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TableofContents
includesthePolyporeSeparationsMediaacquisition),AdvancedMaterials,CommunicationMarkets,DisplayMaterialsand
Systems,HealthInformationSystems,IndustrialAdhesivesandTapes,InfectionPrevention,OralCareSolutions,PersonalSafety
(whichincludestheCapitalSafetyacquisition),andTrafficSafetyandSecurity.Theestimatedfairvaluesforthesereportingunits
wereinexcessofcarryingvaluebyapproximately50percentormore,exceptforonereportingunitwithapproximately$300million
ofgoodwill,wherethefairvalueexceededthecarryingvaluebyapproximately30percent.3M’smarketvalueatbothSeptember30,
2015,andDecember31,2015,wassignificantlyinexcessofitsequityofapproximately$12billionatbothDecember31,2015and
September30,2015.
In2015,3Mprimarilyusedanindustryprice-earningsratioapproach,butalsousedadiscountedcashflowsapproachforcertain
reportingunits,todeterminefairvalues.Whereapplicable,3Musedaweighted-averagediscountedcashflowanalysisforcertain
divisions,usingprojectedcashflowsthatwereweightedbasedondifferentsalesgrowthandterminalvalueassumptions,among
otherfactors.Theweightingwasbasedonmanagement’sestimatesofthelikelihoodofeachscenariooccurring.
3Misanintegratedmaterialsenterprise,thusmanyof3M’sbusinessescouldnoteasilybesoldonastand-alonebasis.3M’sfocuson
researchanddevelopmenthasresultedinaportionof3M’svaluebeingcomprisedofinternallydevelopedbusinessesthathaveno
goodwillassociatedwiththem.Basedontheannualtestinthefourthquarterof2015,nogoodwillimpairmentwasindicatedforany
ofthereportingunits.
Factorswhichcouldresultinfutureimpairmentchargesinclude,amongothers,changesinworldwideeconomicconditions,changes
incompetitiveconditionsandcustomerpreferences,andfluctuationsinforeigncurrencyexchangerates.Theseriskfactorsare
discussedinItem1A,“RiskFactors,”ofthisdocument.Inaddition,changesintheweightedaveragecostofcapitalcouldalso
impactimpairmenttestingresults.Asindicatedabove,duringthethirdquarterof2015,theCompanycompleteditsassessmentof
anypotentialgoodwillimpairmentforreportingunitsimpactedbychangesbetweenreportingunitsanddeterminedthatno
impairmentexisted.Long-livedassetswithadefinitelifearereviewedforimpairmentwhenevereventsorchangesincircumstances
indicatethatthecarryingamountofanasset(assetgroup)maynotberecoverable.Iffuturenon-cashassetimpairmentchargesare
taken,3Mwouldexpectthatonlyaportionofthelong-livedassetsorgoodwillwouldbeimpaired.3Mwillcontinuetomonitorits
reportingunitsandassetgroupsin2016foranytriggeringeventsorotherindicatorsofimpairment.
Income Taxes:
Theextentof3M’soperationsinvolvesdealingwithuncertaintiesandjudgmentsintheapplicationofcomplextaxregulationsina
multitudeofjurisdictions.Thefinaltaxespaidaredependentuponmanyfactors,includingnegotiationswithtaxingauthoritiesin
variousjurisdictionsandresolutionofdisputesarisingfromfederal,state,andinternationaltaxaudits.TheCompanyrecognizes
potentialliabilitiesandrecordstaxliabilitiesforanticipatedtaxauditissuesintheUnitedStatesandothertaxjurisdictionsbasedon
itsestimateofwhether,andtheextenttowhich,additionaltaxeswillbedue.TheCompanyfollowsguidanceprovidedbyASC740,
IncomeTaxes,regardinguncertaintyinincometaxes,torecordtheseliabilities(refertoNote8foradditionalinformation).The
Companyadjuststhesereservesinlightofchangingfactsandcircumstances;however,duetothecomplexityofsomeofthese
uncertainties,theultimateresolutionmayresultinapaymentthatismateriallydifferentfromtheCompany’scurrentestimateofthe
taxliabilities.IftheCompany’sestimateoftaxliabilitiesprovestobelessthantheultimateassessment,anadditionalchargeto
expensewouldresult.Ifpaymentoftheseamountsultimatelyprovestobelessthantherecordedamounts,thereversalofthe
liabilitieswouldresultintaxbenefitsbeingrecognizedintheperiodwhentheCompanydeterminestheliabilitiesarenolonger
necessary.
NEWACCOUNTINGPRONOUNCEMENTS
InformationregardingnewaccountingpronouncementsisincludedinNote1totheConsolidatedFinancialStatements.
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