Item 8. Financial Statements and Supplementary Data.

Reports of Management

Management’s Responsibilities

The following financial statements have been prepared by management in conformity with U.S. generally accepted accounting principles and include, where required, amounts based on the best estimates and judgments of management. The integrity and objectivity of data in the financial statements and elsewhere in this Annual Report are the responsibility of management.

In fulfilling its responsibilities for the integrity of the data presented and to safeguard the Company’s assets, management employs a system of internal accounting controls designed to provide reasonable assurance, at appropriate cost, that the Company’s assets are protected and that transactions are appropriately authorized, recorded and summarized. This system of control is supported by the selection of qualified personnel, by organizational assignments that provide appropriate delegation of authority and division of responsibilities, and by the dissemination of written policies and procedures. This control structure is further reinforced by a program of internal audits, including a policy that requires responsive action by management.

The Board of Directors monitors the internal control system, including internal accounting and financial reporting controls, through its Audit Committee, which consists of eight independent Directors. The Audit Committee meets periodically with the independent registered public accounting firm, the internal auditors and management to review the work of each and to satisfy itself that they are properly discharging their responsibilities. The independent registered public accounting firm and the internal auditors have full and free access to the Audit Committee and meet with its members, with and without management present, to discuss the scope and results of their audits including internal control, auditing and financial reporting matters.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Act of 1934. Management conducted an assessment of the effectiveness of internal control over financial reporting based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on the Company's assessment of the effectiveness of internal control over financial reporting and the criteria noted above, management concluded that internal control over financial reporting was effective as of September 30, 2020.

The financial statements and internal control over financial reporting have been audited by Ernst & Young LLP, an independent registered public accounting firm. Ernst & Young’s reports with respect to fairness of the presentation of the financial statements, and the effectiveness of internal control over financial reporting, are included herein.

/s/ Thomas E. Polen						/s/ Christopher Reidy						/s/ Thomas J. Spoerel
Thomas E. Polen						Christopher Reidy						Thomas J. Spoerel
Chief Executive Officer and President						Executive Vice President, Chief Financial Officer and Chief Administrative Officer						Vice President, Controller and Chief Accounting Officer

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Becton, Dickinson and Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Becton, Dickinson and Company (the Company) as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 25, 2020 expressed an unqualified opinion.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

						Estimation of Product Liability Reserves
Description of the Matter						As described in Note 5 to the consolidated financial statements, the Company is a defendant in various product liability matters in which the plaintiffs allege a wide variety of claims associated with the use of certain Company devices. At September 30, 2020, the Company’s product liability reserves totaled approximately $2.5 billion. The Company engaged an actuarial specialist to perform an analysis to estimate the outstanding liability for indemnity costs related to claims arising from these product liability matters. The methods used by the Company to estimate these reserves are based on reported claims, historical settlement amounts, and stage of litigation, among other items. Auditing management’s estimate of certain of the Company’s product liability reserves and the related disclosure was challenging due to the significant judgment required to determine the methods used to estimate the amount of unreported product liability claims and the indemnity costs and the key assumptions utilized in those methods given the stages of these matters and the amount of claims history.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s evaluation of the product liability reserve. For example, we tested controls over management's review of the methods, significant assumptions and the underlying data used by the actuary to estimate the product liability reserve. To evaluate management’s estimate of the product liability reserves, our audit procedures included, among others, testing the completeness and accuracy of the underlying data used by management's actuarial specialist to estimate the amount of unreported claims and the indemnity cost. For example, we compared filed and settled claims data to legal letters obtained from external counsel, and, on a sample basis, compared settlement amounts to the underlying agreements. In addition, we involved our actuarial specialists to assist us in evaluating the methods used to estimate the unreported claims and the indemnity cost used in the calculation of the product liability reserves. We have also assessed the adequacy of the Company’s disclosures in relation to these matters.

