2023 and 2022.

ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets and Liabilities Held for Sale

During fiscal 2022, the Company determined that its Global Retail business within its Building Solutions North America, Building Solutions Asia Pacific and Building Solutions EMEA/LA segments and a business within the Building Solutions Asia Pacific segment both met the criteria to be classified as held for sale.

The assets and liabilities of both businesses are presented as held for sale in the consolidated statements of financial position as of September 30, 2022.

Assets and liabilities held for sale are recorded at the lower of carrying value or fair value, less costs to sell in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets".

The carrying amount of any assets, including goodwill, that are part of the disposal group, but not in the scope of ASC 360-10, are tested for impairment under the relevant guidance prior to measuring the disposal group at fair value, less cost to sell.

As a result of classifying the Global Retail business as held for sale, during the year ended September 30, 2022, the Company recorded impairment charges of $ 235 million to write down goodwill related to its North America Retail reporting unit and $ 86 million to write down the disposal group to its estimated fair value, less costs to sell.

The Company also fully impaired $ 38 million of internal-use software projects that were no longer probable of being completed.

Refer to Note 8, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for further information regarding the goodwill impairment charge.

An additional $ 60 million was recorded in the year ended September 30, 2022 to write down the business classified as held for sale in the Building Solutions Asia Pacific segment to its estimated fair value, less costs to sell.

All of the impairments were recorded within restructuring and impairment costs in the consolidated statements of income.

The divestiture of the businesses held for sale could result in a gain or loss on sale to the extent the ultimate selling prices differ from the current carrying value of the net assets recorded, which could be material.

The businesses did not meet the criteria to be classified as discontinued operations as neither divestiture represents a strategic shift that will have a major effect on the Company's operations and financial results.

The following table summarizes the carrying value of the Global Retail assets and liabilities held for sale (in millions):

September 30, 2022

Accounts receivable - net $ 199

Inventories 155

Other current assets 21

Current assets held for sale $ 375

Property, plant and equipment - net $ 89

Other intangible assets - net 514

Other noncurrent assets 72

Noncurrent assets held for sale $ 697

Accounts payable $ 127

Accrued compensation and benefits 25

Deferred revenue 36

Other current liabilities 33

Current liabilities held for sale $ 221

Other noncurrent liabilities $ 61

Noncurrent liabilities held for sale $ 61

During the third quarter of fiscal 2020, the Company determined that certain assets of the Building Solutions Asia Pacific segment met the criteria to be classified as held for sale.

During the fourth quarter of fiscal 2022, the Company determined that these assets no longer met the criteria to be classified as held for sale as the Company can no longer assert that the sale of the assets is probable within a year due to the real estate market downturn in China that has worsened in the period after the COVID-19 lockdowns.

During fiscal 2023, the Company concluded that its Global Retail business, which is included in the Building Solutions North America, Building Solutions Asia Pacific and Building Solutions EMEA/LA segments and was previously presented as held for sale in the consolidated statements of financial position as of September 30, 2022, no longer met the criteria to be classified as held for sale.

The Company discontinued sales efforts based on market factors and other considerations and determined that it was no longer probable that the business would be sold within one year.

As a result, the assets and liabilities are now reported as held and used on the consolidated statements of financial position as of both September 30, 2023 and September 30, 2022.

The net assets were reclassified to held and used at the lower of fair value or adjusted carrying value in the current period.

Due to impairment charges recorded in prior periods, there was no impact to the consolidated statements of income as a result of the reclassification.

A business in the Building Solutions Asia Pacific segment, which was previously classified as held for sale, was sold on August 1, 2023.

The net assets were not significant to the consolidated statements of financial position.

During fiscal 2022, the Company determined that certain assets of the Building Solutions Asia Pacific segment no longer met the criteria to be classified as held for sale because the Company could no longer assert that the sale of the assets was probable within one year due to declines in the Chinese real estate market after the COVID-19 lockdowns.

As a result, the Company reclassified the held for sale assets to held and used as of September 30, 2022.

Upon reclassification, an impairment of $ 45 million was recorded within restructuring and impairment costs in the consolidated statements of income to adjust the asset to the lower of its carrying value adjusted for depreciation and the fair value of the asset as of September 30, 2022.

The following table summarizes impairment charges for the various assets held for sale (in millions):

Year Ended September 30,

Global Retail business $ 438 $ 359

Business in the Building Solutions Asia Pacific segment 60 60

Certain assets in the Building Solution Asia Pacific segment — 45

The impairment charges were recorded within restructuring and impairment costs in the consolidated statements of income and include costs to write down the disposal groups to their estimated fair values, less costs to sell;

impairment of goodwill;

and the write-off of internal-use software projects that were no longer probable of being completed.

Refer to Note 8, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for further information regarding the goodwill impairment charges.

The businesses did not meet the criteria to be classified as discontinued operations as neither planned divestiture represented a strategic shift that would have a major effect on the Company's operations and financial results.

Discontinued Operations

The Company completed the sale of its Power Solutions business on April 30, 2019.

In December 2020, the favorable resolution of certain post-closing working capital and net debt adjustments resulted in income from discontinued operations of $ 124 million, net of tax of $ 26 million, due to a reversal of a reserve established in connection with the sale.

There was no Power Solutions related activity in fiscal 2022 and 2020.

In fiscal 2021, the favorable resolution of certain post-closing working capital and net debt adjustments resulted in income from discontinued operations of $ 124 million, net of tax of $ 26 million, due to a reversal of a reserve established in connection with the sale .

REVENUE RECOGNITION

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Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed and consist of unbilled receivables and costs in excess of billings.

Contract liabilities relate to customer payments received in advance of satisfaction of performance obligations under the contract.

Contract assets represent the Company’s right to consideration for performance obligations that have been satisfied but not billed and consist of unbilled receivables and costs in excess of billings.

Contract liabilities are customer payments received before performance obligations are satisfied.

Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.

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Costs to Obtain or Fulfill a Contract

The Company recognizes the incremental costs incurred to obtain or fulfill a contract with a customer as an asset when these costs are recoverable.

The Company recognizes the incremental costs incurred to obtain or fulfill a contract with a customer as an asset when the costs are recoverable.

These costs consist primarily of sales commissions and bid/proposal costs.

Costs to obtain or fulfill a contract are capitalized and amortized to revenue over the period of contract performance.

Costs to obtain or fulfill a contract are capitalized when incurred and amortized to expense over the period of contract performance.

The following table presents the location and amount of costs to obtain or fulfill a contract recorded in the Company's consolidated statements of financial position (in millions):

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Total $ 380 $ 313

Amortization related to costs to obtain or fulfill a contract were $ 191 million and $ 173 million during the years ended September 30, 2022 and 2021, respectively.

Amortization of costs to obtain or fulfill a contract were $ 251 million and $ 191 million during the years ended September 30, 2023 and 2022, respectively.

There were no impairment losses recognized in the year ended September 30, 2023 or 2022.

ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following (in millions):

September 30,

Accounts receivable $ 5,590 $ 5,723

Allowance for expected credit losses ( 62 ) ( 110 )

Accounts receivable, net $ 5,528 $ 5,613

The changes in the allowance for expected credit losses related to accounts receivable were as follows (in millions):

Year Ended September 30, 2022

Balance at beginning of period $ 110 $ 173

Benefit for expected credit losses ( 2 ) ( 3 )

Write-offs charged against the allowance for expected credit losses ( 38 ) ( 65 )

Currency translation ( 3 ) 1

Other ( 5 ) 4

Balance at end of period

The Company sold receivables where it collected customer payments related to the factored receivables on behalf of the financial institution but otherwise maintained no continuing involvement totaling $ 1,115 million and $ 129 million during the years ended September 30, 2022 and 2021, respectively.

The costs of factoring such receivables were not material.

receivables sold under the factoring agreements were $ 476 million as of September 30, 2022 and $ 127 million as of September 30, 2021.

The Company sold $ 1,962 million and $ 1,115 million of accounts receivable under factoring agreements during the years ended September 30, 2023, and 2022, respectively.

The cost of factoring such receivables was not material.

Previously sold receivables still outstanding were $ 681 million and $ 476 million as of September 30, 2023 and September 30, 2022, respectively.

Inventories consisted of the following (in millions):

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Property, plant and equipment - net $ 3,136 $ 3,131

During the fourth quarter of fiscal 2023, the Company determined that a triggering event had occurred in the asset group comprising the security subscriber business of Argentina, primarily as a result of the significant devaluation of the Argentine peso that occurred during the quarter and the resulting impact on operating results and cash flows.

The Company conducted the two-step impairment test required in accordance with ASC 360, "Property, Plant & Equipment" and determined that the carrying amount of the asset group exceeded its fair value.

A non-cash impairment charge to the subscriber system assets of $ 78 million was recorded and is included in restructuring and impairment costs in the consolidated statements of income.

The Company used a discounted cash flow model to estimate the fair value of the asset group.

The primary assumptions and inputs used in the model included management's internal projections of future cash flows, the weighted-average cost of capital and the long-term growth rate.

The fair value measurement is classified as Level 3 within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement" due to the unobservable inputs used.

GOODWILL AND OTHER INTANGIBLE ASSETS

Effective October 1, 2021, the Company's marine businesses previously included in the Building Solutions Asia Pacific and Global Products reportable segments became part of the Building Solutions EMEA/LA reportable segment.

Historical information has been re-cast to present the comparative periods on a consistent basis.

This change was not material to the segment presentation or the allocation of goodwill.

The changes in the carrying amount of goodwill in each of the Company’s reportable segments were as follows (in millions):

September 30,

2020 Business

Acquisitions Business

Divestitures Impairments Currency Translation

and Other September 30,

Building Solutions North America $ 9,160 $ 21 $ — $ — $ 34 $ 9,215

Building Solutions EMEA/LA 1,987 35 — — 19 2,041

Building Solutions Asia Pacific 1,223 — ( 7 ) — 21 1,237

Global Products 5,562 244 — — 36 5,842

Total $ 17,932 $ 300 $ ( 7 ) $ — $ 110 $ 18,335

September 30, 2021 Business

Acquisitions Business

Year Ended September 30, 2023

Building Solutions North America Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total

Goodwill $ 9,630 $ 1,794 $ 1,116 $ 5,591 18,131

Accumulated impairment loss ( 659 ) ( 47 ) — ( 75 ) ( 781 )

Balance at beginning of period 8,971 1,747 1,116 5,516 17,350

Acquisitions (1)

399 13 55 119 586

Impairments — — — ( 184 ) ( 184 )

Foreign currency translation and other 11 125 8 40 184

Balance at end of period $ 9,381 $ 1,885 $ 1,179 $ 5,491 $ 17,936

Year Ended September 30, 2022

Building Solutions North America Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total

Goodwill $ 9,639 $ 2,088 $ 1,237 $ 5,842 18,806

Accumulated impairment loss ( 424 ) ( 47 ) — — ( 471 )

Balance at beginning of period 9,215 2,041 1,237 5,842 18,335

Acquisitions (1)

37 78 44 60 219

Divestitures — ( 5 ) ( 14 ) — ( 19 )

Impairments Currency Translation

and Other September 30,

Building Solutions North America $ 9,215 $ 37 $ — $ ( 235 ) $ ( 46 ) $ 8,971

Building Solutions EMEA/LA 2,041 78 ( 98 ) — ( 296 ) 1,725

Building Solutions Asia Pacific 1,237 44 ( 29 ) — ( 136 ) 1,116

Global Products 5,842 60 — ( 75 ) ( 311 ) 5,516

Total $ 18,335 $ 219 $ ( 127 ) $ ( 310 ) $ ( 789 ) $ 17,328

(1) Business divestitures include $ 93 million and $ 29 million of goodwill within the Building Solutions EMEA/LA and Building Solutions Asia Pacific reportable segments, respectively, transferred to noncurrent assets held for sale on the consolidated statements of financial position.

