What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-02-28 · 230 added, 309 removed, 1504 unchanged (26% of the section changed)

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Summary of Significant Accounting Policies

Business Combination and Divestitures

Cost Reduction Programs and Other Charges

Acquisition and Divestitures

Russia-Ukraine Conflict and Other Charges

Earnings Per Share – Linde plc Shareholders

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Revenue Recognition

Subsequent Events

MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS

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PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited and issued their opinion on the effectiveness of the company’s internal control over financial reporting as of December 31, 2022 as stated in their report.

/s/ S TEPHEN F.

/s/ K ELCEY E .

/s/ Sanjiv Lamba /s/ K ELCEY E .

Chief Executive Officer Kelcey E.

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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 the accompanying Management’s Report on Internal Control Over Financial Reporting.

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.

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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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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Revenue Recognition - Estimated Costs at Completion

As described in Note 19 to the consolidated financial statements, $ 2,867 million of the Company’s total revenues for the year ended December 31, 2021 was generated from sale of equipment contracts.

As described in Note 19 to the consolidated financial statements, $2,762 million of the Company’s total revenues for the year ended December 31, 2022 was generated from the sale of equipment contracts.

Sale of equipment contracts are generally comprised of a single performance obligation.

Revenue from sale of equipment is generally recognized over time as the Company has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use.

Revenue from the sale of equipment is generally recognized over time as the Company has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use.

For contracts recognized over time, revenue is recognized primarily using a cost incurred input method.

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Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer.

The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs at completion is a critical audit matter are (i) the significant judgment by management when developing the estimated costs at completion for sale of equipment contracts;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimated costs at completion and management’s significant assumptions related to the total estimated material and labor costs;

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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 the revenue recognition process, including controls over developing the estimated costs at completion for sale of equipment contracts.

These procedures also included, among others, evaluating and testing management’s process for developing the estimated costs at completion for sale of equipment contracts, which included evaluating the reasonableness of management’s significant assumptions related to the total estimated material and labor costs.

Evaluating the reasonableness of management’s significant assumptions involved evaluating management’s ability to reasonably estimate costs at completion for sale of equipment contracts on a sample basis by (i) performing a comparison of the originally estimated and actual costs incurred on similar completed equipment contracts, and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion, including actual costs in excess of estimates.

These procedures also included, among others, evaluating and testing management’s process for developing the estimated costs at completion for the sale of equipment contracts, which included evaluating the reasonableness of management’s significant assumptions related to the total estimated material and labor costs.

Evaluating the reasonableness of management’s significant assumptions involved evaluating management’s ability to reasonably estimate costs at completion for the sale of equipment contracts on a sample basis by (i) performing a comparison of the originally estimated and actual costs incurred on similar completed equipment contracts, and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion, including actual costs in excess of estimates.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s estimates and significant assumptions related to the total estimated material and labor costs.

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Research and development 143 143 152

Cost reduction programs and other charges 273 506 567

Net gain on sale of businesses — — 164

Russia-Ukraine conflict and other charges 1,029 273 506

Other income (expenses) – net ( 62 ) ( 26 ) ( 61 )

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noncontrolling interests from continuing operations ( 134 ) ( 135 ) ( 125 )

noncontrolling interests from discontinued operations — — ( 7 )

Net Income – Linde plc $ 4,147 $ 3,826 $ 2,501

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Derivative instruments ( 13 ) 71 31

Current year unrealized gain (loss) — — 1

Reclassifications to net income — — —

Income taxes — — —

Securities — — 1

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) ( 778 ) ( 358 ) 157

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Linde plc Shareholders’ Equity:

Ordinary shares (€ 0.001 par value, authorized 1,750,000,000 shares, 2021 issued:

552,012,862 ordinary shares;

Ordinary shares (€ 0.001 par value, authorized 1,750,000,000 shares, 2022 and 2021 issued:

552,012,862 ordinary shares)

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

Cost Reduction Programs and other charges, net of payments 98 258 ( 236 )

Amortization of merger-related inventory step-up — — 12

Russia-Ukraine conflict and other charges, net of payments 902 98 258

Depreciation and amortization 4,204 4,635 4,626

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Share-based compensation 107 128 133

Net gain on sale of businesses, net of tax — — ( 108 )

Non-cash charges and other ( 49 ) ( 19 ) 152

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Divestitures and asset sales, net of cash divested 195 167 482

Net cash provided by (used for) investing activities ( 3,007 ) ( 2,986 ) 1,189

Net cash used for investing activities ( 3,088 ) ( 3,007 ) ( 2,986 )

Short-term debt borrowings (repayments) – net 3,050 ( 1,329 ) 1,198

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Net cash used for financing activities ( 3,089 ) ( 7,588 ) ( 3,345 )

Discontinued Operations

Cash provided by operating activities $ — $ — $ 69

Cash used for investing activities — — ( 60 )

Cash provided by financing activities — — 5

Net cash provided by discontinued operations — — 14

Effect of exchange rate changes on cash and cash equivalents ( 74 ) ( 61 ) ( 44 )

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Cash and cash equivalents, beginning-of-period 2,823 3,754 2,700

Cash and cash equivalents, including discontinued operations $ 2,823 $ 3,754 $ 2,714

Cash and cash equivalents of discontinued operations — — ( 14 )

Cash and cash equivalents, end-of-period $ 5,436 $ 2,823 $ 3,754

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( 2,028 ) ( 2,028 ) ( 2,028 )

Issuances of common stock:

Issuances of ordinary shares:

For employee savings and incentive plans ( 132 ) ( 154 ) ( 1,208 ) 233 ( 53 ) ( 53 )

Purchases of common stock 14,333 ( 2,654 ) ( 2,654 ) ( 2,654 )

Purchases of ordinary shares 12,294 ( 2,451 ) ( 2,451 ) ( 2,451 )

Share-based compensation 133 133 133

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Additions (Reductions) - (Note 14) — ( 876 ) ( 876 )

Redemption value adjustments 17 17 17

Dividends ($ 4.24 per ordinary share)

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Linde’s registered office is located at Ten Earlsfort Terrace, Dublin 2, D02 T380 Ireland.

Linde’s principal executive offices are located at The Priestley Centre, 10 Priestley Road, Surrey Research Park, Guildford, Surrey GU2 7XY, United Kingdom and 10 Riverview Drive, Danbury, Connecticut, United States.

Linde’s principal executive offices are located at Forge, 43 Church Street West, Woking, Surrey GU21 6HT, United Kingdom and 10 Riverview Drive, Danbury, Connecticut, United States 06810.

Linde trades on the New York Stock Exchange and on the Frankfurt Stock Exchange under the symbol LIN.

On January 18, 2023, shareholders approved the company’s proposal for an intercompany reorganization that will result in the delisting of its ordinary shares from the Frankfurt Stock Exchange.

Following the completion of legal and regulatory approvals, Linde anticipates that the intercompany reorganization and delisting process will be completed, and its ordinary shares will be delisted from the Frankfurt Stock Exchange, on or about March 1, 2023.

In connection with the closing of the intercompany reorganization, Linde shareholders will automatically receive one share of the new holding company, to be listed on the New York Stock Exchange in exchange for each share of Linde plc they own.

The new holding company will also be named “Linde plc” and will trade under the existing ticker LIN.

Principles of Consolidation – The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (" U.S.

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Linde’s Engineering business offers its customers an extensive range of gas production and processing services including supplying plant components and services directly to customers.

Revenue Recognition – Revenue is recognized as control of goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.

Revenue Recognition – Revenue is recognized as control of goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled to receive in exchange for the goods or services.

See Note 19 for additional details regarding Linde's revenue recognition policies.

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Expenditures for additions and improvements that extend the lives or increase the capacity of plant assets are also capitalized.

Depreciation is calculated on the straight-line method based on the estimated useful lives of the assets, which range from 3 years to 40 years (see Note 8).

Depreciation is calculated on the straight-line method based on the estimated useful lives of the assets, which

range from 3 years to 40 years (see Note 8).

Linde uses accelerated depreciation methods for tax purposes where appropriate.

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The company performs a test for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable.

Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required.

Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value may be required.

Fair value is determined based on the most appropriate valuation technique, including discounted cash flows.

Asset-Retirement Obligations – An asset-retirement obligation is recognized in the period in which sufficient information exists to determine the fair value of the liability with a corresponding increase to the carrying amount of the related property, plant and equipment which is then depreciated over its useful life.

The liability is initially measured at fair

value and then accretion expense is recorded in each subsequent period.

The liability is initially measured at fair value and then accretion expense is recorded in each subsequent period.

The company’s asset-retirement obligations are primarily associated with its on-site long-term supply arrangements where the company has built a facility on land leased from the customer and is obligated to remove the facility at the end of the contract term.

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Allocations of the purchase price are based on preliminary estimates and assumptions at the date of acquisition and are subject to revision based on final information received, including appraisals and other analyses which support underlying estimates.

The company performs a goodwill impairment test annually, during the fourth quarter, or more frequently if events or circumstances indicate that an impairment loss may have been incurred.

The company performs a goodwill impairment test annually as of October 1 or more frequently if events or circumstances indicate that an impairment loss may have been incurred.

The impairment test allows an entity to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than carrying value.

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Other Intangible Assets – Other intangible assets, primarily customer relationships, are amortized over the estimated period of benefit.