						Income taxes - Uncertain tax positions
Description of the Matter						As discussed in Notes 1 and 17 of the consolidated financial statements, the Company has recorded a liability of $719 million related to uncertain tax positions as of September 30, 2020. The Company conducts business in numerous countries and is therefore subject to income taxes in multiple jurisdictions, which impacts the provision for income taxes. Due to the multinational operations of the Company, changes in global income tax laws and regulation result in complexity in the accounting for and monitoring of income taxes including the provision for uncertain tax positions. Auditing the completeness of management’s identification of uncertain tax positions involved complex analysis and auditor judgment related to the evaluation of the income tax consequences of significant transactions, including internal restructurings, and changes in income tax law and regulations in various jurisdictions, which is often subject to interpretation.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s income tax provision process, such as controls over management’s identification and assessment of changes to tax laws and income tax positions to account for uncertain tax positions, including management’s review of the related tax technical analyses. We performed audit procedures, among others, to evaluate the Company’s assumptions used to develop its uncertain tax positions and related unrecognized income tax benefit amounts by jurisdiction. We obtained an understanding of the Company’s legal structure through our review of organizational charts and related legal documents. We further considered the income tax consequences of significant transactions, including internal restructurings, and assessed management’s interpretation of those changes under the relevant jurisdiction’s tax law. Due to the complexity of tax law, we involved our tax subject matter professionals to assess the Company’s interpretation of and compliance with tax laws in these jurisdictions, as well as to identify tax law changes. We also involved our tax subject matter professionals to evaluate the technical merits of the Company’s accounting for its tax positions, including assessing the Company’s correspondence with the relevant tax authorities and evaluating third-party advice obtained by the Company. We also evaluated the Company’s income tax disclosures included in Note 17 to the consolidated financial statements in relation to these matters.

						Goodwill impairment - Interventional segment
Description of the Matter						At September 30, 2020, the Company’s goodwill assigned to the Interventional segment was $12.7 billion. As discussed in Note 1 of the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level using quantitative models. Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units. In particular, the fair value estimates were sensitive to significant assumptions such as the discount rate, revenue growth rate, operating margin, and terminal value, which are affected by expectations about future market or economic conditions, including the impact of the pandemic.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process. For example, we tested controls over management’s review of the inputs and assumptions to the goodwill impairment analysis. To test the estimated fair value of the Company’s reporting units, our audit procedures included, among others, assessing fair value methodology, evaluating the prospective financial information used by the Company in its valuation analysis and involving our valuation specialists to assist in testing the significant assumptions discussed above. We compared the significant assumptions used by management to current industry and economic trends, historical financial results, and other relevant factors that would affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units. In addition, we tested the reconciliation of the fair value of the reporting units to the market capitalization of the Company.

/s/ ERNST & YOUNG LLP
We have served as the Company's auditor since 1959.
New York, New York
November 25, 2020

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Becton, Dickinson and Company

Opinion on Internal Control over Financial Reporting

We have audited Becton, Dickinson and Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, (2013 framework), (the COSO criteria). In our opinion, Becton, Dickinson and Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and our report dated November 25, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.

/s/ ERNST & YOUNG LLP
New York, New York
November 25, 2020

Consolidated Statements of Income

Becton, Dickinson and Company

Years Ended September 30

Millions of dollars, except per share amounts			2020						2019						2018
Revenues			$	17,117					$	17,290					$	15,983
Cost of products sold			9,540						9,002						8,714
Selling and administrative expense			4,325						4,332						4,016
Research and development expense			1,096						1,062						1,004
Acquisitions and other restructurings			309						480						740
Other operating expense, net			363						654						—
Total Operating Costs and Expenses			15,633						15,530						14,474
Operating Income			1,484						1,760						1,509
Interest expense			(528)						(639)						(706)
Interest income			7						12						65
Other income, net			23						43						305
Income Before Income Taxes			985						1,176						1,173
Income tax provision (benefit)			111						(57)						862
Net Income			874						1,233						311
Preferred stock dividends			(107)						(152)						(152)
Net income applicable to common shareholders			$	767					$	1,082					$	159
Basic Earnings per Share			$	2.75					$	4.01					$	0.62
Diluted Earnings per Share			$	2.71					$	3.94					$	0.60

Amounts may not add due to rounding.