As of September 30, 2022, the accumulated impairment loss totaled $ 781 million, of which $ 659 million related to the Building Solutions North America segment, $ 75 million related to the Global Products segment and $ 47 million related to the Building Solutions EMEA/LA segment.

As of September 30, 2021 and 2020, the accumulated impairment loss totaled $ 471 million, of which $ 424 million related to the Building Solutions North America segment and $ 47 million related to the Building Solutions EMEA/LA segment.

The Company reviews goodwill for impairment annually as of July 31 or more frequently if events or changes in circumstances indicate the asset might be impaired.

During its fiscal 2022 annual impairment test, the Company determined that its Silent-Aire reporting unit's goodwill was impaired.

As a result, the Company recorded a non-cash impairment charge of $ 75 million within restructuring and impairment costs in the consolidated statements of income in the fourth quarter of fiscal 2022, which was determined by comparing the carrying amount of the reporting unit to its fair value.

The Silent-Aire reporting unit has a remaining goodwill balance of $ 183 million at September 30, 2022.

The Company used a discounted cash flow model to estimate the fair value of the reporting unit.

The primary assumptions used in the model were management's internal projections of future cash flows, the weighted-average cost of capital and long-term growth rates, which are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying business, there was significant judgment in determining the expected future cash flows attributable to the Silent-Aire reporting unit.

Other than the Silent-Aire reporting unit that is recorded at fair value, no other reporting unit was determined to be at risk of failing the goodwill impairment test.

In the second quarter of fiscal 2022, the Company concluded it had a triggering event requiring assessment of goodwill impairment for its North America Retail reporting unit in conjunction with classifying its Global Retail business as held for sale.

Refer to Note 3, "Discontinued Operations & Assets and Liabilities Held for Sale," of the notes to the consolidated financial statements for further disclosure related to the Global Retail assets held for sale.

As a result, the Company recorded a non-cash impairment charge of $ 235 million within restructuring and impairment costs in the consolidated statements of

income in the second quarter of fiscal 2022.

The North America Retail reporting unit has no remaining goodwill balance as of September 30, 2022.

Impairments ( 235 ) — — ( 75 ) ( 310 )

Foreign currency translation and other ( 46 ) ( 367 ) ( 151 ) ( 311 ) ( 875 )

Balance at end of period $ 8,971 $ 1,747 $ 1,116 $ 5,516 $ 17,350

(1) Includes measurement period adjustments

In the second quarter of fiscal 2023, management completed an updated comprehensive review of the Silent-Aire reporting unit, which is included in the Global Products segment.

Because actual results were lower than planned and the nearer term forecast was revised to reflect lower margins and earnings, the Company determined a triggering event had occurred and a quantitative test of goodwill for possible impairment was necessary.

As a result of the goodwill impairment test, the Company recorded a non-cash impairment charge of $ 184 million within restructuring and impairment costs in the consolidated statements of income in fiscal 2023, which was determined by comparing the carrying amount of the reporting unit to its fair value.

The Silent-Aire reporting unit has no remaining goodwill balance as of September 30, 2023.

Management completed its fiscal 2023 annual impairment test as of July 31.

The fair value of all reporting units substantially exceeded their carrying values, with the exception of one reporting unit with $ 455 million of goodwill whose fair value in excess of its carrying value was approximately 10 %.

For this reporting unit, a 1 % increase in the discount rate, or a 1.5 % decrease in the revenue growth rates, would cause the fair value to be less than the carrying value.

While no impairment was recorded, it is possible that future changes in circumstances could result in a non-cash impairment charge.

During its fiscal 2022 annual impairment test, the Company determined that goodwill in the Silent-Are reporting unit was impaired and recorded a non-cash impairment charge of $ 75 million within restructuring and impairment costs in the consolidated statements of income.

The impairment charge was determined by comparing the carrying amount of the reporting unit to its fair value.

The Company used a discounted cash flow model to estimate the fair value of the Silent-Aire reporting unit in both fiscal 2023 and 2022.

The primary assumptions and inputs used in the model included management's internal projections of future cash flows, the weighted-average cost of capital and the long-term growth rate.

The fair value measurement is classified as Level 3 within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement" due to the unobservable inputs used.

In fiscal 2022, the Company concluded it had a triggering event requiring assessment of goodwill impairment for its North America Retail reporting unit in conjunction with classifying its Global Retail business as held for sale.

As a result, the Company recorded a non-cash impairment charge of $ 235 million within restructuring and impairment costs in the consolidated statements of income in fiscal 2022.

The North America Retail reporting unit had no remaining goodwill balance as of September 30, 2023 or 2022.

The Company used the market approach to estimate the fair value of the reporting unit based on the relative estimated sales proceeds for the planned disposal of the Global Retail business attributable to the North America Retail reporting unit.

The inputs utilized in the analysis are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement."

There were no other triggering events requiring that an impairment assessment be conducted in fiscal 2022.

There were no goodwill impairments resulting from the fiscal 2021 and the fiscal 2020 annual impairment test and no reporting unit was determined to be at risk of failing the goodwill impairment test as of September 30, 2021.

During fiscal 2020, the Company considered the deterioration in general economic and market conditions due to the COVID-19 pandemic and its impact on each of the Company’s reporting units’ performance.

Due to declines in cash flow projections of the North America Retail reporting unit in the third quarter of fiscal 2020 as a result of the COVID-19 pandemic, the Company concluded a triggering event occurred requiring assessment of impairment for its North America Retail reporting unit.

As a result, the Company recorded a non-cash impairment charge of $ 424 million within restructuring and impairment costs in the consolidated statements of income in the third quarter of fiscal 2020.

The North America Retail reporting unit had a remaining goodwill balance of $ 235 million at September 30, 2021.

The Company used a discounted cash flow model to estimate the fair value of the reporting unit.

Refer to Note 3, "Assets and Liabilities Held for Sale & Discontinued Operations," of the notes to the consolidated financial statements for further disclosure.

There were no other triggering events requiring that an impairment assessment be conducted in fiscal 2023, 2022 or 2021.

However, it is possible that future changes in circumstances would require the Company to record additional non-cash impairment charges.

Other Intangible Assets

The Company’s other intangible assets, primarily from business acquisitions, consisted of (in millions):

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Trademarks/tradenames 2,114 — 2,114 2,207 — 2,207

Miscellaneous — — — 80 — 80

2,088 — 2,088 2,412 — 2,412

Total intangible assets $ 7,625 $ ( 2,737 ) $ 4,888 $ 7,648 $ ( 2,493 ) $ 5,155

The Company reviews indefinite-lived intangible assets for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired.

There were no indefinite-lived intangible asset impairments resulting from the fiscal 2022, 2021 and 2020 annual impairment tests.

However, it is possible that future changes in circumstances would require the Company to record non-cash impairment charges.

For fiscal 2022, the estimated fair values of all indefinite-lived intangibles substantially exceeded their carrying values, with the exception of the indefinite-lived trademarks related to the Company's Asia Pacific subscriber business.

The estimated fair value for the Asia Pacific indefinite-lived trademark was consistent with its carrying value of $ 54 million.

During the second and third quarters of fiscal 2020, the Company determined that it had a triggering event at each reporting period end requiring assessment of impairment for certain of its indefinite-lived intangible assets due to declines in revenue directly attributable to the COVID-19 pandemic.

As a result, the Company recorded an impairment charge of $ 62 million related primarily to the Company's retail business indefinite-lived intangible assets within restructuring and impairment costs in the consolidated statements of income in the second quarter of fiscal 2020.

No further impairment was required to be recorded in the third quarter of fiscal 2020 as a result of the completed impairment assessment.

During the fourth quarter of fiscal 2023, the Company impaired $ 18 million of Miscellaneous intangible assets in the Global Products segment and $ 10 million of a trademark in the Building Solutions Asia Pacific segment.

These non-cash charges were recorded within restructuring and impairment costs in the consolidated statements of income.

There was no impairment of other indefinite-lived intangible assets in any of these years, other than as disclosed above.

For all other remaining indefinite lived intangible assets, the Company estimated fair values were greater than the carrying values, with the exception of three other registered trademarks in which the estimated fair values were consistent with their carrying values which totaled $ 412 million.

Amortization of other intangible assets included within continuing operations for the years ended September 30, 2023, 2022 and 2021 was $ 439 million, $ 427 million and $ 435 million, respectively.

22 unchanged sentences

Right-of-use assets obtained in exchange for operating lease liabilities 427 369 515

The following table presents maturities of operating lease liabilities (in millions):

September 30, 2022

The following table presents future minimum rental payments for operating lease liabilities as of September 30, 2023 (in millions):

After 2028 404

3 unchanged sentences

DEBT AND FINANCING ARRANGEMENTS

Short-Term Debt

Short-term debt consisted of the following (in millions):

4 unchanged sentences

Weighted average interest rate on short-term debt outstanding 5.1 % 0.5 %

As of September 30, 2022, the Company had a syndicated $ 2.5 billion committed revolving credit facility, which is scheduled to expire in December 2024, and a syndicated $ 500 million committed revolving credit facility, which is scheduled to expire in December 2022.

There were no draws on the facilities as of September 30, 2022.

Long-Term Debt

Long-term debt consisted of the following (in millions;

due dates by fiscal year):

September 30,

Unsecured notes

JCI plc - Term Loan -¥ 25 billion;

LIBOR JPY plus 0.40 % due in 2022

JCI plc - 4.625 % due in 2023 ($ 25 million par value)

Tyco International Finance S.A.

("TIFSA") - 4.625 % due in 2023 ($ 7 million par value)

JCI plc - 1.00 % due in 2023 (€ 846 million par value)

JCI plc - 3.625 % due in 2024 ($ 453 million par value)

- 3.625 % due in 2024 ($ 31 million par value)

JCI plc - 1.375 % due in 2025 (€ 423 million par value)

TIFSA - 1.375 % due in 2025 (€ 54 million par value)

JCI plc - 3.90 % due in 2026 ($ 487 million par value)

TIFSA - 3.90 % due in 2026 ($ 51 million par value)

JCI plc - Term Loan - ¥ 30 billion;

TORF plus 0.40 % due in 2027

JCI plc and Tyco Fire & Security Finance S.C.A.