The determination of the estimated period of benefit will be dependent upon the use and underlying

characteristics of the intangible asset.

The determination of the estimated period of benefit will be dependent upon the use and underlying characteristics of the intangible asset.

Linde evaluates the recoverability of its intangible assets subject to amortization when facts and circumstances indicate that the carrying value of the asset may not be recoverable.

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See Note 10 for additional information relating to other intangible assets.

Assets Held for Sale and Discontinued Operations – Assets held for sale, as well as liabilities directly related to these assets, are classified separately in the consolidated balance sheets as held for sale if the requirements of the FASB’s Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment , are satisfied.

The main requirements of ASC 360 are:

(i) management having the authority to approve the action has committed to a plan to sell the assets and an active program to locate a buyer has been initiated, (ii) the assets are available for sale in their present condition at a reasonable market price, and (iii) a sale within the next twelve months is probable.

Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Amortization and depreciation has been discontinued.

The process involved in determining the fair value less costs to sell involves estimates and assumptions that are subject to uncertainty.

Discontinued operations are reported as soon as a business is classified as held for sale, or has already been disposed of, and when the business to be disposed of represents a strategic shift that has (or will have) a major effect on the company’s operations and financial results.

Businesses acquired with the intent of divesting are also required to be reported as discontinued operations.

The profit/loss from discontinued operations is reported separately from the expenses and income from continuing operations in the consolidated statements of income.

In the consolidated statement of cash flows, the cash flows from discontinued operations are shown separately from the cash flows from continuing operations.

The information provided in the Notes relates to continuing operations.

If the information relates exclusively to discontinued operations, this is highlighted accordingly.

Income Taxes – Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates.

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Accounting Standards Implemented in 2022

• Income Taxes - Simplifying the Accounting for Income Taxes - In December 2019, the FASB issued guidance which simplifies the accounting for income taxes by removing several exceptions in the current standard and adds guidance to reduce complexity in certain areas, such as requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, evaluating whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction and allocating taxes to members of a consolidated group.

The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The adoption of this standard did not materially impact the company's consolidated financial statements.

• Reference Rate Reform - In March 2020 with amendments in 2021, the FASB issued guidance related to reference rate reform which provides practical expedients and exceptions for applying U.S.

GAAP to contract modifications, hedging relationships and other transactions that the reference London Interbank Offered Rate (“LIBOR”) and other interbank offered rates.

This update is applicable to our contracts and hedging relationships that reference LIBOR and other interbank offered rates.

The amendments may be applied to impacted contracts and hedges prospectively through December 31, 2022.

The application of this guidance did not materially impact the company's consolidated financial statements.

Business Combination and Divestitures

Merger of Praxair, Inc.

On October 31, 2018 Praxair and Linde AG combined their respective businesses through an all-stock transaction and became subsidiaries of the company.

Linde AG Merger-Related Divestitures - Primarily Americas Industrial Gases Business

As a condition of the U.S.

regulatory approval of the merger, Linde AG agreed to sell the majority of its industrial gases business in the Americas, as described below:

• The Linde AG Americas Sales and Purchase Agreement, dated July 16, 2018, as and further amended on September 22, 2018, October 19, 2018, and February 20, 2019 whereby Linde AG and Praxair, Inc.

entered into an agreement with a consortium comprising companies of the German industrial gases manufacturer Messer Group and CVC Capital Partners Fund VII to sell the majority of Linde AG’s industrial gases business in North America and certain industrial gases business activities of Linde AG's in South America for $ 2.9 billion in cash consideration after purchase price adjustments for certain items relating to assets and liabilities of the sold businesses.

In addition, divestitures include $ 0.5 billion of proceeds for incremental plant sales within the Americas under other agreements.

These transactions were completed on March 1, 2019.

• On April 30, 2019, Linde completed the sale of select assets of Linde South Korea with the sale price of $ 1.2 billion to IMM Private Equity Inc., to satisfy requirements of the Korea Fair Trade Commission.

The assets divested include bulk and on-site business in Giheung, Pohang and Seosan sites as well as oxygen and nitrogen on-site generators.

• On December 16, 2019, Linde completed the sale of select assets of Linde India with a sale price of $ 193 million.

• In March 2020, Linde completed the sale of select assets of Linde China with a sale price of $ 98 million.

Discontinued Operations

Only the sales of the Linde AG merger-related divestitures meet the criteria for discontinued operations, Praxair merger-related divestitures do not qualify as discontinued operations.

As such, operations related to the Linde AG merger-related divestitures are included within Income from discontinued operations, net of tax for periods subsequent to the merger, as summarized below:

Millions of dollars 2021 2020 2019

Net sales $ 5 $ 7 $ 449

Cost of sales 1 3 251

Other operating costs 1 1 43

Operating profit $ 3 $ 3 $ 155

Income from equity investments 2 1 8

Income taxes — — 54

Income from discontinued operations, net of tax $ 5 $ 4 $ 109

Noncontrolling interests — — ( 7 )

Income from continuing operations, net of tax and noncontrolling interests $ 5 $ 4 $ 102

For the years ended December 31, 2021, 2020 and 2019 there were no material amounts of capital expenditures or significant operating or investing non-cash items related to discontinued operations.

Non-Merger Related Acquisitions

Non-merger related acquisitions of $ 88 million, $ 68 million and $ 225 million for the years ended December 31, 2021, 2020 and 2019, respectively, were primarily related to the Americas and are not material, individually or in the aggregate.

Non-Merger Related Divestitures

There were no new accounting pronouncements that would materially impact the 2022 financial statements.

Acquisitions and Divestitures

Acquisitions were $ 110 million, $ 88 million and $ 68 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Acquisitions in 2022 and 2021 primarily related to the Americas and EMEA.

Acquisitions in 2020 primarily related to the Americas.

Sale of GIST business

In the third quarter of 2022, the company completed the sale of its GIST business.

Proceeds from the sale were $ 184 million, net of cash divested of $ 75 million, for net proceeds of $ 109 million.

The sale resulted in a loss of $ 21 million (benefit of $ 3 million, after tax), recorded within the Russia-Ukraine conflict and other charges in the consolidated statement of income (see Note 3).

Deconsolidation of Joint Venture in APAC

Effective January 1, 2021, Linde deconsolidated a joint venture with operations in APAC, due to the expiration of certain contractual rights that the parties mutually agreed not to renew.

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Upon deconsolidation an equity investment was recorded representing Linde's share of the joint venture's net assets.

The deconsolidation resulted in a gain of $ 52 million recorded within cost reduction programs and other charges (see Note 3) related to the release of the CTA balance recorded within AOCI.

The deconsolidation resulted in a gain of $ 52 million recorded within 2021 charges (see Note 3) related to the release of the CTA balance recorded within AOCI.

The company did not receive any consideration, cash or otherwise, as part of the deconsolidation.

The joint venture contributed sales of approximately $ 600 million in 2020.

Future earnings per share will not be affected as the ownership percent remains the same.

COST REDUCTION PROGRAMS AND OTHER CHARGES

Cost reduction programs and other charges were $ 273 million, $ 506 million, and $ 567 million for the 12 months ended December 31, 2021, 2020, and 2019, respectively.

After tax and noncontrolling interests, charges were $ 279 million, $ 372 million, and $ 444 million for the same respective periods.

The following tables provide a summary of the pre-tax charges by reportable segment for the years ended December 31, 2021, 2020, and 2019:

Russia-Ukraine Conflict and Other Charges

Russia-Ukraine conflict and other charges were $ 1 billion ($ 896 million, after tax and noncontrolling interests) for the year ended December 31, 2022, largely attributable to the Russia-Ukraine conflict.

Russia-Ukraine Conflict

In response to the Russian invasion of Ukraine, multiple jurisdictions, including Europe and the U.S., have imposed several tranches of economic sanctions on Russia.

As a result, Linde reassessed its ability to control its Russian subsidiaries and determined that as of June 30, 2022 it can no longer exercise control over these entities.

As such, Linde deconsolidated its Russian gas and engineering business entities as of June 30, 2022 .

The deconsolidation of the company's Russian gas and engineering business entities resulted in a loss of $ 787 million ($ 730 million after tax) during the second quarter.

The fair value of Linde’s Russian subsidiaries was determined using a probability weighted discounted cash flow model, which resulted in the recognition of a $ 407 million loss on deconsolidation when compared to the carrying value of the entities.

This loss is recorded within Russia-Ukraine conflict and other charges in the consolidated statements of income.

Upon deconsolidation an investment was recorded, which represents the fair value of net assets.

The company did not receive any consideration, cash or otherwise, as part of the deconsolidation.

Linde will maintain its interest in its Russian subsidiaries and will continue to comply with sanctions and government restrictions as it continues to develop divestiture options.

The investment will be monitored for impairment in future periods.

Receivables, primarily loans receivable, with newly deconsolidated entities were reassessed for collectability resulting in a write-off of approximately $ 380 million.

Other Russia related charges

Other charges related specifically to the Russia-Ukraine conflict were $ 103 million ($ 73 million after tax) for the year ended December 31, 2022, and are primarily comprised of impairments of assets which are maintained by international entities in support of the Russian business.