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

Becton, Dickinson and Company

Years Ended September 30

Millions of dollars			2020						2019						2018
Net Income			$	874					$	1,233					$	311
Other Comprehensive (Loss) Income, Net of Tax
Foreign currency translation adjustments			(161)						(93)						(161)
Defined benefit pension and postretirement plans			(35)						(275)						(26)
Cash flow hedges			(67)						(6)						1
Other Comprehensive Loss, Net of Tax			(265)						(374)						(186)
Comprehensive Income			$	609					$	859					$	125

Amounts may not add due to rounding.

See notes to consolidated financial statements.

Consolidated Balance Sheets

Becton, Dickinson and Company

September 30

Millions of dollars, except per share amounts and numbers of shares			2020						2019
Assets
Current Assets
Cash and equivalents			$	2,825					$	536
Restricted cash			92						54
Short-term investments			20						30
Trade receivables, net			2,398						2,345
Inventories			2,743						2,579
Prepaid expenses and other			891						1,119
Total Current Assets			8,969						6,664
Property, Plant and Equipment, Net			5,923						5,659
Goodwill			23,620						23,376
Developed Technology, Net			10,146						11,054
Customer Relationships, Net			3,107						3,424
Other Intangibles, Net			560						500
Other Assets			1,687						1,088
Total Assets			$	54,012					$	51,765
Liabilities and Shareholders’ Equity
Current Liabilities
Short-term debt			$	707					$	1,309
Accounts payable			1,355						1,092
Accrued expenses			2,638						2,127
Salaries, wages and related items			993						987
Income taxes			144						140
Total Current Liabilities			5,836						5,655
Long-Term Debt			17,224						18,081
Long-Term Employee Benefit Obligations			1,435						1,272
Deferred Income Taxes and Other Liabilities			5,753						5,676
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock			2						2
Common stock — $1 par value: authorized — 640,000,000 shares; issued — 364,639,901 shares in 2020 and 346,687,160 shares in 2019.			365						347
Capital in excess of par value			19,270						16,270
Retained earnings			12,791						12,913
Deferred compensation			23						23
Common stock in treasury — at cost — 74,622,657 shares in 2020 and 76,259,835 shares in 2019.			(6,138)						(6,190)
Accumulated other comprehensive loss			(2,548)						(2,283)
Total Shareholders’ Equity			23,765						21,081
Total Liabilities and Shareholders’ Equity			$	54,012					$	51,765

Amounts may not add due to rounding.

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

Becton, Dickinson and Company

Years Ended September 30

Millions of dollars			2020						2019						2018
Operating Activities
Net income			$	874					$	1,233					$	311
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization			2,154						2,253						1,978
Share-based compensation			244						261						322
Deferred income taxes			(302)						(381)						(240)
Change in operating assets and liabilities:
Trade receivables, net			(48)						(51)						(170)
Inventories			(125)						(149)						246
Prepaid expenses and other			81						299						(46)
Accounts payable, income taxes and other liabilities			205						(470)						867
Pension obligation			95						(123)						(263)
Excess tax benefits from payments under share-based compensation plans			52						55						78
Gain on sale of Vyaire interest			—						—						(303)
Gain on sale of business			—						(336)						—
Product liability-related charges			378						914						—
Other, net			(68)						(177)						85
Net Cash Provided by Operating Activities			3,539						3,330						2,865
Investing Activities
Capital expenditures			(810)						(957)						(895)
Acquisitions, net of cash acquired			(164)						—						(15,155)
Proceeds from divestitures, net			—						477						534
Other, net			(257)						(261)						(217)
Net Cash Used for Investing Activities			(1,232)						(741)						(15,733)
Financing Activities
Change in credit facility borrowings			(485)						485						—
Proceeds from long-term debt and term loans			3,389						2,224						5,086
Payments of debt and term loans			(4,664)						(4,744)						(3,996)
Proceeds from issuance of equity securities			2,917						—						—
Dividends paid			(1,026)						(984)						(927)
Other, net			(109)						(205)						(220)
Net Cash Provided by (Used for) Financing Activities			22						(3,223)						(58)
Effect of exchange rate changes on cash and equivalents and restricted cash			(3)						(12)						(17)
Net Increase (Decrease) in Cash and Equivalents and Restricted Cash			2,326						(646)						(12,943)
Opening Cash and Equivalents and Restricted Cash			590						1,236						14,179
Closing Cash and Equivalents and Restricted Cash			$	2,917					$	590					$	1,236
Non-Cash Investing Activities
Fair value of shares issued as acquisition consideration (See Note 10)			$	—					$	—					$	8,004
Fair value of equity awards issued as acquisition consideration (See Note 10)			$	—					$	—					$	613

Amounts may not add due to rounding.