("TFSCA") - 0.375 % due in 2027 (€ 500 million par value)

JCI plc and TFSCA - 3.00 % due in 2028 (€ 600 million par value)

JCI plc and TFSCA - 1.75 % due in 2030 ($ 625 million par value)

JCI plc and TFSCA - 2.00 % due in 2031 ($ 500 million par value)

JCI plc and TFSCA - 1.00 % due in 2032 (€ 500 million par value)

JCI plc and TFSCA - 4.90 % due in 2032 ($ 400 million par value)

JCI plc - 6.00 % due in 2036 ($ 342 million par value)

- 6.00 % due in 2036 ($ 8 million par value)

JCI plc - 5.70 % due in 2041 ($ 190 million par value)

- 5.70 % due in 2041 ($ 30 million par value)

JCI plc - 5.25 % due in 2042 ($ 155 million par value)

- 5.25 % due in 2042 ($ 6 million par value)

JCI plc - 4.625 % due in 2044 ($ 444 million par value)

- 4.625 % due in 2044 ($ 6 million par value)

JCI plc - 5.125 % due in 2045 ($ 477 million par value)

TIFSA - 5.125 % due in 2045 ($ 23 million par value)

JCI plc - 6.95 % due in 2046 ($ 32 million par value)

- 6.95 % due in 2046 ($ 4 million par value)

JCI plc - 4.50 % due in 2047 ($ 500 million par value)

JCI plc - 4.95 % due in 2064 ($ 341 million par value)

- 4.95 % due in 2064 ($ 15 million par value)

Carrying Value

Issuer Interest Rate Due Date Par Value September 30, 2023 September 30, 2022

JCI plc 4.625 % 2023 $ 25 $ — $ 25

4.625 % 2023 $ 7 — 7

JCI plc 1.00 % 2023 € 846 — 830

JCI plc 3.625 % 2024 $ 453 453 453

3.625 % 2024 $ 31 31 31

JCI plc EURIBOR plus 0.70 %

2024 € 150 159 —

JCI plc 1.375 % 2025 € 423 450 419

1.375 % 2025 € 54 57 53

JCI plc 3.90 % 2026 $ 487 499 505

3.90 % 2026 $ 51 50 51

JCI plc TORF plus 0.40 %

2027 ¥ 30,000 202 208

JCI plc and TFSCA 2

0.375 % 2027 € 500 528 488

JCI plc and TFSCA 2

3.00 % 2028 € 600 634 586

JCI plc and TFSCA 2

1.75 % 2030 $ 625 624 623

JCI plc and TFSCA 2

2.00 % 2031 $ 500 497 496

JCI plc and TFSCA 2

1.00 % 2032 € 500 529 489

JCI plc and TFSCA 2

4.90 % 2032 $ 400 394 394

JCI plc and TFSCA 2

4.25 % 2035 € 800 839 —

JCI plc 6.00 % 2036 $ 342 339 339

6.00 % 2036 $ 8 8 8

JCI plc 5.70 % 2041 $ 190 189 189

5.70 % 2041 $ 30 30 30

JCI plc 5.25 % 2042 $ 155 155 155

5.25 % 2042 $ 6 6 6

JCI plc 4.625 % 2044 $ 444 442 441

4.625 % 2044 $ 6 6 6

JCI plc 5.125 % 2045 $ 477 431 557

5.125 % 2045 $ 23 23 23

JCI plc 6.95 % 2046 $ 32 32 32

6.95 % 2046 $ 4 4 4

JCI plc 4.50 % 2047 $ 500 496 496

JCI plc 4.95 % 2064 $ 341 340 340

4.95 % 2064 $ 15 15 15

Gross long-term debt 8,498 8,324

2 unchanged sentences

Long-term debt $ 7,818 $ 7,426

1 TIFSA = Tyco International Finance S.A.

2 TFSCA = Tyco Fire & Security Finance S.C.A.

The following table presents maturities of long-term debt as of September 30, 2023 (in millions):

Total $ 8,498

As of September 30, 2023, the Company had a syndicated $ 2.5 billion committed revolving credit facility, which was scheduled to expire in December 2024, and a syndicated $ 500 million committed revolving credit facility, which expired in November 2023.

Both credit facilities were renewed on December 11, 2023.

The $ 2.5 billion facility is now scheduled to expire in December 2028 and the $ 500 million facility is now scheduled to expire in December 2024.

There were no draws on the facilities as of September 30, 2023.

As of September 30, 2023, the Company was in compliance with all financial covenants set forth in its credit agreements and the indentures governing its outstanding notes, and expects to remain in compliance for the foreseeable future.

Total interest paid on both short and long-term debt for the years ended September 30, 2023, 2022 and 2021 was $ 298 million, $ 226 million and $ 242 million, respectively.

Financing Arrangements

In November 2021, the Company entered into a € 200 million ($ 196 million as of September 30, 2022) bank term loan which had an interest rate of EURIBOR plus 0.5 % and was due in October 2022.

In March 2022, the Company entered into two bank term loans totaling € 285 million ($ 280 million as of September 30, 2022) which both have an interest rate of EURIBOR plus 0.5 % and are due in March 2023.

In September 2022, the Company and its wholly owned subsidiary, TFSCA issued € 600 million ($ 589 million as of September 30, 2022) of bonds with an interest rate of 3.0 %, which are due in September 2028 and $ 400 million of bonds with an interest rate of 4.9 %, which are due in December 2032.

In September 2022, the Company repaid a ¥ 25 billion ($ 181 million) term loan and entered into a ¥ 30 billion ($ 208 million as of September 30, 2022) term loan which is due in September 2027.

The new ¥ 30 billion loan has an interest rate of TORF plus 0.4 %.

The original ¥ 25 billion loan had an interest rate of LIBOR JPY plus 0.4 %.

Net Financing Charges

The Company's net financing charges line item in the consolidated statements of income contained the following components (in millions):

Year Ended September 30,

2022 2021 2020

Interest expense, net of capitalized interest costs $ 225 $ 219 $ 240

Other financing charges 27 25 26

Interest income ( 6 ) ( 9 ) ( 23 )

Net foreign exchange results for financing activities ( 33 ) ( 29 ) ( 12 )

Net financing charges $ 213 $ 206 $ 231

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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The Company hedges 70 % to 90 % of the notional amount of each of its known foreign exchange transactional exposures.

The Company selectively hedges anticipated transactions that are subject to commodity price risk, primarily using commodity hedge contracts, to minimize overall price risk associated with the Company’s purchases of copper and aluminum in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts.

The Company selectively hedges anticipated transactions that are subject to commodity price risk, primarily using commodity hedge contracts, to minimize overall price risk associated with its purchases of copper and aluminum in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts.

Commodity risks are systematically managed pursuant to policy guidelines.

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Anticipated note issuance 800 600

All of the forward-starting interest swaps were terminated when the anticipated notes were issued and none were outstanding at September 30, 2022.

Forward-starting interest swaps are terminated when the anticipated notes are issued.

As of September 30, 2023, $ 600 million of forward-starting interest swaps were outstanding.

Accumulated amounts recorded in AOCI as of the date of the note issuance are amortized to interest expense over the life of the related note to reflect the difference between the swap's reference rate and the fixed rate of the note.

Net Investment Hedges

The Company enters into foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S.

The Company enters into cross-currency interest rate swaps and foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S.

subsidiaries.

The currency effects of the debt obligations are reflected in the AOCI account within shareholders’ equity attributable to Johnson Controls ordinary shareholders where they offset currency gains and losses recorded on the Company’s net investments globally.

The currency effects of the cross-currency interest rate swaps and debt obligations are reflected in the AOCI account within shareholders’equity attributable to Johnson Controls ordinary shareholders where they offset gains and losses recorded on the Company’s net investments globally.

The following table summarizes net investment hedges (in billions):

2 unchanged sentences

Yen-denominated debt designated as a net investment hedge in Japan ¥ 30 ¥ 30

US dollar vs.

Yen cross-currency interest rate swap designated as a net investment hedge in Japan ¥ 14 ¥ —

Derivatives Not Designated as Hedging Instruments

The Company selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans.

These equity compensation liabilities increase as the Company’s stock price increases and decrease as the Company’s stock price decreases.

In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount.

The Company hedged approximately 0.3 million ordinary shares, which had a cost basis of $ 23 million, as of September 30, 2021.

No shares were hedged as of September 30, 2022.

The Company also holds certain foreign currency forward contracts not designated as hedging instruments under ASC 815 to hedge foreign currency exposure resulting from monetary assets and liabilities denominated in nonfunctional currencies.

The Company holds certain foreign currency forward contracts not designated as hedging instruments under ASC 815 to hedge foreign currency exposure resulting from monetary assets and liabilities denominated in nonfunctional currencies.

The changes in fair value of these foreign currency exchange derivatives are recorded in the consolidated statements of income where they offset foreign currency transactional gains and losses on the nonfunctional currency denominated assets and liabilities being hedged.

6 unchanged sentences

Foreign currency exchange derivatives $ 16 $ 30 $ 13 $ 24

Commodity derivatives — 2 — —

Interest rate swaps 22 — — —

Other noncurrent assets

Equity swap — — — 23

Cross-currency interest rate swap 5 — — —

Total assets $ 43 $ 30 $ 13 $ 24

47 unchanged sentences

Foreign currency exchange derivatives Income tax provision — — ( 1 )

Interest rate swaps Net financing charges 1 — —

Equity swap Selling, general and administrative — ( 5 ) 28

10 unchanged sentences

Foreign currency exchange derivatives $ 29 $ — $ 29 $ —

Exchange traded funds (fixed income) 1

Interest rate swaps 22 — 22 —

Other noncurrent assets

Cross-currency interest rate swap 5 — 5 —

Deferred compensation plan assets 45 45 — —

15 unchanged sentences

Foreign currency exchange derivatives $ 54 $ — $ 54 $ —

Commodity derivatives 2 — 2 —

Exchange traded funds (fixed income) 1

Other noncurrent assets

2 unchanged sentences

Exchange traded funds (equity) 1

Equity swap 23 — 23 —

Total assets $ 339 $ 285 $ 54 $ —

16 unchanged sentences

Valuation Methods

Foreign currency exchange derivatives :

The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices.

Commodity derivatives :

The commodity derivatives are valued under a market approach using publicized prices, where available, or dealer quotes.

Equity swaps :

The equity swaps are valued under a market approach as the fair value of the swaps is equal to the Company’s stock price at the reporting period date.

Contingent earn-out liabilities :

The contingent earn-out liabilities are generally established using a Monte Carlo simulation based on the forecasted operating results and the earn-out formulas specified in the purchase agreements.

Cross-currency interest rate swaps:

The fair value of cross-currency interest rate swaps represents the difference between the swap's reference rate and exchange rate and the interest and exchange rates for a similar instrument as of the reporting period.

Cross-currency interest rate swaps are valued under a market approach using publicized prices.

Deferred compensation plan assets :

2 unchanged sentences

Unrealized gains (losses) on the deferred compensation plan assets are recognized in the consolidated statements of income where they offset unrealized gains and losses on the related deferred compensation plan liability.

Foreign currency exchange derivatives :

The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices.

Interest rate swaps:

The fair value of interest rate swaps represents the difference between the swap's reference rate and the interest rate for a similar instrument as of the reporting period.

Interest rate swaps are valued under a market approach using publicized prices.

Investments in exchange traded funds :

1 unchanged sentence

Refer to Note 21, "Commitments and Contingencies," of the notes to consolidated financial statements for further information.

Contingent earn-out liabilities :

The contingent earn-out liabilities are typically established using a Monte Carlo simulation based on the forecasted operating results and the earn-out formulas specified in the purchase agreements.

The following table presents the portion of unrealized gains (losses) recognized in the consolidated statements of income that relate to equity securities still held at September 30, 2023 and 2022 (in millions):

4 unchanged sentences

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values.

At September 30, 2022, the fair value of long-term debt was $ 7.3 billion, including public debt of $ 7.1 billion and other long-term debt of $ 0.2 billion.

At September 30, 2021, the fair value of long-term debt was $ 8.5 billion, including public debt of $ 8.3 billion and other long-term debt of $ 0.2 billion.