Merger-Related Costs and Other Charges

Merger-related costs and other charges were $ 139 million ($ 93 million, after tax) for the year ended December 31, 2022 , primarily related to severance actions within the Engineering segment recorded during the fourth quarter, the impairment of an equity method investment in the EMEA segment, and the sale of the GIST business completed on September 30, 2022 (see Note 2).

The following table provides a summary of the pre-tax charges by reportable segment for the year ended December 31, 2022 :

Year Ended December 31, 2022

(millions of dollars) Severance costs Other cost reduction charges Total cost reduction program related charges Merger related and other charges Total

(millions of dollars) Russia deconsolidation charges Other Russia related charges Total Russia charges Merger-related costs and other charges Total

Americas $ — $ — $ — $ 4 $ 4

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Total $ 787 $ 103 $ 890 $ 139 $ 1,029

Cost reduction programs and other charges were $ 273 million ($ 279 million after tax) for the year ended December 31, 2021.

Total cost reduction program related charges were $ 338 million ($ 253 million after tax), for the year ended December 31, 2021.

These expenses consisted primarily of severance charges of $ 259 million and other charges of $ 79 million for the year ended December 31, 2021.

Other charges related primarily to the execution of the company's synergistic actions including location consolidations and business rationalization projects, process harmonization, and associated non-recurring costs.

Merger-related and other charges were benefits of $ 65 million (benefit of $ 26 million, after tax) for the year ended December 31, 2021.

The 2021 pre-tax benefit was primarily due to a $ 52 million gain triggered by a joint venture deconsolidation in the APAC segment.

Year Ended December 31, 2021

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Total $ 259 $ 79 $ 338 $ ( 65 ) $ 273

Cost reduction programs and other charges were $ 506 million for the year ended December 31, 2020, ($ 372 million after tax).

Total cost reduction program related charges were $ 391 million ($ 277 million after tax) for the year ended December 31, 2020.

These expenses consisted primarily of severance costs of $ 298 million and other charges of $ 93 million for the year ended December 31, 2020.

Other charges related to the execution of the company's synergistic actions including location consolidations and business rationalization projects, process harmonization, and associated non-recurring costs.

Merger-related and other charges were $ 115 million ($ 95 million, after tax).

for the year ended December 31, 2020.

Year Ended December 31, 2020

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Total $ 298 $ 93 $ 391 $ 115 $ 506

Cost Reduction Programs

In 2019, Linde initiated a cost reduction program, which represents charges of achieving synergies and cost efficiencies expected from the merger of Praxair and Linde AG (see Note 2).

Total charges related to the cost reduction programs were $ 338 million ($ 253 million, after tax), $ 391 million ($ 277 million, after tax and noncontrolling interests), and $ 304 million ($ 233 million, after tax) for the years ended December 31, 2021, 2020, and 2019, respectively.

Severance costs

During the year ended December 31, 2021, severance costs of $ 259 million were recorded for the elimination of approximately 2,000 positions.

Severance costs of $ 298 million and $ 204 million for the years ended December 31, 2020 and December 31, 2019 were recorded for the elimination of approximately 3,100 and 2,400 positions, respectively.

As of December 31, 2021, the majority of the actions have been taken, with the remaining actions planned to be completed within the next 12 months.

Other cost reduction charges

Other cost reduction charges were $ 79 million, $ 93 million, and $ 100 million for the years ended December 31, 2021, 2020, and 2019, respectively.

These amounts primarily represent charges related to the execution of the company's

synergistic actions including location consolidations and business rationalization projects, software and process harmonization, and associated non-recurring costs.

Merger-Related Costs and Other Charges

Merger-related costs and other charges were a benefit of $ 65 million ($ 26 million, after tax) and charges of $ 115 million ( $ 95 million , after tax) and $ 263 million ($ 211 million, after tax and noncontrolling interests) for the years ended December 31, 2021 , 2020 , and 2019 , respectively.

The 2021 pretax benefit was primarily due to a $ 52 million gain triggered by a joint venture deconsolidation in the APAC segment in the first quarter (see Note 2).

After-tax charges also include the impact of the below items.

2021 after-tax charges include a net income tax charge of $ 56 million, primarily related to (i) $ 83 million of expense due to the revaluation of a net deferred tax liability resulting from a tax rate increase in the United Kingdom which was enacted in the second quarter, and (ii) a tax settlement benefit of $ 33 million.

2021 also includes an impairment charge of $ 35 million ($ 35 million, after tax) related to a joint venture in the APAC segment.

The charge is shown within income from equity investments in the consolidated statements of income.

2019 includes other charges for an asset impairment related to a joint venture in APAC of approximately $ 73 million ($ 42 million, after tax and noncontrolling interests) resulting from an unfavorable arbitration ruling.

Cash Requirements

Total cash requirements of the cost reduction program and other charges incurred during the twelve months ended December 31, 2021 are estimated to be approximately $ 259 million, of which $ 175 million was paid through December 31, 2021.

The total cash requirements of the Russia-Ukraine conflict and other charges incurred for the year ended December 31, 2022 are expected to be immaterial.

Remaining cash requirements are expected to be paid through 2023.

Total cost reduction programs and other charges, net of payments in the consolidated statements of cash flows for the twelve months ended December 31, 2021 and 2020 also reflect the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2020 and 2019, respectively.

The following table summarizes the activities related to the company's cost reduction programs and other charges during 2020 and 2021:

(millions of dollars) Severance costs Other cost reduction charges Total cost reduction program related charges Merger related and other charges Total

Russia-Ukraine conflict and other charges, net of payments in the consolidated statements of cash flows for the twelve months ended December 31, 2022 and 2021 also reflect the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2021 and 2020, respectively.

The following table summarizes the activities related to the Russia-Ukraine conflict and the company's cost reduction programs and other charges during 2021 and 2022:

(millions of dollars) Total Russia charges Severance costs Other cost reduction charges Total cost reduction program related charges Merger related and other charges Total

Balance, December 31, 2020 $ — $ 283 $ 22 $ 305 $ 64 $ 369

$ 117 $ 16 $ 133 $ 67 $ 200

2021 Cost Reduction Programs and Other Charges — 259 79 338 ( 65 ) 273

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Balance, December 31, 2021 $ — $ 384 $ 38 $ 422 $ 31 $ 453

$ 283 $ 22 $ 305 $ 64 $ 369

2021 Cost Reduction Programs and Other Charges 259 79 338 ( 65 ) 273

2022 Russia-Ukraine conflict and other charges 890 41 24 65 74 1,029

Cash payments — ( 122 ) ( 24 ) ( 146 ) 19 ( 127 )

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Balance, December 31, 2022 $ — $ 281 $ 27 $ 308 $ 12 $ 320

$ 384 $ 38 $ 422 $ 31 $ 453

Classification in the consolidated financial statements

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Total income taxes $ 1,434 $ 1,262 $ 847

(a) 2019 includes $ 70 million related to divestitures, non-U.S.

current tax expense of $ 48 million and non-U.S.

deferred tax expense of $ 22 million.

Tax Cuts and Jobs Act (Tax Act) 2018

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tax credits and deductions (a) ( 16 ) ( 0.3 ) % ( 23 ) ( 0.5 ) % ( 8 ) ( 0.2 ) %

tax differentials (b) (c) 219 4.3 % 167 4.9 % 113 3.9 %

tax differentials (b) 176 3.2 % 219 4.3 % 167 4.9 %

Share-Based compensation ( 41 ) ( 0.7 ) % ( 56 ) ( 1.1 ) % ( 53 ) ( 1.6 ) %

Divestitures — — % — — % 36 1.2 %

Other – net (d) ( 32 ) ( 0.6 ) % 9 0.3 % 46 1.6 %

Russia/Ukraine Charges 108 1.9 % — — % — — %

Other – net (c) ( 41 ) ( 0.7 ) % ( 32 ) ( 0.6 ) % 9 0.3 %

Provision for income taxes $ 1,434 25.9 % $ 1,262 24.7 % $ 847 25.0 %

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tax rate and the statutory tax rate in the countries where the company operates.

Excluding (c), other permanent items and tax rate changes were not significant.

(d) Other - net includes $ 8 million, $ 11 million and $ 26 million of U.S tax related to Global Intangible Low-Taxed Income in 2021, 2020 and 2019, respectively and a decrease in unrecognized tax benefits and accrued interest and penalties of $ 47 million in 2021.

Excluding 2021, which included an $ 83 million deferred income tax charge related to a tax rate increase in the U.K, other permanent items and tax rate changes were not significant.

(c) Other - net includes net tax benefits related to the settlement of tax audits of $ 71 million in 2022 , and $ 47 million in 2021.

Net Deferred Tax Liabilities

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Deferred tax liabilities

Fixed assets $ 3,177 $ 3,430

Fixed assets (a) $ 2,775 $ 3,177

Goodwill 173 166

Other intangible assets (a) 3,263 3,703

Other intangible assets 2,939 3,263

Subsidiary/equity investments 545 586

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Carryforwards $ 289 $ 358

Benefit plans and related (c) 607 814

Benefit plans and related (c)(d) 165 607

Inventory 68 57

Accruals and other (d) 1,042 1,243

Accruals and other (e) 1,001 1,042

$ 1,523 $ 2,064

Valuation allowances (e) ( 235 ) ( 243 )

Valuation allowances (f) ( 276 ) ( 235 )

$ 1,247 $ 1,829

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________________________

(a) Excludes $ 230 million of Intangibles in 2021 due to the effects of the deconsolidation of a joint venture with operations in APAC (See Note 2).

