Johnson Controls International Plc

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Johnson Controls International Plc JOHNSON CONTROLS INTERNATIONAL PLC Annual Report For the Year Ended September 30, 2017 TABLE OF CONTENTS Page Directors' Report 3 Independent Auditors' Report 47 Consolidated Statement of Income 54 Consolidated Statement of Comprehensive Income (Loss) 55 Consolidated Statement of Financial Position 56 Consolidated Statement of Cash Flows 57 Consolidated Statement of Shareholders' Equity Attributable to Johnson Controls Ordinary Shareholders 58 Notes to Consolidated Financial Statements 59 Company Balance Sheet 131 Company Statement of Changes in Equity 132 Notes to Company Financial Statements 133 2 JOHNSON CONTROLS INTERNATIONAL PLC DIRECTORS' REPORT For the Financial Year Ended September 30, 2017 The directors present their report and the audited consolidated financial statements for the financial year ended September 30, 2017, which are set out on pages 54 to 129, and audited parent company financial statements for the financial year ended September 30, 2017, which are set out on pages 130 to 143. The directors have elected to prepare the consolidated financial statements of Johnson Controls International plc and its subsidiaries (hereinafter referred to as "Johnson Controls" or the "Group") in accordance with Section 279 of the Companies Act 2014 (the "Act"), which provides that a true and fair view of the state of affairs and profit or loss may be given by preparing the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), as defined in Section 279 of the Act, to the extent that the use of those principles in the preparation of the financial statements does not contravene any provision of the Act or of any regulations made thereunder. The directors have elected to apply the amendments to Schedule III Part II of Companies Act 2014, introduced by the Companies (Accounting) Act 2017, which allows the directors to adopt a balance sheet and profit and loss format in a different way than the formats as prescribed by Section B, provided that the information given is at least equivalent to that which would have been required by the use of such format. To ensure comparability, corresponding amounts have been disclosed in the same format. The directors have elected to prepare the Johnson Controls International plc parent company ("Johnson Controls Ireland" or "Parent Company") financial statements in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Ireland" ("FRS 102"), together with the Companies Act 2014. DIRECTORS' COMPLIANCE STATEMENT The directors acknowledge that they are responsible for securing the Parent Company’s compliance with its relevant obligations. The directors confirm that the Parent Company has: 1. Drawn up a compliance policy statement setting out the Parent Company’s policies respecting compliance by the Parent Company with its relevant obligations. 2. Put in place appropriate arrangements or structures that are designed to secure material compliance with the Parent Company’s relevant obligations. 3. Conducted a review during the financial year ended September 30, 2017 of the arrangements and structures referred to at 2 above. STATEMENT OF DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with Irish law. Irish law requires the directors to prepare financial statements for each financial year giving a true and fair view of the Group’s assets, liabilities and financial position at the end of the financial year and the profit or loss of the Group for the financial year. Under that law, the directors have prepared the consolidated financial statements in accordance with U.S. accounting standards, as defined by Section 279(1) of the Companies Act 2014, to the extent that the use of those principles in the preparation of the financial statements does not contravene any provision of the Companies Act or of any regulations made thereunder and the Parent Company financial statements in accordance with Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council of the UK, including Financial Reporting Standard 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland and promulgated by the Institute of Chartered Accountants in Ireland and Irish law). Under Irish law, the directors shall not approve the financial statements unless they are satisfied that they give a true and fair view of the Group’s assets, liabilities and financial position as at the end of the financial year and the profit or loss of the Group for the financial year. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; 3 • state whether the financial statements have been prepared in accordance with applicable accounting standards and identify the standards in question, subject to any material departures from those standards being disclosed and explained in the notes to the financial statements; and • prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to: • correctly record and explain the transactions of the Group; • enable, at any time, the assets, liabilities, financial position and profit or loss of the Group to be determined with reasonable accuracy; and • enable the directors to ensure that the financial statements comply with the Act and enable those financial statements to be audited. The directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. BASIS OF PRESENTATION The accompanying financial statements have been prepared in United States dollars and reflect the consolidated operations of the Group. Unless otherwise indicated, references to 2017 and 2016 are to Johnson Control's financial years ending September 30, 2017 (fiscal 2017) and 2016 (fiscal 2016), respectively. On September 2, 2016, Johnson Controls, Inc. ("JCI Inc.") and Tyco International plc (“Tyco”), a public liability company organized under the laws of Ireland, completed their combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 24, 2016, as amended by Amendment No. 1, dated as of July 1, 2016, by and among JCI Inc., Tyco and certain other parties named therein, including Jagara Merger Sub LLC, an indirect wholly owned subsidiary of Tyco (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on September 2, 2016, Merger Sub merged with and into JCI Inc., with JCI Inc. being the surviving corporation in the merger and a wholly owned, indirect subsidiary of Tyco (the “Merger”). Following the Merger, Tyco changed its name to “Johnson Controls International plc.” The Merger changed the jurisdiction of organization from the United States to Ireland. The domicile to Ireland became effective on September 2, 2016. The merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, "Business Combinations." JCI Inc. was the accounting acquirer for financial reporting purposes. Accordingly, the historical consolidated financial statements of JCI Inc. for periods prior to this transaction are considered to be the historic financial statements of the Group. Refer to Note 2, "Merger Transaction," of the notes to consolidated financial statements for further information. You should read this discussion and analysis along with our consolidated financial statements and related notes thereto as of and for the financial years ended September 30, 2017 and September 30, 2016. Due to the timing of the Merger, the results of operations of Tyco are only reflected in the Group's results of operations for the last month of fiscal 2016, compared to the full financial year of fiscal 2017, which may affect comparability throughout this report. PRINCIPAL ACTIVITIES Johnson Controls International plc, headquartered in Cork, Ireland, is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. The Group creates intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities. The Group is committed to helping our customers win and creating greater value for all of its stakeholders through strategic focus on our buildings and energy growth platforms. Johnson Controls was originally incorporated in the state of Wisconsin in 1885 as Johnson Electric Service Company to manufacture, install and service automatic temperature regulation systems for buildings. The Group was renamed to Johnson Controls, Inc. in 1974. In 1978, the Group acquired Globe-Union, Inc., a Wisconsin-based manufacturer of automotive batteries for both the replacement and
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