The fair value of long-term debt at September 30, 2023 and 2022 was as follows (in billions):

September 30,

Public debt $ 7.1 $ 7.1

Other long-term debt 0.4 0.2

Total fair value of long-term debt $ 7.5 $ 7.3

The fair value of public debt was determined primarily using market quotes which are classified as Level 1 inputs within the ASC 820 fair value hierarchy.

1 unchanged sentence

STOCK-BASED COMPENSATION

On March 10, 2021, the shareholders of the Company approved the Johnson Controls International plc 2021 Equity and Incentive Plan, which terminated the Johnson Controls International plc 2012 Share and Incentive Plan, as amended in September 2016 (collectively, the "Plans").

Both Plans authorize stock options, stock appreciation rights, restricted (non-vested) stock/units, performance shares, performance units and other stock-based awards.

The Johnson Controls International plc 2021 Equity and Incentive Plan authorizes stock options, stock appreciation rights, restricted (non-vested) stock/units, performance shares, performance units and other stock-based awards.

The Compensation and Talent Development Committee of the Company's Board of Directors determines the types of awards to be granted to individual participants and the terms and conditions of the awards.

Annual awards are typically granted in the first quarter of the fiscal year.

As of September 30, 2023, there were 55 million shares of the Company's common stock reserved and 41 million shares available for issuance under the 2021 Equity and Incentive Plan.

5 unchanged sentences

Tax impact from exercise and vesting of equity settled awards 7 12 12

Compensation expense excludes the offsetting impact of equity swaps and is recorded in selling, general and administrative expenses.

Compensation expense is recorded in selling, general and administrative expenses.

The Company does not settle stock options granted under share-based payment arrangements in cash.

7 unchanged sentences

Non-vested, September 30, 2023 $ 64.90 2,807,113

At September 30, 2022, the Company had approximately $ 107 million of total unrecognized compensation cost related to non-vested restricted stock arrangements granted for continuing operations which is expected to be recognized over a weighted-average period of 2.0 years.

Performance Share Awards

At September 30, 2023, the Company had approximately $ 113 million of total unrecognized compensation cost related to non-vested restricted stock arrangements granted which is expected to be recognized over a weighted-average period of 1.9 years.

Performance Share Awards (PSU's)

The following table summarizes the assumptions used in determining the fair value of stock options granted:

3 unchanged sentences

Expected volatility of the Company’s stock 33.50 % 30.00 % 30.90 %

A summary of the status of the Company’s non-vested PSUs at September 30, 2022, and changes for the year then ended, is presented below:

A summary of the status of the Company’s non-vested PSU's at September 30, 2023, and changes for the year then ended, is presented below:

Price Shares/Units

4 unchanged sentences

Non-vested, September 30, 2023 $ 71.77 867,524

At September 30, 2022, the Company had approximately $ 37 million of total unrecognized compensation cost related to non-vested performance-based share unit awards granted for continuing operations which is expected to be recognized over a weighted-average period of 1.7 years.

At September 30, 2023, the Company had approximately $ 32 million of total unrecognized compensation cost related to non-vested performance-based share unit awards which is expected to be recognized over a weighted-average period of 1.9 years.

Stock Options

22 unchanged sentences

Intrinsic value of options exercised (in millions) 27 19 94

At September 30, 2022, the Company had approximately $ 10 million of total unrecognized compensation cost related to non-vested stock options granted for continuing operations which is expected to be recognized over a weighted-average period of 1.6 years.

At September 30, 2023, the Company had approximately $ 10 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 1.6 years.

EARNINGS PER SHARE

20 unchanged sentences

The share repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

The Company repurchased and retired its ordinary shares of approximately $ 1,441 million, $ 1,307 million and $ 2,204 million during the years ended September 30, 2022, 2021 and 2020, respectively.

Accumulated Other Comprehensive Income

4 unchanged sentences

Balance at beginning of period $ ( 901 ) $ ( 421 ) $ ( 778 )

Aggregate adjustment for the period (net of tax effect of $ 0 , $ 0 and $ 1 )

( 480 ) 357 7

Aggregate adjustment for the period ( 69 ) ( 480 ) 357

Balance at end of period ( 970 ) ( 901 ) ( 421 )

1 unchanged sentence

Balance at beginning of period ( 11 ) ( 17 ) 2

Current period changes in fair value (net of tax effect of $ 2 , $ 5 and $ 1 )

Reclassification to income (net of tax effect of $( 4 ), $( 3 ) and $ 0 ) (1)

Current period changes in fair value 19 20 ( 3 )

Reclassification to income (1)

11 ( 16 ) ( 14 )

Net tax impact ( 4 ) 2 ( 2 )

Balance at end of period 15 ( 11 ) ( 17 )

1 unchanged sentence

Balance at beginning of period 1 4 —

Reclassification to income (net of tax effect of $ 0 , $ 0 and $( 1 ))

( 3 ) ( 3 ) ( 1 )

Other changes (net of tax effect of $ 0 , $( 1 ) and $ 4 )

Reclassification to income ( 1 ) ( 3 ) ( 3 )

Other changes — — 8

Net tax impact — — ( 1 )

Balance at end of period — 1 4

6 unchanged sentences

Certain of the Company’s U.S.

pension plans have been amended to prohibit new participants from entering the plans and no longer accrue benefits.

pension plans no longer allow new participants to enter the plans and no longer accrue benefits.

Funding for U.S.

11 unchanged sentences

Fair value of plan assets 1,633 1,729

During the year ended September 30, 2022, total employer contributions to the defined benefit pension plans were $ 93 million, none of which were voluntary contributions made by the Company.

The Company expects to contribute approximately $ 38 million in cash to its defined benefit pension plans in the year ended September 30, 2023.

The Company contributed $ 55 million to the defined benefit plans in fiscal 2023 and expects to contribute approximately $ 24 million in cash in fiscal 2024.

None of contributions made by the Company were voluntary.

Projected benefit payments from the plans as of September 30, 2023 are estimated as follows (in millions):

13 unchanged sentences

Fair value of plan assets 24 28

During the year ended September 30, 2022, total employer contributions to the postretirement plans were $ 3 million.

The Company expects to contribute approximately $ 3 million in cash to its postretirement plans in the year ended September 30, 2023.

The Company contributed $ 2 million to the postretirement benefit plans in fiscal 2023 and expects to contribute approximately $ 2 million in cash in fiscal 2024.

Projected benefit payments from the plans as of September 30, 2023 are estimated as follows (in millions):

3 unchanged sentences

Under specified conditions, the Company will contribute to certain savings plans based on predetermined percentages of compensation earned by the employee and/or will match a percentage of the employee contributions up to certain limits.

The Company temporarily suspended certain contributions in fiscal 2021 and 2020 in response to the COVID-19 pandemic.

Defined contribution plan contributions charged to expense amounted to $ 209 million, $ 196 million and $ 118 million during the years ended September 30, 2023, 2022 and 2021, respectively.

The Company temporarily suspended certain contributions in fiscal 2021 in response to the COVID-19 pandemic.

Multiemployer Benefit Plans

6 unchanged sentences

• If a participating employer stops contributing to the multiemployer benefit plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

• If the Company stops participating in some of its multiemployer benefit plans, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

• If the Company stops participating in some of its multiemployer benefit plans, it may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

The Company participates in approximately 260 multiemployer benefit plans, none of which are individually significant to the Company.

14 unchanged sentences

The majority of the real estate component of the portfolio is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the targeted appreciation.

Investments in other alternative asset classes, including hedge funds and commodities, diversify the expected investment returns relative to the equity and fixed income investments.

Investments in other alternative asset classes, including hedge funds, diversify the expected investment returns relative to the equity and fixed income investments.

As a result of the Company's diversification strategies, there are no significant concentrations of risk within the portfolio of investments.

18 unchanged sentences

Corporate/Other 583 583 — —

Alternative 211 — 211 —

Total Investments in the Fair Value Hierarchy 1,333 $ 1,061 $ 272 $ —

17 unchanged sentences

Cash and Cash Equivalents $ 8 $ 8 $ — $ —

Equity Securities

Global 66 — 66 —

Equity Securities - Global

Total Investments in the Fair Value Hierarchy 79 $ 8 $ 71 $ —

33 unchanged sentences

Equity Securities

Large-Cap 24 — 24 —

Small-Cap 8 — 8 —

International - Developed 19 — 19 —

International - Emerging 12 — 12 —

Fixed Income Securities

Government 20 — 20 —

Corporate/Other 56 — 56 —

Commodities 17 — 17 —

Real Estate 11 — 11 —

Global 66 — 66 —

Total Investments in the Fair Value Hierarchy 79 13 66 —

Multi-Credit Strategy Investments Measured at Net Asset Value (1)

Total Plan Assets $ 144

(1) The fair value of certain real estate and multi-credit strategy investments do not have a readily determinable fair value and require the fund managers to independently arrive at fair value by calculating net asset value ("NAV") per share.

calculate NAV per share, the fund managers value the investments using any one, or a combination of, the following methods:

In order to calculate NAV per share, the fund managers value the investments using any one, or a combination of, the following methods:

independent third party appraisals, discounted cash flow analysis of net cash flows projected to be generated by the investment and recent sales of comparable investments.

Assumptions used to revalue the investments are updated every quarter.

Due to the fact that the fund managers calculate NAV per share, the Company utilizes a practical expedient for measuring the fair value of its real estate and multi-credit strategy investments, as provided for under ASC 820, "Fair Value Measurement." In applying the practical expedient, the Company is not required to further adjust the NAV provided by the fund manager in order to determine the fair value of its investments as the NAV per share is calculated in a manner consistent with the measurement principles of ASC 946, "Financial Services - Investment Companies," and as of the Company's measurement date.

practical expedient, the Company is not required to further adjust the NAV provided by the fund manager in order to determine the fair value of its investments as the NAV per share is calculated in a manner consistent with the measurement principles of ASC 946, "Financial Services - Investment Companies," and as of the Company's measurement date.

The Company believes this is an appropriate methodology to obtain the fair value of these assets.

15 unchanged sentences

The underlying holdings are direct quoted market prices on regulated financial exchanges.

The fair value of the commodities is determined by quoted market prices of the underlying holdings on regulated financial exchanges.

The fair value of hedge funds is accounted for by the custodian.

6 unchanged sentences

Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

There were no Level 3 assets as of September 30, 2022 or 2021 or any Level 3 asset activity during fiscal 2022 or 2021.

Funded Status

10 unchanged sentences

Actuarial gain ( 37 ) ( 587 ) ( 62 ) ( 651 ) ( 7 ) ( 25 )

Amendments made during the year — — ( 1 ) ( 6 ) — —

Benefits and settlements paid ( 299 ) ( 276 ) ( 126 ) ( 166 ) ( 12 ) ( 14 )

Curtailment — — — ( 3 ) — —

Other — — ( 3 ) ( 3 ) — —

25 unchanged sentences

For the non-U.S.

pension and postretirement plans, the Company consistently uses the relevant country specific benchmark indices for

determining the various discount rates.

The Company has elected to utilize a full yield curve approach in the estimation of service and interest components of net periodic benefit cost (credit) for pension and other postretirement for plans that utilize a yield curve approach.

pension and postretirement plans, the Company consistently uses the relevant country specific benchmark indices for determining the various discount rates.

yield curve approach.