(a) Excludes $ 39 million and $ 19 million of fixed assets in 2022 related to the deconsolidation of Russia and the sale of GIST, respectively (see Notes 3 and 2).

(b) Includes $ 206 million in 2022 and $ 236 million in 2021 related to right-of-use lease assets.

(c) Includes deferred taxes of $ 305 million and $ 560 million in 2021 and 2020, respectively, related to pension / OPEB funded status (See Notes 7 and 16).

(d) Includes $ 246 million in 2021 and $ 255 million in 2020 related to lease liabilities and $ 42 million and $ 63 million in 2021 and 2020, respectively, related to research and development costs.

(e) Summary of changes in valuation allowances relating to deferred tax assets follows (millions of dollars):

(c) Includes deferred tax liabilities of $ 54 million and deferred tax assets of $ 305 million in 2022 and 2021, respectively, related to pension / OPEB funded status (see Notes 7 and 16).

(d) The amounts are net of non-US deferred tax liabilities of $ 315 million in 2022 and $ 71 million in 2021.

(e) Includes $ 212 million in 2022 and $ 246 million in 2021 related to lease liabilities and $ 25 million and $ 42 million in 2022 and 2021, respectively, related to research and development costs.

(f) Summary of changes in valuation allowances relating to deferred tax assets follows (millions of dollars):

2022 2021 2020

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Income tax (charge) benefit ( 44 ) 8 ( 21 )

Merger with Linde AG — — 18

Other, including write-offs (i) — 2 26

Other, including write-offs — — 2

Translation adjustments 3 — ( 2 )

Balance, December 31, $ ( 276 ) $ ( 235 ) $ ( 243 )

(i) 2019 includes $ 26 million related to the squeeze out of Linde AG (See Note 14).

The company evaluates deferred tax assets quarterly to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing to result in their recovery.

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These deferred tax assets include $ 215 million relating to NOLs of which $ 90 million expire within 5 years, $ 42 million expire after 5 years and $ 83 million have no expiration.

The deferred tax assets also include $ 92 million related to credits of which $ 5 million expire within 5 years, $ 83 million expire after 5 years, and $ 4 million have no expiration.

The valuation allowances of $ 235 million primarily relate to NOLs and are required because management has determined, based on financial projections and available tax strategies, that it is unlikely that the NOLs will be utilized before they expire.

deferred tax assets also include $ 74 million related to credits of which $ 5 million expire within 5 years, $ 66 million expire after 5 years, and $ 3 million have no expiration.

The valuation allowances of $ 276 million primarily relate to NOLs and foreign currency loss related to the revaluation of deferred tax liabilities associated with future repatriations.

Management has determined, based on financial projections and available tax strategies, that it is unlikely that the benefit of these losses will be realized.

If events or circumstances change, valuation allowances are adjusted at that time resulting in an income tax benefit or charge.

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Unrecognized income tax benefits, January 1 $ 387 $ 452 $ 472

Additions for tax positions of prior years (a) 11 35 151

Reductions for tax positions of prior years ( 11 ) ( 34 ) ( 3 )

Additions for tax positions of prior years 26 11 35

Reductions for tax positions of prior years (a) ( 45 ) ( 11 ) ( 34 )

Additions for current year tax positions — 19 11

Reductions for settlements with taxing authorities (b) ( 60 ) ( 39 ) ( 26 )

Reductions for settlements with taxing authorities (a)(b) ( 23 ) ( 60 ) ( 39 )

Foreign currency translation and other ( 20 ) ( 24 ) 7

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________________________

(a) Increase primarily relates to tax positions in the United States and Europe, $ 66 million in 2019 related to the merger with Linde AG.

(a) 2022 amounts are primarily related to the settlement of tax audits.

(b) Settlements are uncertain tax positions that were effectively settled with the taxing authorities, including positions where the company has agreed to amend its tax returns to eliminate the uncertainty.

The company classifies interest income and expense related to income taxes as tax expense in the consolidated statements of income.

The company recognized net interest benefit of $ 15 million, and expense of $ 29 million and $ 1 million for the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively.

The company had $ 40 million and $ 99 million of accrued interest and penalties as of December 31, 2021 and December 31, 2020, respectively which were recorded in other long-term liabilities in the consolidated balance sheets (See Note 7).

The company recognized net interest benefit of $ 3 million and $ 15 million and expense of $ 29 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The company had $ 35 million and $ 40 million of accrued interest and penalties as of December 31, 2022 and 2021, respectively, which were recorded in other long-term liabilities in the consolidated balance sheets (See Note 7).

As of December 31, 2022, the company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below:

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Germany 2018 through 2022

Republic of South Africa 2018 through 2021

Spain 2010 through 2022

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Diluted Earnings Per Share $ 8.23 $ 7.33 $ 4.71

There were no antidilutive shares for the years ended December 31, 2021, 2020 or 2019.

There were no antidilutive shares for the years ended December 31, 2022, 2021 and 2020.

SUPPLEMENTAL INFORMATION

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Noncontrolling interests' operations (c) $ 134 $ 135 $ 125

Redeemable noncontrolling interests' operations (Note 14) — — 2

Noncontrolling interests from continuing operations $ 135 $ 125 $ 89

Noncontrolling interests from discontinued operations — $ — $ 7

Balance Sheet

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Unrealized gains on derivatives (Note 12) 24 101

Assets held for sale (Note 2) — 4

Other 104 146

$ 970 $ 1,112

December 31, 2022 2021

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Deposits 52 43

Investments carried at cost 18 23

Investments carried at cost (h) 184 18

Deferred charges 66 62

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Unrealized losses on derivatives (Note 12) 23 27

Noncontrolling interest redemption and dividend (Note 14) — 231

Synergy cost accruals (Note 3) 200 199

Cost reduction programs (Note 3) 187 200

Other 1,055 998

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Unrealized losses on derivatives (Note 12) 73 8

Synergy cost accruals (Note 3) 253 170

Cost reduction programs (Note 3) 133 253

Other 516 497

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Derivatives – net of taxes 62 75

Pension/OPEB funded status obligation (net of $ 305 million and $ 560 million tax benefit in 2021 and 2020) (Note 16)

Pension/OPEB funded status obligation (net of $ 54 million tax obligation in 2022 and $ 305 million tax benefit in 2021) (Note 16)

( 60 ) ( 1,130 )

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(f) The balances at December 31, 2022 and 2021 are net of reserves of $ 36 million and $ 33 million, respectively.

The amounts in both years relate primarily to long-term notes receivable from customers in APAC and EMEA and government receivables in Brazil.

The amounts in both years relate primarily to long-term notes receivable from customers in APAC and government receivables in Brazil.

The amount in 2022 also includes receivables from the sale of GIST.

(g) Americas consists of currency translation adjustments primarily in Canada, Mexico, and Brazil.

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APAC relates primarily to China, South Korea, India and Australia.

(h) In 2022 includes investments from the deconsolidation of Russian subsidiaries.

PROPERTY, PLANT AND EQUIPMENT – NET

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Foreign currency translation and other ( 41 ) ( 559 ) ( 173 ) ( 186 ) ( 7 ) ( 966 )

Disposals ( 7 ) ( 42 ) — — — ( 49 )

Disposals (Note 2) — ( 8 ) ( 235 ) — — ( 243 )

Balance, December 31, 2021 9,087 10,278 4,854 2,496 323 27,038

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Foreign currency translation and other 5 ( 773 ) ( 304 ) ( 146 ) ( 13 ) ( 1,231 )

Disposals (Note 2) — ( 8 ) ( 235 ) — — ( 243 )

Disposals (Note 2 & Note 3) — ( 41 ) — ( 1 ) ( 20 ) ( 62 )

Balance, December 31, 2022 $ 9,136 $ 9,492 $ 4,550 $ 2,349 $ 290 $ 25,817

Linde has performed its goodwill impairment tests annually during the fourth quarter of each year and has determined that the fair value of each of its reporting units was substantially in excess of its carrying value.

For the 2021 test, the company applied the FASB's accounting guidance which allows the company to first assess qualitative factors to determine the extent of additional quantitative analysis, if any, that may be required to test goodwill for impairment.

Linde performs its goodwill impairment tests annually as of October 1 or more frequently if events or circumstances indicate that an impairment loss may have been incurred.

For the fourth quarter 2022 test, the company applied the FASB's accounting guidance which allows the company to first assess qualitative factors to determine the extent of additional quantitative analysis, if any, that may be required to test goodwill for impairment.

Based on the qualitative assessments performed, the company concluded that it was more likely than not that the fair value of each reporting unit substantially exceeded its carrying value and therefore, further quantitative analysis was not required.

As a result, no impairment was recorded.

There were no indicators of impairment through December 31, 2021.

There were no indicators of impairment since the annual goodwill impairment test was performed through December 31, 2022.