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

Becton, Dickinson and Company

Millions of dollars, except per share amounts or as otherwise specified

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements of Becton, Dickinson and Company (the “Company” or "BD") have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. Our fiscal year ends on September 30.

Principles of Consolidation

The consolidated financial statements include the Company’s accounts and those of its majority-owned subsidiaries after the elimination of intercompany transactions. The Company has no material interests in variable interest entities.

Cash Equivalents

Cash equivalents consist of all highly liquid investments with a maturity of three months or less at time of purchase.

Restricted Cash

Restricted cash consists of cash restricted from withdrawal and usage and largely represents funds that are restricted for certain product liability matters assumed in the acquisition of C.R. Bard, Inc. ("Bard"), which are further discussed in Note 5.

Trade Receivables

The Company grants credit to customers in the normal course of business and the resulting trade receivables are stated at their net realizable value. The allowance for doubtful accounts represents the Company’s estimate of probable credit losses relating to trade receivables and is determined based on historical experience and other specific account data. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectable.

Inventories

Inventories are stated at the lower of approximate cost determined on the first-in, first-out basis or market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are principally provided on the straight-line basis over estimated useful lives, which range from 20 to 45 years for buildings, four to 13 years for machinery and equipment and one to 20 years for leasehold improvements. Depreciation and amortization expense was $646 million, $633 million and $600 million in fiscal years 2020, 2019 and 2018, respectively.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Goodwill and Other Intangible Assets

The Company’s unamortized intangible assets include goodwill which arise from acquisitions of businesses. The Company currently reviews goodwill for impairment using quantitative models. Goodwill is reviewed at least annually for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company’s reporting units generally represent one level below reporting segments. Potential impairment of goodwill is generally identified by comparing the fair value of a reporting unit, estimated using an income approach, with its carrying value. The annual impairment review performed on July 1, 2020 indicated that all identified reporting units’ fair values exceeded their respective carrying values.

Amortized intangible assets include developed technology assets which arise from acquisitions. These assets represent acquired intellectual property that is already technologically feasible upon the acquisition date or acquired in-process research and development assets that are completed subsequent to acquisition. Developed technology assets are generally amortized over periods ranging from 15 to 20 years, using the straight-line method. Customer relationship assets are generally amortized over periods ranging from 10 to 15 years, using the straight-line method. Other intangibles with finite useful lives, which include patents, are amortized over periods principally ranging from one to 40 years, using the straight-line method. Finite-lived intangible assets, including developed technology assets, are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted cash flows. The carrying values of these finite-lived assets are compared to the undiscounted cash flows they are expected to generate and an impairment loss is recognized in operating results to the extent any finite-lived intangible asset’s carrying value exceeds its calculated fair value.

Foreign Currency Translation

Generally, foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in the foreign currency translation adjustments in Accumulated other comprehensive income (loss).

Revenue Recognition

The Company recognizes revenue from product sales when the customer obtains control of the product, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. Revenues associated with certain instruments and equipment for which installation is complex, and therefore significantly affects the customer’s ability to use and benefit from the product, are recognized upon customer acceptance of these installed products. Revenue for certain service arrangements, including extended warranty and software maintenance contracts, is recognized ratably over the contract term. When arrangements include multiple performance obligations, the total transaction price of the contract is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Variable consideration such as rebates, sales discounts and sales returns are estimated and treated as a reduction of revenue in the same period the related revenue is recognized. These estimates are based on contractual terms, historical practices, and current trends, and are adjusted as new information becomes available. Revenues exclude any taxes that the Company collects from customers and remits to tax authorities.

Equipment lease transactions with customers are evaluated and classified as either operating or sales-type leases. Generally, these arrangements are accounted for as operating leases and therefore, revenue is recognized at the contracted rate over the rental period defined within the customer agreement.