The full yield curve approach applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

1 unchanged sentence

Net Periodic Benefit Cost

The following table contains the components of net periodic benefit costs, which are primarily recorded in selling, general and administrative expenses in the consolidated statements of income (in millions):

The following table contains the components of net periodic benefit costs, which are recorded in selling, general and administrative expenses or cost of sales consistent with the related employees' salaries in the consolidated statements of income (in millions):

Pension Benefits Postretirement Benefits

6 unchanged sentences

Net actuarial (gain) loss 28 16 ( 214 ) 86 ( 116 ) ( 115 ) ( 5 ) 4 ( 35 )

Settlement (gain) loss 1 1 — 6 5 ( 1 ) — — —

Amortization of prior service cost (credit)

— — — — — 1 ( 4 ) ( 4 ) ( 4 )

Curtailment gain — — — — ( 3 ) ( 8 ) — — —

Settlement (gain) loss 1 — 6 5 ( 1 ) — — — —

Special termination benefit cost — — — — 2 — — — —

Other — — — — — ( 1 ) — — —

Net periodic benefit cost (credit) included in continuing operations

5 unchanged sentences

Interest crediting rate N/A N/A N/A 1.69 % 1.44 % 1.50 % N/A N/A N/A

SIGNIFICANT RESTRUCTURING AND IMPAIRMENT COSTS

RESTRUCTURING AND RELATED COSTS

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company commits to restructuring plans as necessary.

Restructuring plans generally result in charges for workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and impairment costs in the Company’s consolidated statements of income.

The other related costs consist primarily of consulting costs incurred as a direct result of the restructuring initiatives.

Restructuring activities generally result in charges for workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and impairment costs in the Company’s consolidated statements of income.

The Company expects the restructuring actions to reduce cost of sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

In fiscal 2021, the Company committed to a significant multi-year restructuring plan ("2021 Plan") which is expected to be completed during fiscal 2023.

The Company originally expected to incur $ 385 million of restructuring costs across all segments and at Corporate through fiscal 2023.

The Company has incurred and exceeded these costs during fiscal 2022 due to certain restructuring actions and expenses planned for fiscal 2023 being accelerated into fiscal 2022.

In total, the Company recorded $ 424 million of restructuring and impairment costs related to the 2021 Plan, which is the total amount expected to be incurred for this restructuring plan.

The following table summarizes restructuring and impairment costs related to the 2021 Plan (in millions):

Year Ended September 30, 2022 Inception to

September 30, 2022

In the third quarter of fiscal 2023, the Company began developing a restructuring plan with certain actions focused on continued scaling of SG&A expenses to its planned growth.

The scope of the plan was substantially finalized in the fourth quarter of fiscal 2023 and certain actions related to this plan were committed and executed during the fourth quarter, primarily related to workforce reductions, and were recorded to restructuring and impairment costs in the consolidated statements of income.

Additional restructuring charges are expected in subsequent quarters.

Restructuring charges incurred during the first and second quarters of fiscal 2023 were the result of other segment and Corporate-level restructuring plans.

Refer to Note 3, "Assets and Liabilities Held for Sale & Discontinued Operations," Note 7, "Property, Plant and Equipment," and Note 8, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for disclosure of other impairment costs.

The following table summarizes restructuring and related costs (in millions):

Year Ended September 30, 2023

Building Solutions North America $ 43

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Global Products 69

Corporate 12 36

Total $ 182 $ 424

The following table summarizes the changes in the Company’s 2021 Plan reserve, included primarily within other current liabilities in the consolidated statements of financial position (in millions):

Employee Severance and Termination Benefits Long-Lived Asset Impairments (1)

Original reserve $ 68 $ 98 $ 76 $ 242

Utilized—cash ( 28 ) — ( 51 ) ( 79 )

Utilized—noncash — ( 98 ) — ( 98 )

Balance at September 30, 2021 40 — 25 65

Additional restructuring costs 116 17 49 182

The following table summarizes changes in the restructuring reserve, which is included within other current liabilities in the consolidated statements of financial position, for new restructuring actions taken in the year ended September 30, 2023 (in millions):

Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Total

Restructuring and related costs 204 38 34 276

Utilized—cash ( 111 ) — ( 19 ) ( 130 )

Utilized—noncash — ( 38 ) ( 3 ) ( 41 )

Currency translation ( 1 ) — — ( 1 )

Balance at September 30, 2023

$ 93 $ — $ 12 $ 105

(1) Of the $ 98 million of long-lived asset impairment charges in fiscal 2021, $ 50 million related to the Global Products segment, $ 33 million related to the Building Solutions North America segment, $ 6 million related to Corporate assets, $ 5 million related to the Building Solutions EMEA/LA segment and $ 4 million related to the Building Solutions Asia Pacific segment.

Of the $ 17 million of long-lived asset impairment charges in fiscal 2022, $ 6 million related to the Building Solutions Asia Pacific segment, $ 5 million related to Corporate assets, $ 3 million related to the Global Products segment, $ 2 million related to the Building Solutions EMEA/LA segment and $ 1 million related to the Building Solutions North America segment.

The 2021 Plan included workforce reductions of approximately 6,200 employees.

Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum basis in accordance with individual severance agreements.

As of September 30, 2022, approximately 4,000 of the employees have been separated from the Company pursuant to the restructuring plans.

Company management closely monitors its overall cost structure and continually analyzes each of its businesses for opportunities to consolidate current operations, improve operating efficiencies and locate facilities in close proximity to customers.

This ongoing analysis includes a review of its manufacturing, engineering and purchasing operations, as well as the overall global footprint for all its businesses.

The more significant components of the Company’s income tax provision from continuing operations are as follows (in millions):

2023 2022 2021

Tax expense at Ireland statutory rate $ 214 $ 327 $ 113

Tax expense at Ireland statutory rate of 12.5 %

$ 214 $ 214 $ 327

state income tax, net of federal benefit 39 ( 23 ) 34

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federal tax rate

( 95 ) 3 ( 92 )

Income subject to rates different than the statutory rate 92 125 30

Reserve and valuation allowance adjustments ( 559 ) ( 274 ) 66

Intercompany intellectual property transfer — 417 —

Intellectual property transactions and adjustments ( 176 ) — 417

Restructuring and impairment costs 11 40 ( 9 )

Income tax provision (benefit) $ ( 323 ) $ ( 13 ) $ 868

The statutory tax rate in Ireland of 12.5 % is being used as a comparison since the Company is domiciled in Ireland.

For fiscal 2022, the effective tax rate for continuing operations was ( 1 )% and was lower than the statutory tax rate primarily due to tax reserve adjustments as the result of expired statute of limitations for certain tax years and the benefits of continuing global tax planning initiatives, partially offset by the income tax effects of impairment and restructuring charges, valuation allowance adjustments, the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestitures and tax rate differentials.

For fiscal 2021, the effective tax rate for continuing operations was 33 % and was higher than the statutory tax rate primarily due to the tax impacts of an intercompany transfer of certain of the Company’s intellectual property rights, valuation allowance adjustments, the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

For fiscal 2020, the effective tax rate for continuing operations was 12 % and was lower than the statutory tax rate primarily due to tax audit reserve adjustments, the income tax effects of mark-to-market adjustments, valuation allowance adjustments and the benefits of continuing global tax planning initiatives, partially offset by a discrete tax charge related to the remeasurement of deferred tax assets and liabilities as a result of Swiss tax reform, the tax impact of an impairment charge and tax rate differentials.

Effective tax rate ( 19 ) % ( 1 )%

For fiscal 2023, the effective tax rate for continuing operations was ( 19 )% and was lower than the statutory tax rate primarily due to the favorable tax impacts of intellectual property tax adjustments, tax reserve adjustments as the result of tax audit resolutions and remeasurements, valuation allowance adjustments and the benefits of continuing global tax planning initiatives, partially offset by the unfavorable impact of impairment and restructuring charges.

For fiscal 2022, the effective tax rate for continuing operations was ( 1 )% and was lower than the statutory tax rate primarily due to favorable impact of tax reserve adjustments as the result of expired statute of limitations for certain tax years and the benefits of continuing global tax planning initiatives, partially offset by the unfavorable impact of impairment and restructuring charges, valuation allowance adjustments, and the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestitures and tax rate differentials.

For fiscal 2021, the effective tax rate for continuing operations was 33 % and was higher than the statutory tax rate primarily due to the unfavorable impact of tax impacts of an intercompany transfer of certain of the Company’s intellectual property rights, valuation allowance adjustments, the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

Valuation Allowances

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Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

In fiscal 2023, due to changes in forecasted taxable income, the Company determined that it was more likely than not that certain deferred tax assets of Canada, Mexico, and Spain would be realized.

The valuation allowance adjustment resulted in a tax benefit of $ 121 million.

In fiscal 2022, due to changes in forecasted taxable income, the Company determined that it was more likely than not that certain deferred tax assets of Japan would not be realized.

The valuation allowance adjustment resulted in a tax charge of $ 27 million.

In fiscal 2021, as a result of an intercompany transfer of certain of the Company’s intellectual property rights, the Company determined that it is more likely than not that certain deferred tax assets of Switzerland would be realized, and it was more likely than not that certain deferred tax assets of Canada would not be realized.

The valuation allowance adjustments resulted in a $ 39 million net benefit to income tax expense.

Due to changes in forecasted taxable income, the Company also recorded a

discrete tax charge of $ 105 million related to valuation allowances on certain Mexico deferred tax assets now considered unrealizable.

In fiscal 2020, the Company performed an analysis related to the realizability of its worldwide deferred tax assets.

As a result, and after considering feasible tax planning initiatives and other positive and negative evidence, the Company determined that it was more likely than not that certain deferred tax assets primarily within the U.S.

would not be realized, and it is more likely than not that certain deferred tax assets of Canada would be realized.

In fiscal 2021, as a result of an intercompany transfer of certain of the Company’s intellectual property rights, the Company determined that it was more likely than not that certain deferred tax assets of Switzerland would be realized and certain deferred tax assets of Canada would not be realized.

The valuation allowance adjustments resulted in a $ 39 million net benefit to income tax expense.

Due to changes in forecasted taxable income, the Company also recorded a discrete tax charge of $ 105 million related to valuation allowances on certain Mexico deferred tax assets which were considered unrealizable.

The following table summarizes changes in the valuation allowance (in millions):

Year Ended September 30,

2023 2022 2021

Balance at beginning of period $ 5,973 $ 5,853 $ 5,518

Allowance provision for new operating and other loss carryforwards 573 325 505

Allowance benefits ( 168 ) ( 205 ) ( 170 )

Balance at end of period $ 6,378 $ 5,973 $ 5,853

Uncertain Tax Positions

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Ending balance, September 30 $ 2,226 $ 2,537 $ 2,726

The following table summarizes gross tax effected unrecognized tax benefits that, if recognized, would impact the effective tax rate and the related accrued interest, net of tax benefit (in millions):

The following table summarizes tax effected unrecognized tax benefits that, if recognized, would impact the effective tax rate and the related accrued interest, net of tax benefit (in millions):

September 30,

2023 2022 2021

Gross tax effected unrecognized tax benefits $ 1,973 $ 2,268 $ 2,132

Tax effected unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 1,581 $ 1,973 $ 2,268

Net accrued interest 335 284 252

In fiscal 2023, as the result of tax audit resolutions, statute expirations, and remeasurements of ongoing controversy matters in various jurisdictions, the Company adjusted its reserve for uncertain tax positions which resulted in a $ 438 million net benefit to income tax expense.