OTHER INTANGIBLE ASSETS

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Foreign currency translation 64 3 22 89

Disposals 1 — 20 21

Disposals (Note 2) 66 1 13 80

Other * 352 — 15 367

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dollar denominated unless otherwise noted)

3.875 % Euro denominated notes due 2021 (c)

0.250 % Euro denominated notes due 2022 (b) (f)

0.250 % Euro denominated notes due 2022 (b) (c)

2.20 % Notes due 2022 (e)

2.70 % Notes due 2023

2.00 % Euro denominated notes due 2023 (b)

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1.875 % Euro denominated notes due 2024 (b)

4.800 % Notes due 2024 (f)

4.700 % Notes due 2025 (f)

2.65 % Notes due 2025

1.625 % Euro denominated notes due 2025

0.00 % Euro denominated notes due 2026 (d)

0.00 % Euro denominated notes due 2026

3.20 % Notes due 2026

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0.250 % Euro denominated notes due 2027

1.00 % Euro denominated notes due 2027 (d)

1.00 % Euro denominated notes due 2028 (b)

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1.90 % Euro denominated notes due 2030

1.375 % Euro denominated notes due 2031 (d)

0.550 % Euro denominated notes due 2032

0.375 % Euro denominated notes due 2033

1.625 % Euro denominated notes due 2035 (d)

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2.00 % Notes due 2050

1.00 % Euro denominated notes due 2051 (d)

1.00 % Euro denominated notes due 2051

borrowings 152 243

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(b) December 31, 2022 and 2021 included a cumulative $ 56 million and $ 42 million adjustment to carrying value, respectively, related to hedge accounting of interest rate swaps.

(d) In September 2021, Linde issued € 700 million of 0.000 % notes due 2026, € 500 million of 0.375 % notes due 2033, and € 700 million of 1.000 % notes due 2051.

(e) In November 2021, Linde repaid $ 600 million of 2.45 % notes that were due in 2022.

(d) In March, 2022, Linde issued € 500 million of 1.000 % notes due 2027, € 750 million of 1.375 % notes due 2031, and € 800 million of 1.625 % notes due 2035.

(e) In May 2022, Linde repaid $ 500 million of 2.20 % notes that were due in August 2022.

There was no impact to interest within the consolidated statements of income.

(f) In January 2022, Linde repaid € 1.0 billion of 0.250 % notes that became due in 2022.

(f) In November 2022, Linde issued $ 300 million of 4.800 % notes due in 2024 and $ 600 million of 4.700 % notes due in 2025.

Credit Facilities

On March 26, 2019 the company and certain of its subsidiaries entered into an unsecured revolving credit agreement ("the Credit Agreement") with a syndicate of banking institutions, which became effective on March 29, 2019.

The Credit Agreement provides for total commitments of $ 5.0 billion, which may be increased up to $ 6.5 billion, subject to receipt of additional commitments and satisfaction of customary conditions.

On December 7, 2022, the company and certain of its subsidiaries entered into an amended and restated unsecured revolving credit agreement (the “ Five Year Credit Agreement”) with a syndicate of banking institutions.

The Five Year Credit Agreement provides for total commitments of $ 5.0 billion, which may be increased up to $ 6.5 billion, subject to receipt of additional commitments and satisfaction of customary conditions.

There are no financial maintenance covenants contained within the Credit Agreement.

The revolving credit facility expires on March 26, 2024 with the option to request two one-year extensions of the expiration date.

No borrowings were outstanding under the Credit Agreement as of December 31, 2021.

The revolving credit facility expires on December 7, 2027 with the option to request two one-year extensions of the expiration date.

In addition, on December 7, 2022, the company and certain of its subsidiaries entered into an unsecured 364 -day revolving credit agreement (the “ 364 -Day Credit Agreement” and, together with the Five Year Credit Agreement, the “Credit Agreements”) with a syndicate of banking institutions.

The 364 -Day Credit Agreement provides for total commitments of $ 1.5 billion.

There are no financial maintenance covenants contained within the Credit Agreement.

The revolving credit facility expires on December 7, 2023 with the option to elect to have the entire principal balance outstanding under the Credit Agreement converted into non-revolving term loans, which will be due and payable one year after the commitment termination date.

No borrowings were outstanding under the Credit Agreements as of December 31, 2022.

Other Debt Information

As of December 31, 2021 and 2020, the weighted-average interest rate of short-term borrowings outstanding was 0.0 % in both years.

The weighted-average interest rates of short-term borrowings outstanding were 3.2 % and 0.0 % as of December 31, 2022 and 2021, respectively.

Expected maturities of long-term debt are as follows:

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Whether designated as hedges for accounting purposes or not, all derivatives are linked to an appropriate underlying exposure.

an ongoing basis, the company assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective in offsetting changes in fair values or cash flows of the underlying hedged items.

On an ongoing basis, the company assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective in offsetting changes in fair values or cash flows of the underlying hedged items.

If it is determined that the hedge is not highly effective, through the use of a qualitative assessment, then hedge accounting will be discontinued prospectively.

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Total Derivatives $ 4,726 $ 7,121 $ 28 $ 136 $ 96 $ 35

(a) December 31, 2021 and 2020 included current assets of $ 101 million and $ 110 million, which are recorded in prepaid and other current assets;

(a) Amounts at December 31, 2022 and 2021 included current assets of $ 24 million and $ 101 million, which are recorded in prepaid and other current assets;

long-term assets of $ 4 million and $ 35 million, which are recorded in other long-term assets;

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Forecasted Transactions

Foreign currency contracts related to forecasted transactions consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on (1) forecasted purchases of capital-related equipment and services, (2) forecasted sales, or (3) other forecasted cash flows denominated in currencies other than the functional

currency of the related operating units.

For forecasted transactions that are designated as cash flow hedges, fair value adjustments are recorded to accumulated other comprehensive income ("AOCI") with deferred amounts reclassified to earnings over the same time period as the income statement impact of the associated purchase.

For forecasted transactions that are designated as cash flow hedges, fair value adjustments are recorded to accumulated other comprehensive income (loss) with deferred amounts reclassified to earnings over the same time period as the income statement impact of the associat ed purchase.

For forecasted transactions that do not qualify for cash flow hedging relationships, fair value adjustments are recorded directly to earnings.

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To reduce the extent of this risk, Linde enters into a limited number of electricity, natural gas, and propane gas derivatives.

Net Investment Hedges

As of December 31, 2021, Linde has € 4.2 billion ($ 4.8 billion) Euro-denominated notes and intercompany loans that are designated as hedges of the net investment positions in foreign operations.

Since hedge inception, the deferred gain recorded within cumulative translation adjustment component of AOCI in the consolidated balance sheet and the consolidated statement of comprehensive income is $ 140 million (deferred gain of $ 140 million for the year ended December 31, 2021).

As of December 31, 2021, exchange rate movements relating to previously designated hedges that remain in AOCI is a loss of $ 42 million.

These movements will remain in AOCI, until appropriate, such as upon sale or liquidation of the related foreign operations at which time amounts will be reclassified to the consolidated statements of income.

As of December 31, 2022, Linde has € 8.0 billion ($ 8.5 billion) Euro-denominated notes and intercompany loans and ¥ 3.2 billion ($ 0.5 billion) CNY-denominated intercompany loans that are designated as hedges of the net investment positions in certain foreign operations.

Since hedge inception, the deferred gain recorded within cumulative translation adjustment component of accumulated other comprehensive income (loss) in the consolidated balance sheet and the consolidated statement of comprehensive income is $ 473 million (deferred gain of $ 333 million for the year ended December 31, 2022).

As of December 31, 2022, exchange rate movements relating to previously designated hedges that remain in accumulated other comprehensive income (loss) is a loss of $ 42 million.

These movements will remain in accumulated other comprehensive income (loss), until appropriate, such as upon sale or liquidation of the related foreign operations at which time amounts will be reclassified to the consolidated statements of income.

Interest Rate Swaps

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These interest rate swaps effectively convert fixed-rate interest exposures to variable rates;

fair value adjustments are recognized in earnings along with an equally offsetting charge/benefit to earnings for the changes in the fair value of the underlying financial asset or financial liability.

The notional value of outstanding interest rate swaps of Linde with maturity dates from 2022 through 2028 was $ 1,251 million at December 31, 2021 and $ 1,923 million at December 31, 2020 (see Note 11 for further information).

Terminated Treasury Rate Locks

The unrecognized aggregated losses related to terminated treasury rate lock contracts on the underlying $ 500 million 2.20 % fixed-rate notes that mature in 2022 at December 31, 2021 and December 31, 2020 were immaterial in both periods.

The unrecognized gains/(losses) for the treasury rate locks are shown in AOCI and are being recognized on a straight line basis to interest expense - net over the term of the underlying debt agreements.

Derivatives Impact on Consolidated Statements of Income

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* The gains (losses) on balance sheet items are offset by gains (losses) recorded on the underlying hedged assets and liabilities.

Accordingly, the gains (losses) for the derivatives and the underlying hedged assets and liabilities related to debt items are recorded in the consolidated statements of income as

interest expense-net.

Accordingly, the gains (losses) for the derivatives and the underlying hedged assets and liabilities related to debt items are recorded in the consolidated statements of income as interest expense-net.

Other balance sheet items and anticipated net income gains (losses) are recorded in the consolidated statements of income as other income (expenses)-net.

The amounts of gain or loss recognized in AOCI and reclassified to the consolidated statement of income was immaterial for the year ended December 31, 2021.

Net losses expected to be reclassified to earnings during the next twelve months are also not material.

The amounts of gain or loss recognized in accumulated other comprehensive income (loss) and reclassified to the consolidated statement of income was not material for the years ended December 31, 2022, December 31, 2021, and December 31, 2020.

Net impacts expected to be reclassified to earnings during the next twelve months are also not material.

FAIR VALUE DISCLOSURES

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Linde may issue new ordinary shares for dividend reinvestment and stock purchase plans and employee savings and incentive plans.

The number of new Linde ordinary shares issued from the merger date through December 31, 2019 was 958,293 shares.

No new ordinary shares were issued in 2020 or 2021.

On December 10, 2018 the Linde board of directors approved the repurchase of $ 1.0 billion of its ordinary shares under which Linde had repurchased 6,385,887 shares through December 31, 2019 ( 4,068,642 shares were repurchased through December 31, 2018).

Linde completed the repurchases under this program in the first quarter of 2019.

On January 22, 2019 the company’s board of directors approved the additional repurchase of $ 6.0 billion of its ordinary shares under which Linde had repurchased 24,847,354 shares through December 31, 2021 ( 24,310,534 shares were repurchased through December 31, 2020).

This program expired on February 1, 2021.

No new ordinary shares were issued in 2022, 2021 and 2020.

Linde completed the repurchases under this program in the first quarter of 2021.

On January 25, 2021 the company's board of directors approved the additional repurchase of $ 5.0 billion of its ordinary shares ("2021 program") under which Linde had repurchased 16,662,678 shares through December 31, 2022.

This program is set to expire on July 31, 2023.

On February 28, 2022 the Linde board of directors authorized a new share repurchase program for up to $ 10.0 billion of its ordinary shares expiring on July 31, 2024.

Linde completed the repurchases under this program in the first quarter of 2022.

On February 28, 2022, the company's board of directors authorized a new share repurchase program for up to $ 10.0 billion of its ordinary shares ("2022 program") under which Linde had repurchased 15,474,759 shares through December 31, 2022.

This program expires on July 31, 2024.

Noncontrolling Interests

Noncontrolling interest ownership changes are presented within the consolidated statements of equity.

The decrease during 2021 is primarily related to the deconsolidation of a joint venture with operations in APAC (see Note 2).

2022 includes the impact of deconsolidating the company's Russian gas and engineering business entities (see to Note 3).

The decrease during 2021 is primarily related to the deconsolidation of a joint venture with operations in APAC (see to Note 2).

The decrease during 2020 primarily relates to the initiated buyout of minority interests in the Republic of South Africa.

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Therefore, the company reclassified $ 196 million from non-controlling interest to other current liabilities reflecting the transaction price.

An additional $ 35 million of dividends declared to the minority owners, reflected on the Dividends and other capital reductions line, was also reclassified to other current liabilities at December 31, 2020 and was paid in January 2021.

The $ 2,921 million decrease during 2019 was primarily driven by the completion of the cash merger squeeze-out of the 8 % of Linde AG shares which were not tendered in the Exchange Offer related to the merger.

Redeemable Noncontrolling Interests

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Options granted under the 2021 Plan subject only to time vesting requirements may become partially exercisable after a minimum of one year after the date of grant but may not become fully exercisable until at least three years have elapsed from the date of grant, and all options have a maximum duration of ten years .

In connection with the business combination, on October 31, 2018 the company's Board of Directors adopted the Long Term Incentive Plan 2018 of Linde plc (“the LTIP 2018”), the purpose of which was to replace certain outstanding Linde AG equity based awards that were terminated.

Under the LTIP 2018, the aggregate number of shares available for replacement option rights and replacement restricted share units was set at 473,128 .

As of December 31, 2021, 285,113 shares remained available for grant, and since the company was obligated to make these replacement awards only in 2019, no further grants will be made under this plan.

Exercise prices for the replacement option rights that were granted in 2019 under the LTIP 2018 were equal to EUR 1.67 ($ 1.92 as converted at an exchange rate from the time the exchange offer was completed as the option rights are exercisable in U.S.

dollars on the NYSE) as prescribed in the business combination agreement.

Each replacement option right granted under the LTIP 2018 is subject to vesting based on continued service until the end of the four -year waiting period applicable to the relevant Linde AG award that had been granted before the business combination.

After vesting, each option right will be exercisable for one year .

In order to satisfy option exercises and other equity grants, the company may issue authorized but previously unissued shares or it may issue treasury shares.

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The weighted-average fair value of options granted during 2022 was $ 45.07 ($ 37.80 in 2021 and $ 17.37 in 2020) based on the Black-Scholes Options-Pricing model.

The increase in grant date fair value year-over-year is primarily attributable to the increase in the stock price.

The weighted-average fair value of replacement option rights granted in 2019 was $ 160.08 based on intrinsic value method.

The increase in the grant date fair value year-over-year is primarily attributable to the increase in the stock price.

The following weighted-average assumptions were used to value the grants in 2022, 2021 and 2020:

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As of December 31, 2022, $ 15 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 1 year.

Performance-Based and Restricted Stock Awards

In 2021, the company granted 187,830 performance-based stock awards under the 2009 Plan to senior management that vest, subject to the attainment of pre-established minimum performance criteria, principally on the third anniversary of their date of grant.

Performance-Based and Restricted Stock Unit Awards

In 2022, the company granted 368,600 performance-based stock unit awards under the 2021 Plan to senior management that vest, subject to the attainment of pre-established minimum performance criteria, principally on the third anniversary of their date of grant.

These awards are tied to either after tax return on capital ("ROC") performance or relative total shareholder return ("TSR") performance versus that of the S&P 500 (weighted 67%) and Eurofirst 300 (weighted 33%).

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TSR awards are measured at their grant date fair value and not subsequently re-measured.

The weighted-average fair value of ROC performance-based stock awards granted in 2021 was $ 241.10 ( $ 161.56 in 2020 and $ 168.47 in 2019).

The number of performance-based stock unit awards granted in 2022 includes an increase of 226,690 stock units to the target number of performance-based awards originally granted in 2019, as these awards achieved a higher payout factor upon completion of the three-year performance period.

The weighted-average fair value of ROC awards granted in 2022 was $ 257.63 ($ 241.10 in 2021 and $ 161.56 in 2020).

These fair values are based on the closing market price of Linde's ordinary shares on the grant date adjusted for dividends that will not be paid during the vesting period.

The weighted-average fair value of performance-based stock tied to relative TSR performance granted in 2021 was $ 301.04 ($ 198.61 in 2020 and $ 215.85 in 2019) and was estimated using a Monte Carlo simulation performed as of the grant date.

The weighted-average fair value of TSR awards granted in 2022 was $ 301.42 ($ 301.04 in 2021 and $ 198.61 in 2020) and was estimated using a Monte Carlo simulation performed as of the grant date.

There were 139,512 restricted stock units granted to employees by Linde during 2022.

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Compensation expense related to the restricted stock units is recognized over the vesting period.

The following table summarizes non-vested performance-based and restricted stock award activity as of December 31, 2021 and changes during the period then ended (shares based on target amounts, averages are calculated on a weighted basis):

The following table summarizes non-vested performance-based and restricted stock unit award activity as of December 31, 2022 and changes during the period then ended (shares based on target amounts, averages are calculated on a weighted basis):

Performance-Based Restricted Stock

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Non-vested at December 31, 2022 583 $ 226.04 646 $ 190.33

There are approximately 14 thousand performance-based shares and 15 thousand restricted stock shares that are non-vested at December 31, 2021 which will be settled in cash due to foreign regulatory limitations.

There are approximately 12 thousand performance-based stock units and 18 thousand restricted stock units that are non-vested at December 31, 2022 which will be settled in cash due to foreign regulatory limitations.

The liability related to these grants reflects the current estimate of performance that will be achieved and the current share price.

As of December 31, 2021, $ 47 million of unrecognized compensation cost related to performance-based awards and $ 31 million of unrecognized compensation cost related to the restricted stock awards is expected to be recognized primarily through the first quarter of 2024.

As of December 31, 2022, $ 42 million of unrecognized compensation cost related to performance-based awards and $ 32 million of unrecognized compensation cost related to the restricted stock unit awards is expected to be recognized primarily through the first quarter of 2025.

RETIREMENT PROGRAMS

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In the United States Linde participates in eight multi-employer defined benefit pension plans ("MEPs"), pursuant to the terms of collective bargaining agreements, that cover approximately 200 union-represented employees.

The collective

bargaining agreements expire on different dates through 2026.

The collective bargaining agreements expire on different dates through 2026.

In connection with such agreements, the company is required to make periodic contributions to the MEPs in accordance with the terms of the respective collective bargaining agreements.

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Linde has obtained the most recently available Pension Protection Act ("PPA") annual funding notices from the Trustees of the MEPs.

As of December 31, 2021, there were four Red Zone plans, deemed to be in "critical" or "critical and declining" status that have implemented financial improvement or rehabilitation plans.

As of December 31, 2022, there were three Red Zone plans, deemed to be in "critical" or "critical and declining" status that have implemented financial improvement or rehabilitation plans.

Linde does not currently anticipate significant future obligations due to the funding status of these plans and such obligation would be immaterial.