In fiscal 2022, the statute of limitations for certain tax years expired, which resulted in a $ 301 million benefit to income tax expense.

During fiscal 2020, tax audit resolutions resulted in a $ 44 million net benefit to income tax expense.

In the U.S., fiscal years 2017 through 2018 are currently under exam by the Internal Revenue Service (“IRS”) for certain legal entities.

In the U.S., fiscal years 2017 through 2018 are currently under appeal by the Internal Revenue Service (“IRS”) for certain legal entities.

Additionally, the Company is currently under exam in the following major non-U.S.

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Impacts of Tax Legislation and Change in Statutory Tax Rates

On September 11, 2023, the Schaffhausen parliament approved a partial revision of the cantonal act on direct taxation:

Immediate Minimum Taxation Measure (“IMTM”).

The IMTM increases Switzerland’s combined statutory income tax rate to approximately 15 %.

On November 19, 2023, IMTM was approved in a public referendum in the canton of Schaffhausen, was published in the cantonal official gazette on December 8,2023, and is effective starting January 1, 2024.

The Company is still evaluating the impact on its deferred tax assets in the canton of Schaffhausen, however the revaluation of these assets could have a noncash impact of less than $ 100 million to its consolidated financial statements.

On August 16, 2022, the U.S.

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The Company does not expect this provision to have a material impact on its effective tax rate.

In fiscal 2020, the Company recorded a noncash discrete tax charge of $ 30 million due to the remeasurement of deferred tax assets and liabilities related to Switzerland and the canton of Schaffhausen.

On September 28, 2018, the Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (“TRAF”), which was subsequently approved by the Swiss electorate on May 19, 2019.

During the fourth quarter of fiscal 2019, the Swiss Federal Council enacted TRAF which became effective for the Company on January 1, 2020.

The impacts of the federal enactment did not have a material impact to the Company’s financial statements.

TRAF also provides for parameters which enable the Swiss cantons to adjust tax rates and establish new regulations for companies.

As of September 30, 2019, the canton of Schaffhausen had not concluded its public referendum;

however, the enactment did occur during the first quarter of fiscal 2020.

During the fiscal years ended 2023, 2022 and 2021, other tax legislation was adopted in various jurisdictions.

These law changes did not have a material impact on the Company's consolidated financial statements.

Continuing Operations

Selected Income Tax Data

Selected income tax data related to continuing operations were as follows (in millions):

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Income tax provision (benefit) $ ( 323 ) $ ( 13 ) $ 868

Income taxes paid (refunded) $ 568 $ 504 $ ( 386 )

Income taxes paid $ 430 $ 568 $ 504

At September 30, 2023 and 2022, the Company recorded within the consolidated statements of financial position in other current assets approximately $ 65 million and $ 253 million, respectively, of income tax assets.

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In applying the criteria set forth in ASC 280, the Company has determined that it has four reportable segments for financial reporting purposes.

Building Solutions North America:

Building Solutions North America designs, sells, installs and services HVAC, controls, building management, refrigeration, integrated electronic security and integrated fire-detection and suppression systems for commercial, industrial, retail, small business, institutional and governmental customers in the United States and Canada.

Building Solutions North America also provides energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and controls systems, as well as data-driven “smart building” solutions, to non-residential building and industrial applications in the United States and Canadian marketplace.

Building Solutions EMEA/LA:

Building Solutions EMEA/LA designs, sells, installs and services HVAC, controls, building management, refrigeration, integrated electronic security, integrated fire-detection and suppression systems, and provides technical services, including data-driven “smart building” solutions, to markets in Europe, the Middle East, Africa and Latin America.

Building Solutions Asia Pacific:

Building Solutions Asia Pacific designs, sells, installs and services HVAC, controls, building management, refrigeration, integrated electronic security, integrated fire-detection and suppression systems, and provides technical services, including data-driven “smart building” solutions, in the Asia Pacific marketplace.

Global Products:

Global Products designs, manufactures and sells HVAC equipment, controls software and software services for residential and commercial applications to commercial, industrial, retail, residential, small business, institutional and

governmental customers worldwide.

In addition, Global Products designs, manufactures and sells refrigeration equipment and controls globally.

The Global Products business also designs, manufactures and sells fire protection, fire suppression and security products, including intrusion security, anti-theft devices, access control, and video surveillance and management systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide.

Global Products includes the Johnson Controls-Hitachi joint venture.

Historical information has been re-cast to present the comparative periods on a consistent basis.

This change was not material to the segment presentation or the allocation of goodwill.

The Company conducts its business through four business segments:

• Building Solutions North America which operates in the United States and Canada;

• Building Solutions EMEA/LA which operates in Europe, the Middle East, Africa and Latin America;

• Building Solutions Asia Pacific which operates in Asia Pacific;

• Global Products which operates worldwide and includes the Johnson Controls-Hitachi joint venture.

The Building Solutions segments:

• Design, sell, install and service HVAC, controls, building management, refrigeration, integrated electronic security and integrated fire-detection and suppression systems;

• Provide energy-efficiency solutions and technical services, including data-driven "smart building" solutions as well as inspection, scheduled maintenance, and repair and replacement of mechanical and controls systems.

The Global Products segment designs, manufactures and sells:

• HVAC equipment, controls software and software services for residential and commercial applications;

• Refrigeration equipment and controls;

• Fire protection and suppression;

• Security products, including intrusion security, anti-theft devices, access control, and video surveillance and management systems.

The Company’s segments provide products and services to commercial, institutional, industrial, data center, governmental and residential customers.

Management evaluates the performance of its business segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

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Global Products assets as of September 30, 2023, 2022 and 2021 include $ 905 million, $ 834 million and $ 945 million, respectively, of investments in partially-owned affiliates.

Investments in partially-owned affiliates for other segments is immaterial.

Investments in partially-owned affiliates for other segments are immaterial.

In fiscal 2023, 2022 and 2021, no customer exceeded 10% of consolidated net sales.

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A typical warranty program requires that the Company replace defective products within a specified time period from the date of sale.

The Company records an estimate for future warranty-related costs based on actual historical return rates and other known factors.

Based on analysis of return rates and other factors, the Company’s warranty provisions are adjusted as necessary.

The Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates.

The changes in the carrying amount of the Company’s total product warranty liability were as follows (in millions).

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Accruals for warranties issued during the period 134 119

Accruals from acquisitions and divestitures ( 1 ) —

Changes in estimates to pre-existing warranties ( 6 ) 11

Settlements made (in cash or in kind) during the period ( 112 ) ( 114 )

Changes in estimates to pre-existing warranties 1 ( 6 )

Accruals from acquisitions and divestitures 1 —

Currency translation ( 1 ) ( 11 )

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Environmental Matters

The Company accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable.

The following table presents the location and amount of reserves for environmental liabilities in the Company's consolidated statements of financial position (in millions):

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The Company periodically examines whether the contingent liabilities related to the environmental matters described below are probable and reasonably estimable based on experience and ongoing developments in those matters, including continued study and analysis of ongoing remediation obligations.

During the three months ended September 30, 2022, with the assistance of independent environmental consultants and taking into consideration investigation and remediation actions previously completed, new information available to the Company during the fourth quarter of 2022 and ongoing discussions with the Wisconsin Department of Natural Resources ("WDNR"), the Company completed a comprehensive long-term analysis and cost assessment related to the Company’s ongoing environmental remediation obligations.

As a result of this analysis, the Company increased its accrual for environmental liabilities by $ 228 million, which are recorded on an undiscounted basis.

The Company expects that it will pay the amounts recorded over an estimated period of up to 20 years.

The Company is not able to estimate a possible loss or range of loss, if any, in excess of the established accruals for environmental liabilities at this time.

A substantial portion of the increase to the Company's environmental reserves relates to ongoing long-term remediation efforts to address contamination relating to fire-fighting foams containing perfluorooctane sulfonate ("PFOS"), perfluorooctanoic acid ("PFOA"), and/or other per- and poly-fluoroalkyl substances ("PFAS") at or near the Tyco Fire Products L.P.

A substantial portion of the Company's environmental reserves relates to ongoing long-term remediation efforts to address contamination relating to fire-fighting foams containing perfluorooctane sulfonate ("PFOS"), perfluorooctanoic acid ("PFOA"), and/or other per- and poly-fluoroalkyl substances ("PFAS") at or near the Tyco Fire Products L.P.

(“Tyco Fire Products”) Fire Technology Center ("FTC") located in Marinette, Wisconsin and surrounding areas in the City of Marinette and Town of Peshtigo, Wisconsin, as well as the continued remediation of PFAS, arsenic and other contaminants at the Tyco Fire Products Stanton Street manufacturing facility also located in Marinette, Wisconsin (the “Stanton Street Facility”).

The increase in reserves was recorded as a result of several events that occurred in the three months ended September 30, 2022, including the completion and testing of the Groundwater Extraction and Treatment System (“GETS”) at the FTC (as further discussed below), the completion of resident surveys in Peshtigo regarding long-term drinking water solutions, correspondence with regulators on planned remediation activities, finalization of cost estimates for system upgrades and related long-term run rate costs in response to new permit requirements at the Stanton Street Facility, and the development of additional information through ongoing investigation and analysis.

These events have allowed the Company to develop estimates of costs associated with the long-term remediation actions expected to be performed over an estimated period of up to 20 years, including the continued operation of the GETS, the implementation of long-term drinking water solutions, continued monitoring and testing of the wells, the operation and wind-down of other legacy remediation and treatment systems and the completion of ongoing investigation obligations.

The use of fire-fighting foams at the FTC was primarily for training and testing purposes to ensure that such products sold by the Company’s affiliates, Chemguard, Inc.

("Chemguard") and Tyco Fire Products, were effective at suppressing high intensity fires that may occur at military installations, airports or elsewhere.

In May 2021, as part of Tyco Fire Products’ ongoing investigation and remediation program, the WDNR approved Tyco Fire Products’ proposed GETS, a permanent groundwater remediation system that will extract groundwater that contains PFAS, treat it using advanced filtration systems, and return the treated water to the environment.

Tyco Fire Products has completed construction of the GETS, which is now in operation.

Tyco Fire Products is also in the process of completing the removal and disposal of PFAS-affected soil from the FTC.

On July 18, 2023, Tyco Fire Products announced that it plans to discontinue the production and sale of fluorinated firefighting foams by June 2024, including AFFF products, and will transition to non-fluorinated foam alternatives.

Tyco Fire Products has been engaged in remediation activities at the Stanton Street Facility since 1990.

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Under this agreement, Tyco Fire Products’ principal obligations are to contain the arsenic contamination on the site, pump and treat on-site groundwater, dredge, treat and properly dispose of contaminated sediments in the adjoining river areas, and monitor contamination levels on an ongoing basis.

Activities completed under the Consent Order since 2009 include the installation of a subsurface barrier wall around the facility to contain contaminated groundwater, the installation of a groundwater extraction and treatment system and the dredging and offsite disposal of treated river sediment.

In addition to ongoing remediation activities, the Company is also working with the WDNR to investigate and remediate the presence of PFAS at or near the Stanton Street Facility as part of the evaluation and remediation of PFAS in the Marinette region.

Activities completed under the Consent Order since 2009 include the installation of a subsurface barrier wall around the facility to contain contaminated groundwater, the installation and ongoing operation and monitoring of a groundwater extraction and treatment system and the dredging and offsite disposal of treated river sediment.

In addition to ongoing remediation activities, the Company is also working with the Wisconsin Department of Natural Resources ("WDNR") to investigate and remediate the presence of PFAS at or near the Stanton Street Facility as part of the evaluation and remediation of PFAS in the Marinette region.

Tyco Fire Products is operating and monitoring the recently constructed Groundwater Extraction and Treatment System ("GETS"), a permanent groundwater remediation system that extracts groundwater containing PFAS, treats it using advanced filtration systems, and returns the treated water to the environment.

Tyco Fire Products has also completed the removal and disposal of PFAS-affected soil from the FTC.

The Company's reserves for continued remediation of the FTC, the Stanton Street Facility and surrounding areas in Marinette and Peshtigo are based on estimates of costs associated with the long-term remediation actions, including the continued operation of the GETS, the implementation of long-term drinking water solutions, continued monitoring and testing of the wells, the operation and wind-down of other legacy remediation and treatment systems and the completion of ongoing investigation obligations.

PFOA, PFOS, and other PFAS compounds are being studied by EPA and other environmental and health agencies and researchers.

EPA has not issued binding regulatory limits, but had initially stated that it would propose regulatory standards for PFOS and PFOA in drinking water by the end of 2019, in accordance with its PFAS Action Plan released in February 2019, and issued interim recommendations for addressing PFOA and PFOS in groundwater in December 2019.

In March 2021, EPA published its final determination to regulate PFOS and PFOA in drinking water.

While those studies continue, EPA issued in June 2022 an updated set of interim health advisory levels for PFOA and PFOS in drinking water, as well as final health advisory levels for two other types of PFAS (PFBS and GenX chemicals).

In November 2022, EPA added a class definition of PFAS to the final version of EPA's fifth Contaminant Candidate List (CCL 5), which is a list of substances not currently subject to national drinking water regulation, but which EPA believes may require future regulation.

In October 2021, EPA released its "PFAS Strategic Roadmap:

EPA's Commitments to Action 2021-2024." The 2021-2024 Roadmap sets timelines by which EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as Comprehensive Environmental Response, Compensation and Liability Act hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater discharges.

Both PFOA and PFOS are types of synthetic chemical compounds that have been present in firefighting foam.

However, both are also present in many existing consumer products.

According to EPA, PFOA and PFOS have been used to make carpets, clothing, fabrics for furniture, paper packaging for food and other materials (e.g., cookware) that are resistant to water, grease or stains.

In August 2022, EPA published a proposed rule that would designate PFOA and PFOS as “hazardous substances” under CERCLA.

2023, EPA announced a proposed National Primary Drinking Water Regulation (“NPDWR”) for six PFAS compounds including PFOA and PFOS.

The NPDWR proposes establishing legally enforceable levels, called Maximum Contaminant Levels, of 4.0 parts per trillion for each of PFOA and PFOS.

EPA indicated that it anticipates finalizing the regulation by the end of 2023.

In August 2022, EPA published a proposed rule that would designate PFOA and PFOS as “hazardous substances” under Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").

In April 2023, EPA issued an Advanced Notice of Proposed Rulemaking ("ANPR") seeking input on whether it should expand the proposed rule to designate as "hazardous substances" under CERCLA:

(1) seven additional PFAS;

(2) the precursors to PFOA, PFOS, and the seven additional PFAS;

or (3) entire categories of PFAS.

It is difficult to estimate the Company’s ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the financial viability of other potentially responsible parties and third-party indemnitors, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur.

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The WDHS recommended a groundwater enforcement standard for PFOA and PFOS of 20 parts per trillion.

Although Wisconsin recently approved final regulatory standards for PFOA and PFOS in drinking water and surface water, the Wisconsin Natural Resources Board did not approve WDNR's proposed standards for PFOA and PFOS in groundwater.

In September 2022, the Governor of Wisconsin signed a scope statement setting out parameters for the WDNR to draft a final rule regarding groundwater quality standards for PFOA and PFOS, among other compounds.

The WDNR is now in the process of drafting the rule.

Although Wisconsin approved final regulatory standards for PFOA and PFOS in drinking water and surface water in February 2022, the Wisconsin Natural Resources Board did not approve WDNR's proposed standards for PFOA and PFOS in groundwater.

The WDNR has initiated a rulemaking proceeding for a rule that would establish groundwater quality standards for PFOA, PFOS, perfluorobutane sulfonic acid and its potassium salt (“PFBS”) and hexafluoropropylene oxide dimer acid and its ammonium salt (“HFPO-DA”).

WDNR indicates that the rule could be finalized by the winter of 2023-2024.

In July 2019, the Company received a letter from the WDNR directing the expansion of the evaluation of PFAS in the Marinette region to include (1) biosolids sludge produced by the City of Marinette Waste Water Treatment Plant and spread on certain fields in the area and (2) the Menominee and Peshtigo Rivers.

Tyco Fire Products responded to the WDNR’s letter by requesting additional necessary information.

On October 16, 2019, the WDNR issued a “Notice of Noncompliance” to Tyco

Fire Products and Johnson Controls, Inc.

On October 16, 2019, the WDNR issued a “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc.

regarding the WDNR’s July 2019 letter.

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In September 2021, the WDNR sent an additional “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc.

concerning land-applied biosolids, which reviewed and responded to the Company’s biosolids investigation conducted to date.

Tyco Fire Products responded to the WDNR’s September 2021 notice by the December 27, 2021 deadline set by WDNR and submitted a Land Applied Biosolids Interim Site Status Update Report to WDNR on October 25, 2022.

concerning land-applied biosolids, which reviewed and responded to the Company’s biosolids investigation conducted to that date.

On April 10, 2023, the WDNR issued a third “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc.

concerning land-applied biosolids in the Marinette region.

Tyco Fire Products and Johnson Controls, Inc.

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The WDOJ alleges that the Company failed to timely report the presence of PFAS chemicals at the FTC, and that the Company has not sufficiently investigated or remediated PFAS at or near the FTC.

The WDOJ seeks monetary penalties and an injunction ordering these two subsidiaries to complete a site investigation and cleanup of PFAS contamination in accordance with the WDNR's requests.

The lawsuit is presently at the beginning stages of litigation.

Tyco Fire Products and Johnson Controls, Inc.

each filed Answers to the Complaint on April 4, 2022 and the parties are proceeding with initial fact discovery.

The WDOJ seeks monetary penalties and an injunction ordering these two subsidiaries to complete a site investigation and cleanup of PFAS contamination in

accordance with the WDNR's requests.

The parties are proceeding with fact discovery and the court has set a trial date of December 3, 2024.

The Company is vigorously defending this civil enforcement action and believes that it has meritorious defenses, but the Company is presently unable to predict the duration, scope, or outcome of this action.

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The Town seeks monetary penalties and an injunction ordering abatement of PFAS contamination in Peshtigo.

The lawsuit is presently at the beginning stages of litigation.

The Company was served with the operative complaint on October 21, 2022.

The case has been removed to federal court and transferred to a multi-district litigation ("MDL") before the United States District Court for the District of South Carolina.

The Company plans to vigorously defend against this case and believes that it has meritorious defenses, but the Company is presently unable to predict the duration, scope, or outcome of this action.

In November 2022, individuals filed six actions in Dane County, Wisconsin alleging personal injury and/or property damage against Tyco Fire Products, Johnson Controls Inc., Chemguard, Inc., and other unaffiliated defendants related to environmental matters at the FTC.

Plaintiffs allege that use of AFFF products at the FTC and activities by third parties unrelated to the Company contaminated nearby drinking water sources, surface waters, and other natural resources and properties, including their personal properties.

The individuals seek monetary damages for their personal injury and/or property damage.

These lawsuits have been transferred to the MDL.

Subsequently, several additional plaintiffs have direct-filed in the MDL complaints with similar allegations.

These lawsuits are presently at the beginning stages of litigation.

The Company is vigorously defending these cases and believes that it has meritorious defenses, but the Company is presently unable to predict the duration, scope, or outcome of this action.

Aqueous Film-Forming Foam ("AFFF") Litigation

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In September 2018, Tyco Fire Products and Chemguard filed a Petition for Multidistrict Litigation with the United States Judicial Panel on Multidistrict Litigation (“JPML”) seeking to consolidate all existing and future federal cases into one jurisdiction.

On December 7, 2018, the JPML issued an order transferring various AFFF cases to a multi-district litigation (“MDL”) before the United States District Court for the District of South Carolina.

On December 7, 2018, the JPML issued an order transferring various AFFF cases to the MDL.

Additional cases have been identified for transfer to or are being directly filed in the MDL.

AFFF Putative Class Actions

Chemguard and Tyco Fire Products are named in 33 pending putative class actions in federal courts originating from Colorado, Florida, Massachusetts, New York, Pennsylvania, Washington, New Hampshire, South Carolina, the District of Columbia, Guam, West Virginia, Michigan, Texas and South Dakota.

All of these cases except one have been direct-filed in or transferred to the MDL, and the remaining action was recently removed to federal court and will be tagged for transfer to the MDL shortly.

Chemguard and Tyco Fire Products are named in 43 pending putative class actions in federal courts originating from 16 states and territories.

All of these cases have been direct-filed in or transferred to the MDL.

AFFF Individual or Mass Actions

There are more than 2,900 individual or “mass” actions pending that were filed in state or federal court in various states including California, Colorado, New York, Pennsylvania, New Mexico, Missouri, Arizona, Texas, and South Carolina against Chemguard and Tyco Fire Products and other defendants in which the plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values.

There are more than 5,400 individual or “mass” actions pending that were filed in state or federal courts originating from 52 states and territories against Chemguard and Tyco Fire Products and other defendants in which the plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values.

The cases involve plaintiffs from various states including approximately 7,000 plaintiffs in Colorado and more than 5,400 other plaintiffs.

The vast majority of these matters have been tagged for transfer to, transferred to, or directly-filed in the MDL, and it is anticipated that several newly-filed state court actions will be similarly tagged and transferred.

There are several matters that are proceeding in state courts, including actions in Arizona, Illinois, and Texas.

There are several matters that are proceeding in state courts, including actions in Arizona, Illinois and Virginia.

Tyco and Chemguard are also periodically notified by other individuals that they may assert claims regarding PFOS and/or PFOA contamination allegedly resulting from the use of AFFF.

AFFF Municipal and Water Provider Cases

Chemguard and Tyco Fire Products have been named as defendants in more than 250 cases in federal and state courts involving municipal or water provider plaintiffs in various states including Alaska, Alabama, Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Virginia, Washington, West Virginia, Wisconsin, the District of Columbia, and several municipalities or water providers from various states who direct-filed complaints in South Carolina.

The vast majority of these cases have been transferred to or directly filed in the MDL, and it is anticipated that the remaining cases will be transferred to the MDL.

These municipal plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy or Air Force bases released PFOS and PFOA into public water supply wells, allegedly requiring remediation of public property.

Chemguard and Tyco Fire Products have been named as defendants in more than 720 cases in federal and state courts involving municipal or water provider plaintiffs that were filed in state or federal courts originating from 35 states and territories.

The vast majority of these cases have been transferred to or were directly filed in the MDL, and it is anticipated that the remaining cases will be transferred to the MDL.

These municipal and water provider plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy or Air Force bases released PFOS and PFOA into public water supply wells and/or other public property, allegedly requiring remediation.