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The components of net pension and postretirement benefits other than pension ("OPEB") costs for 2022, 2021 and 2020 are shown in the table below:

(Millions of dollars)

Year Ended December 31,

Pensions OPEB

(Millions of dollars) Year Ended December 31,

2022 2021 2020

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Net amortization and deferral 74 171 86

Curtailment and termination benefits (a) — — 8 — — —

Settlement charges (b) 4 6 97 — — —

Settlement charges (a) 6 4 6

$ ( 237 ) $ ( 192 ) $ ( 177 )

Net periodic benefit cost (benefit) $ ( 110 ) $ ( 35 ) $ ( 25 )

(a) In 2019, Linde recorded curtailment gains of $ 9 million and a charge of $ 17 million for termination benefits, primarily in connection with a defined benefit pension plan freeze.

(b) Linde recorded a pension settlement charge of $ 4 million and $ 6 million during the third quarter of 2021 and 2020, respectively.

Settlement charges were triggered by lump sum benefit payments made from a U.S.

non-qualified plan.

In the first quarter of 2019, benefits of $ 91 million were paid related to the settlement of a U.S.

(a) Settlement charges were triggered by lump sum benefit payments made from a U.S.

non-qualified plan.

Such benefits were triggered by a change in control provision and resulted in a settlement charge of $ 51 million.

In the third and fourth quarters of 2019, Linde recorded pension settlement charges of $ 40 million and $ 6 million, respectively, related to lump sum payments made from a U.S.

qualified plan.

These payments were triggered by merger-related divestitures.

Funded Status

Changes in the benefit obligation and plan assets for Linde’s pension and OPEB programs, including reconciliation of the funded status of the plans to amounts recorded in the consolidated balance sheet, as of December 31, 2022 and 2021 are shown below.

(Millions of dollars)

Year Ended December 31,

2021 2020 OPEB

(Millions of dollars) Year Ended December 31,

Change in Benefit Obligation ("PBO")

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Plan settlement ( 9 ) ( 8 ) ( 7 ) ( 13 )

Plan curtailment — — — ( 1 ) — —

Foreign currency translation and other changes — ( 787 ) — ( 286 )

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Prior service cost (credit) ( 12 ) 4 ( 13 ) 6

Deferred tax benefit (Note 7) ( 96 ) ( 217 ) ( 182 ) ( 383 ) 8 5

Deferred tax obligation (benefit) (Note 7) ( 85 ) 139 ( 88 ) ( 217 )

Amount recognized in accumulated other comprehensive income (loss) (Note 7) $ 260 $ ( 200 ) $ 263 $ 867

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The changes in plan assets and benefit obligations recognized in other comprehensive income in 2022 and 2021 are as follows:

Pensions OPEB

(Millions of dollars) 2022 2021

1 unchanged sentence

Amortization of net actuarial gains (losses) ( 75 ) ( 170 )

Plan amendment — 7 — ( 13 )

Amortization of prior service credits (costs) 1 ( 1 )

Pension settlements ( 6 ) ( 4 )

Curtailments — ( 1 ) — —

Foreign currency translation and other changes ( 90 ) ( 39 )

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________________________

* Pension net actuarial gains in 2021 are largely driven by an increase in the actual return on assets during the year and favorability generated from a lower PBO due to an increase in discount rates.

In 2020, the low discount rate environment resulted in actuarial losses from a higher PBO and outweighed favorable plan asset experience for both the non-U.S.

* Pension net actuarial gains in 2022 are largely driven by the continued increase in the discount rate environment resulting in actuarial gains from a lower PBO, which is partially offset by unfavorable plan asset experience for both non-U.S.

In 2021, the actuarial gains were attributable to an increase in actual return on assets and favorability generated from a lower PBO due the initial increase in discount rates.

The following table provides information for pension plans where the accumulated benefit obligation exceeds the fair value of plan assets:

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Discount rate 5.35 % 2.78 % 4.58 % 1.82 %

Interest crediting rate 2.06 % 1.57 % 1.03 % 1.01 % N/A N/A

Rate of increase in compensation levels 3.25 % 3.25 % 2.55 % 2.55 % N/A N/A

Interest crediting rate 4.02 % 2.06 % 2.13 % 1.03 %

Rate of increase in compensation levels 3.25 % 3.25 % 2.59 % 2.55 %

Weighted average assumptions used to determine net periodic benefit cost for years ended December 31,

Discount rate 2.78 % 2.40 % 1.82 % 1.36 %

Interest crediting rate 1.57 % 2.19 % 1.01 % 1.08 % N/A N/A

Rate of increase in compensation levels 3.25 % 3.25 % 2.55 % 2.46 % N/A N/A

Expected long-term rate of return on plan assets (1) 7.00 % 7.00 % 5.28 % 5.31 % N/A N/A

________________________

Interest crediting rate 2.06 % 1.57 % 1.03 % 1.01 %

Rate of increase in compensation levels 3.25 % 3.25 % 2.55 % 2.55 %

Expected long-term rate of return on plan assets (1) 7.00 % 7.00 % 5.60 % 5.28 %

(1) The expected long term rate of return on the U.S.

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plans will be 5.60 %.

Assumed healthcare cost trend rates 2021 2020

Healthcare cost trend assumed 7.00 % 6.50 %

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.00 % 5.00 %

Year that the rate reaches the ultimate trend rate 2030 2027

Pension Plan Assets

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The following table summarizes pension assets measured at fair value by asset category at December 31, 2022 and 2021.

For the twelve months ended December 31, 2021, transfers of assets were not material.

For the twelve months ended December 31, 2020, transfers of assets of $ 15 million into Level 3 include insurance contract and real estate investments of $ 11 million and $ 4 million, respectively, which were reclassified as there is no active market quotation available.

Transfers of assets were not material for the year ended December 31, 2022 and 2021.

See Note 13 for the definition of levels within the fair value hierarchy:

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Balance, December 31, 2020

$ 11 $ 335 $ 1120 $ 1466

Gain/(Loss) for the period 1 27 28 56

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Balance, December 31, 2021

12 360 1,368 1,740

Gain/(Loss) for the period — 5 93 98

4 unchanged sentences

Balance, December 31, 2022

$ 46 $ 353 $ 1,360 $ 1,759

The descriptions and fair value methodologies for the company's pension plan assets are as follows:

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Such funds focus on diversification and employ a variety of investing strategies including long/short equity, multi-strategy, and global macro.

The fair value of these investments is determined by reference to the net asset value of the underlying holdings of the fund, which can be determined using observable data (e.g., indices, yield curves, quoted prices of similar securities), and is classified within level 2 of the valuation hierarchy.

The fair value of these investments is determined by reference to the net asset value of the underlying holdings of the fund, which can be determined using

observable data (e.g., indices, yield curves, quoted prices of similar securities), and is classified within level 2 of the valuation hierarchy.

Insurance Contracts – This category is comprised of purchased annuity insurance contracts (annuity contract buy-ins) and is intended to mitigate the Company's exposure to certain risks, such as longevity risk.

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2028-2032 813 1,788

2024 149 357 11

2025 152 366 10

2026 150 388 9

2027-2031 763 1,952 41

COMMITMENTS AND CONTINGENCIES

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It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities.

Management does not anticipate that in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity;

Management does not anticipate individually or in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity;

however, it is possible that the final outcomes could have a significant impact on the company’s reported results of operations in any given period.

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It is difficult to estimate the timing of resolution of legal matters in Brazil.

• At December 31, 2021 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company.

• At December 31, 2022 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company that previously received favorable rulings.

The total estimated exposure relating to such claims, including interest and penalties, as appropriate, is approximately $ 240 million.

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The company is vigorously defending against the proceedings.

On February 8, 2023, the Brazilian Supreme Court issued a decision confirming the constitutionality of a specific federal income tax, with retroactive effect.

This decision has not yet been finalized and is subject to ongoing motions for clarification.

The timing of when this decision will be final and the potential impact on the company’s tax liability remain uncertain at this time.

• On September 1, 2010, CADE (Brazilian Administrative Council for Economic Defense) announced alleged anticompetitive activity on the part of five industrial gas companies in Brazil and imposed fines.

Originally, CADE imposed a civil fine of $ 2.2 billion Brazilian reais ($ 395 million) on White Martins, the Brazil-based subsidiary of Linde Inc.

The fine was reduced to $ 1.7 billion Brazilian reais ($ 305 million) due to a calculation error made by CADE.

Originally, CADE imposed a civil fine of R$ 2.2 billion Brazilian reais ($ 417 million) on White Martins, the Brazil-based subsidiary of Linde Inc.

The fine was reduced to R$ 1.7 billion Brazilian reais ($ 322 million) due to a calculation error made by CADE.

The fine against White Martins was overturned by the Ninth Federal Court of Brasilia.

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CADE has filed an appeal with the Superior Court of Justice and a decision is pending.

Similarly, on September 1, 2010, CADE imposed a civil fine of $ 237 million Brazilian reais ($ 43 million) on Linde Gases Ltda., the former Brazil-based subsidiary of Linde AG, which was divested to MG Industries GmbH on March 1, 2019 and with respect to which Linde provided a contractual indemnity.

The fine was reduced to $ 188 million Brazilian reais ($ 34 million) due to a calculation error made by CADE.

Similarly, on September 1, 2010, CADE imposed a civil fine of R$ 237 million Brazilian reais ($ 45 million) on Linde Gases Ltda., the former Brazil-based subsidiary of Linde AG, which was divested to MG Industries GmbH on March 1, 2019 and with respect to which Linde provided a contractual indemnity.

The fine was reduced to R$ 188 million Brazilian reais ($ 36 million) due to a calculation error made by CADE.

The fine against Linde Gases Ltda.

was overturned by the Seventh Federal Court in Brasilia.

CADE appealed this decision, and the Federal Court of Appeals rejected CADE's appeal and confirmed the decision of the Seventh Federal Court of Brasilia.

CADE appealed this decision, and the Federal Court of Appeals rejected CADE's appeal and confirmed the decision of the Seventh

Federal Court of Brasilia.

CADE filed an appeal with the Superior Court of Justice, and a final decision is pending.

Linde has strong defenses and is confident that it will prevail on appeal and have the fines overturned.

Linde strongly believes that the allegations of anticompetitive activity against our current and former Brazilian

subsidiaries are not supported by valid and sufficient evidence.

Linde strongly believes that the allegations of anticompetitive activity against our current and former Brazilian subsidiaries are not supported by valid and sufficient evidence.

Linde believes that this decision will not stand up to judicial review and deems the possibility of cash outflows to be extremely unlikely.

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We cannot estimate the timing of resolution.

• On December 30, 2022, the Russian Arbitration Court of the St.

Petersburg and Leningrad Region issued an injunction preventing (i) the sale of any shares in Linde’s subsidiaries and joint ventures in Russia, and (ii) the disposal of any of assets in those entities exceeding 5 % of the relevant company’s overall asset value.

The injunction is not expected to have any impact on the operations of Linde’s Russian businesses.

The injunction was requested by RusChemAlliance (RCA) as a preliminary measure to secure payment of an eventual award under an arbitration proceeding RCA intends to file against Linde Engineering for alleged breach of contract under the agreement to build a gas processing plant in Ust Luga, Russia entered into between a consortium of Linde Engineering and Renaissance Heavy Industries LLC, and RCA on July 7, 2021.

Performance of the agreement was lawfully suspended by Linde Engineering on May 27, 2022 in compliance with applicable sanctions and in accordance with a decision by the sanctions authority in Germany.

As of December 31, 2022, Linde had approximately $ 1.2 billion of advance payments recorded in contract liabilities related to engineering projects with RCA which are subject to sanctions and have been suspended accordingly as of May 27, 2022.

Contract liabilities are typically recognized as revenue as performance obligations are satisfied under contract terms.

Linde deconsolidated its Russian gas and engineering business entities as of June 30, 2022 (see Note 3), and the remaining investment value of its Russia subsidiaries is immaterial.

As such, the obligation to satisfy any residual contract liabilities is not expected to have an adverse impact on earnings, but may result in net cash outflows.

It is difficult to estimate the timing of resolution of this matter.

The company intends to vigorously defend its interests in both the injunction and arbitration proceedings.

At December 31, 2022, Linde had undrawn outstanding letters of credit, bank guarantees and surety bonds valued at approximately $ 3,578 million from financial institutions.

6 unchanged sentences

As further described in the following paragraph, Linde’s industrial gases operations are managed on a geographic basis, which represent three of the company's reportable segments - Americas, EMEA (Europe/Middle East/Africa), and APAC (Asia/South Pacific);

a fourth reportable segment which represents the company's Engineering business, designs and manufactures equipment for air separation and other industrial gas applications specifically for end customers and is managed on a worldwide basis operating in all three geographic segments.

a four th reportable segment, which represents the company's Engineering business, designs and manufactures equipment for air separation and other industrial gas applications specifically for end customers and is managed on a worldwide basis operating in all three geographic segments.

Other consists of corporate costs and a few smaller businesses which individually do not meet the quantitative thresholds for separate presentation.

19 unchanged sentences

Other 1,805 2,047 1,797

Total Segment Sales 30,793 27,243 28,163

Merger-related divestitures — — 65

Total Sales $ 33,364 $ 30,793 $ 27,243

7 unchanged sentences

Reported Segment operating profit 7,904 7,176 5,797

Cost reduction programs and other charges (Note 3) ( 273 ) ( 506 ) ( 567 )

Net gain on sale of business — — 164

Russia-Ukraine conflict and other charges (Note 3) ( 1,029 ) ( 273 ) ( 506 )

Purchase accounting impacts - Linde AG ( 1,506 ) ( 1,919 ) ( 1,969 )

Merger-related divestitures — — 16

Total operating profit $ 5,369 $ 4,984 $ 3,322

20 unchanged sentences

United States $ 10,553 $ 9,123 $ 8,475

Germany 3,601 3,740 3,630

Germany (c) 3,662 3,601 3,740

China 2,643 2,562 2,061

18 unchanged sentences

(a) Sales reflect external sales only.

Intersegment sales, primarily from Engineering to the industrial gases segments, were not material.

Intersegment sales, primarily from Engineering to the industrial gases segments, were $ 1,035 million, $ 896 million and $ 786 million for the year ended December 31, 2022, 2021 and 2020, respectively.

(b) Long-lived assets include property, plant and equipment - net.

(c) Sales in Germany include Engineering sales to third parties, locally and internationally, and represents 44 % , 53 % and 62 % of Germany sales in 2022 , 2021 and 2020, respectively.

REVENUE RECOGNITION

2 unchanged sentences

Contracts with Customers

Linde serves a diverse group of industries including healthcare, energy, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment.

Linde serves a diverse group of industries including healthcare, chemicals and energy, manufacturing, metals and mining, food and beverage, and electronics.

Industrial Gases

10 unchanged sentences

Linde constructs plants on or adjacent to these customers’ sites and supplies the product directly to customers by pipeline.

Where there are large concentrations of customers, a single pipeline

may be connected to several plants and customers.

Where there are large concentrations of customers, a single pipeline may be connected to several plants and customers.

On-site product supply contracts generally are total requirement contracts with terms typically ranging from 10 - 20 years and contain minimum purchase requirements and price escalation provisions.

26 unchanged sentences

Any variable consideration is constrained and will be recognized when the uncertainty related to the consideration is resolved.

Linde Engineering

The company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers.

4 unchanged sentences

Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer.

Contract modifications are typically accounted for as part of the existing contract and are recognized as a cumulative adjustment for the inception-to-date effect of such change.

Changes to cost estimates and contract modifications are typically accounted for as part of the existing contract and are recognized as a cumulative adjustments for the inception-to-date effect of such change.

Contract Assets and Liabilities

6 unchanged sentences

Linde has contract assets of $ 124 million at December 31, 2022 and $ 134 million at December 31, 2021.

Total contract liabilities are $ 3,699 million at December 31, 2021 (current of $ 2,940 million and $ 759 million within other long-

term liabilities in the consolidated balance sheets).

Total contract liabilities were $ 2,301 million at December 31, 2020 (current contract liabilities of $ 1,769 million and $ 532 million within other long-term liabilities in the consolidated balance sheets).

Total contract liabilities are $ 3,986 million at December 31, 2022 (current of $ 3,073 million and $ 913 million within deferred credits in the consolidated balance sheets).

As of December 31, 2022 Linde has approximately $ 1.7 billion recorded in contract liabilities related to engineering projects in Russia subject to sanctions.

Total contract liabilities were $ 3,699 million at December 31, 2021 (current contract liabilities of $ 2,940 million and $ 759 million within deferred credits in the consolidated balance sheets).

Revenue recognized for the twelve months ended December 31, 2022 that was included in the contract liability at December 31, 2021 was $ 1,305 million.

25 unchanged sentences

(Millions of dollars) Year Ended December 31, 2020

Sales Americas EMEA APAC Engineering Other (a) Total %

Sales Americas EMEA APAC Engineering Other Total %

Merchant $ 2,839 $ 1,870 $ 2,005 $ — $ 145 $ 6,859 25 %

3 unchanged sentences

$ 10,459 $ 6,449 $ 5,687 $ 2,851 $ 1,797 $ 27,243 100 %

(a) Other includes $ 65 million for the year ended December 31, 2019 of merger-related divestitures that have been excluded from segment sales.

Remaining Performance Obligations

As described above, Linde's contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase their requirements from Linde and also have minimum purchase requirements.

The company estimates the consideration related to minimum purchase requirements is approximately $ 57 billion.

This amount excludes all sales above minimum purchase requirements, which can be significant depending on customer needs.

Additionally, plant sales from the Linde Engineering business are primarily contracted on a fixed price basis.

The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately $ 51 billion (excludes Russian projects which are impacted by sanctions, refer to Note 3).

This amount excludes all on-site sales above minimum purchase requirements, which can be significant depending on customer needs.

In the future, actual amounts will be different due to impacts from several factors, many of which are beyond the company’s control including, but not limited to, timing of newly signed, terminated and renewed contracts, inflationary price escalations, currency exchange rates, and pass-through costs related to natural gas and electricity.

1 unchanged sentence

The company estimates that approximately half of the revenue related to minimum purchase requirements will be earned in the next five years and the remaining thereafter.

SUBSEQUENT EVENTS

On January 6, 2023, Linde purchased the remaining 77.2 % ownership interest in nexAir, LLC.

nexAir, LLC is one of the largest independent packaged gas distributors in the United States with annual sales of approximately $ 400 million in 2022.

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