The MDL court set the first case for trial on June 5, 2023 ( City of Stuart (Florida) v.

On April 26, 2023, the parties entered a stipulation dismissing Chemguard with prejudice from the City of Stuart case, and on May 4, 2023 the parties entered into a stipulation dismissing Tyco with prejudice from the City of Stuart case.

On June 5, 2023, the MDL court continued the trial date for the City of Stuart case, and the parties remaining in that case later reached settlement.

The parties in the MDL have designated four additional plaintiffs as water provider bellwether cases and are conducting initial discovery into those cases.

The parties are also working to identify potential personal injury cases for an additional bellwether phase.

Tyco and Chemguard are also periodically notified by other municipal entities that those entities may assert claims regarding PFOS and/or PFOA contamination allegedly resulting from the use of AFFF.

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This suit has been removed to federal court and transferred to the MDL.

In January 2019, the State of Ohio filed a lawsuit in Ohio state court ( State of Ohio v.

The 3M Company et al.

G-4801-CI-021804752-000 (Court of Common Pleas of Lucas County, Ohio)) against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various specified and unspecified locations across Ohio.

The lawsuit seeks to recover costs and natural resource damages associated with the contamination.

This lawsuit has been removed to the United States District Court for the Northern District of Ohio and transferred to the MDL.

In addition, in May and June 2019, three other states filed lawsuits in their respective state courts against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various specified and unspecified locations across their jurisdictions ( State of New Hampshire v.

The 3M Company et al.

State of Vermont v.

The 3M Company et al .;

State of New Jersey v.

The 3M Company et al .).

All three of these suits have been removed to federal court and transferred to the MDL.

In September 2019, the government of Guam filed a lawsuit in the superior court of Guam against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within its jurisdiction.

This complaint has been removed to federal court and transferred to the MDL.

In November 2019, the government of the Commonwealth of the Northern Mariana Islands filed a lawsuit in the superior court of the Northern Mariana Islands against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within its jurisdiction.

This complaint has been removed to federal court and transferred to the MDL.

In August 2020, the Attorney General of the State of Michigan filed two substantially similar lawsuits—one in federal court and one in state court—against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various locations within the State.

The federal action has been transferred to the MDL, and the state court action has been removed to federal court and transferred to the MDL.

In December 2020, the State of Mississippi filed a lawsuit against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the use of firefighting foams at various locations throughout the State.

This complaint was direct-filed in the MDL in South Carolina.

In April 2021, the State of Alaska filed a lawsuit in the superior court of the State of Alaska against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the use of firefighting foams at various locations throughout the State.

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In October 2022, the Attorney General filed two similar lawsuits in the superior courts of the State of North Carolina regarding alleged PFAS damages at two additional locations.

It is anticipated that these two cases will be removed to federal court and transferred to the MDL.

In February 2022, the Attorney General of the State of Colorado filed a lawsuit in Colorado state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State's land and natural resources, public health, and State property allegedly resulting from the use of firefighting foams at various locations throughout the State.

This complaint has been removed to federal court and transferred to the MDL.

In April 2022, the Attorney General of the State of Florida filed a lawsuit in Florida state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage to the State's natural resources and public health allegedly resulting from the use of firefighting foams at various locations throughout the State.

It is anticipated that this complaint will be removed to federal court and transferred to the MDL.

In May 2022, the Attorney General of the Commonwealth of Massachusetts filed a lawsuit against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State's natural resources, property, residents, and consumers allegedly resulting from the use of firefighting foams at various locations throughout the State.

This complaint was direct-filed in the MDL in South Carolina.

In July 2022, the Attorney General of the State of Wisconsin filed a lawsuit in Wisconsin state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFAS damage to the State's natural

resources and public health allegedly resulting, in part, from the use of firefighting foams at various locations throughout the State.

This complaint has been removed to federal court and tagged for transfer to the MDL.

The Attorney General has opposed transfer, and the parties are awaiting a decision from the JPML.

In November 2022, the Attorney General of the State of California filed a lawsuit in California state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the manufacture, use, marketing, or sale of PFAS-containing products, including firefighting foams, at various locations throughout the State.

It is anticipated that this case will be removed to federal court and transferred to the MDL.

These two cases have also been removed to federal court and transferred to the MDL.

In addition, 29 other states and territories have filed 31 lawsuits against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFAS damage of each of those State's environmental and natural resources

allegedly resulting from the manufacture, storage, sale, distribution, marketing, and use of PFAS-containing AFFF within each respective State.

The states and territories are:

Arkansas, Arizona, California, Colorado, Delaware, the District of Columbia, Florida, Illinois, Kentucky, Massachusetts, Maryland, Maine, Michigan, Mississippi, New Hampshire, New Jersey, New Mexico, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Washington, Wisconsin, Guam, the Northern Mariana Islands, and Puerto Rico.

All of these complaints, other than Delaware and South Carolina, have been removed to federal court and transferred to the MDL.

It is anticipated that the Delaware and South Carolina complaints will be removed to federal court and transferred to the MDL.

Other AFFF Related Matters

3 unchanged sentences

This complaint has been transferred to the MDL.

The Company is vigorously defending the above matters and believes that it has meritorious defenses to class certification and the claims asserted, including statutes of limitations, the government contractor defense, various medical and scientific defenses, and other factual and legal defenses.

In July 2023, the Fond du Lac Band of Lake Superior Chippewa (a federally recognized tribe) direct-filed a lawsuit in the MDL against a number of manufacturers, including affiliates of the Company, with respect to PFAS contamination allegedly resulting from the use and disposal of AFFF at Duluth Air National Guard Base in Duluth, Minnesota.

The Company is vigorously defending all of the above AFFF matters and believes that it has meritorious defenses to class certification and the claims asserted, including statutes of limitations, the government contractor defense, various medical and scientific defenses, and other factual and legal defenses.

The government contractor defense is a form of immunity available to government contractors that produced products for the United States government pursuant to the government’s specifications.

In September 2022, the AFFF MDL Court declined to grant summary judgment on the government contractor defense, ruling that various factual issues relevant to the defense must be decided by a jury rather than the Court.

Tyco and Chemguard have insurance that has been in place for many years and the Company is pursuing this coverage for these matters.

The Company has a historical general liability insurance program and is pursuing coverage under the program from various insurers through insurance claims discussions and litigation pending in a state court in Wisconsin and a federal district court in South Carolina.

The insurance litigation involves numerous factual and legal issues and remains at a relatively early stage.

However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material.

2 unchanged sentences

These cases have typically involved product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used with asbestos containing components.

The Company estimates the asbestos-related liability for pending and future claims and related defense costs on a discounted basis.

In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable.

The following table presents the location and amount of asbestos-related assets and liabilities in the Company's consolidated statements of financial position (in millions):

9 unchanged sentences

September 30,

Cash $ 20 $ 6

Investments 231 239

Total restricted assets 251 245

Insurance recoveries for asbestos-related liabilities 55 58

Insurance receivables for asbestos-related liabilities 50 55

Total asbestos-related assets $ 301 $ 300

The Company's estimate of the liability and corresponding insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be paid by Company affiliates).

Estimated asbestos-related defense costs are included in the asbestos liability.

The Company's legal strategy for resolving claims also impacts these estimates.

The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be paid through 2068.

At least annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements.

In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy.

The Company also evaluates the recoverability of its insurance receivable on an annual basis.

The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted.

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions.

4 unchanged sentences

As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.

Insurable Liabilities

Self-Insured Liabilities

The Company records liabilities for its workers' compensation, product, general and auto liabilities.

7 unchanged sentences

Other noncurrent liabilities 226 230

Total insurable liabilities $ 341 $ 325

Total self-insured liabilities $ 333 $ 341

The following table presents the location and amount of insurable receivables in the Company's consolidated statements of financial position (in millions):

2 unchanged sentences

Other noncurrent assets 14 20

Total insurable receivables $ 30 $ 20

Total insurance receivables $ 20 $ 30

Other Matters

3 unchanged sentences

SUBSEQUENT EVENTS

In October 2022, the Company acquired Rescue Air Systems, a leading provider of firefighter air replenishment systems, for $ 100 million to enhance its Fire Suppression portfolio.

In October 2022, the Company repaid a € 200 million ($ 196 million as of September 30, 2022) term loan with an interest rate of EURIBOR plus 0.5 % and entered into a € 150 million term loan with an interest rate of EURIBOR plus 0.7 % which is due in April 2024.

In October 2022, a third party warehouse in Menominee, Michigan, at which the Company stores certain Global Products inventory related to its fire suppression business, was severely damaged by a fire.

The fire originated at an adjacent location not owned or operated by the Company.

The Company is evaluating the losses incurred, including inventory and other assets that were damaged or destroyed, as well as expected lost revenues and profits due to the business interruption.

The Company believes losses will be at least partially covered by insurance and also plans to seek recovery from the responsible parties.

The Company expects the majority of the financial impact will be recognized in the first quarter of fiscal 2023.

Based on the current evaluation, the Company believes the warehouse fire will not have a material impact on fiscal 2023 financial results, financial position or cash flows.

JOHNSON CONTROLS INTERNATIONAL PLC AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(In millions)

Year Ended September 30,

2022 2021 2020

Accounts Receivable - Allowance for Expected Credit Losses (1)

Balance at beginning of period $ 110 $ 173 $ 173

Provision (income) charged to costs and expenses ( 2 ) ( 3 ) 20

Accounts charged off, net of recoveries ( 38 ) ( 65 ) ( 21 )

Currency translation ( 3 ) 1 1

Other ( 5 ) 4 —

Balance at end of period $ 62 $ 110 $ 173

Deferred Tax Assets - Valuation Allowance

Balance at beginning of period $ 5,853 $ 5,518 $ 5,068

Allowance provision for new operating and other loss carryforwards 326 505 624

Allowance held for sale ( 8 ) — —

Allowance benefits ( 204 ) ( 170 ) ( 174 )

Balance at end of period $ 5,967 $ 5,853 $ 5,518

(1) Allowance for doubtful accounts as of September 30, 2020, prior to the adoption of ASU 2016-13.

During the weekend of September 23, 2023, the Company experienced a cybersecurity incident impacting its internal information technology ("IT") infrastructure and applications.

The incident was detected shortly after receiving reports of outages to certain of the Company’s systems.

Promptly after detecting the issue, the Company implemented its incident management and response plan and business continuity plans, including implementing remediation measures to mitigate the impact of the incident and restore affected systems and functions.

The Company also engaged leading cybersecurity experts and other specialized consultants to assist in its investigation and remediation of the incident, as well as the restoration of impacted applications and systems.

The cybersecurity incident consisted of unauthorized access, data exfiltration and deployment of ransomware by a third party to a portion of the Company’s internal IT infrastructure.

The incident caused disruptions and limitation of access to portions of the Company’s business applications supporting aspects of the Company’s operations and corporate functions.

Lost and deferred revenues and expenses related to the cybersecurity incident had an immaterial impact on fiscal 2023 net income .

During the first quarter of fiscal 2024, expenses have been and will continue to be incurred, primarily related to third-party expenditures, including IT recovery and forensic experts and others performing professional services to investigate and remediate the incident, as well as incremental operating expenses incurred from the resulting disruption to the Company’s business operations.

The overall impact in fiscal 2024 is not expected to be material to net income, net of insurance recoveries, or cash flows from continuing operations;

however, the timing of recognizing the insurance recoveries may differ from the timing of recognizing the associated expenses.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data