Additional disclosures regarding the Company's accounting for revenue recognition are provided in Note 6.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Shipping and Handling Costs

The Company considers its shipping and handling costs to be contract fulfillment costs and records them within Selling and administrative expense. Shipping expense was $551 million, $511 million and $479 million in 2020, 2019 and 2018, respectively.

Derivative Financial Instruments

All derivatives are recorded in the balance sheet at fair value and changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Any deferred gains or losses associated with derivative instruments are recognized in income in the period in which the underlying hedged transaction is recognized. Additional disclosures regarding the Company's accounting for derivative instruments are provided in Note 14.

Income Taxes

The Company has reviewed its needs in the United States for possible repatriation of undistributed earnings of its foreign subsidiaries and continues to invest foreign subsidiaries earnings outside of the United States to fund foreign investments or meet foreign working capital and property, plant and equipment expenditure needs. As a result, the Company is permanently reinvested with respect to all of its historical foreign earnings as of September 30, 2020. Deferred taxes are not provided on undistributed earnings of foreign subsidiaries that are indefinitely reinvested. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation.

The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. In evaluating the exposure associated with various tax filing positions, the Company records accruals for uncertain tax positions based on the technical support for the positions, past audit experience with similar situations, and the potential interest and penalties related to the matters.

The Company maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances are included in the tax provision in the period of change. In determining whether a valuation allowance is warranted, management evaluates factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. Additional disclosures regarding the Company's accounting for income taxes are provided in Note 17.

Earnings per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In computing diluted earnings per share, only potential common shares that are dilutive (i.e., those that reduce earnings per share or increase loss per share) are included in the calculation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates or assumptions affect reported assets, liabilities, revenues and expenses as reflected in the consolidated financial statements. Actual results could differ from these estimates.

Note 2 — Accounting Changes

New Accounting Principles Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet, as well as

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

expanded disclosures regarding leasing arrangements. The Company adopted this standard on October 1, 2019, and elected certain practical expedients permitted under the transition guidance, including a transition method which allows application of the new standard at its adoption date, rather than at the earliest comparative period presented in the financial statements. The Company also elected not to perform any reassessments relative to its expired and existing leases upon its adoption of the new requirements. The Company's adoption of this standard did not materially impact its consolidated financial statements. Additional disclosures regarding the Company’s lease arrangements are provided in Note 18.

In August 2018, the FASB issued a new accounting standard to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The Company early adopted this standard as of April 1, 2020 on a prospective basis. The adoption of this standard did not materially impact the Company's consolidated financial statements.

In July 2018, the FASB issued accounting standard update (“ASU”) ASU 2018-09, "Codification Improvements", which, among other items, amended an illustrative example of a fair value hierarchy disclosure to indicate that a certain type of investment should not always be considered to be eligible to use the net asset value ("NAV") per share practical expedient. Also, it further clarified that an entity should evaluate whether a readily determinable fair value exists or whether its investments qualify for the NAV practical expedient. The Company early adopted this standard in the fourth quarter of fiscal year 2020 on a prospective basis, which is reflected in the fair value hierarchy classification of pension assets in Note 9, but does not change the fair value measurements of the investments.

On October 1, 2018, the Company adopted Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("ASC 606") using the modified retrospective method. Under ASC 606, revenue is recognized upon the transfer of control of goods or services to customers and reflects the amount of consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company assessed the impact of this new standard on its consolidated financial statements based upon a review of contracts that were not completed as of October 1, 2018. Amounts presented in the Company's financial statements for the prior-year periods were not revised and are reflective of the revenue recognition requirements which were in effect for those periods. This accounting standard adoption, which is further discussed in Note 6, did not materially impact any line items of the Company's consolidated income statements and balance sheet.

On October 1, 2018, the Company retrospectively adopted an accounting standard update which requires all components of net periodic pension and postretirement benefit costs to be disaggregated from the service cost component and to be presented on the income statement outside a subtotal of income from operations, if one is presented. Upon the Company's adoption of the accounting standard update, which did not have a material impact on its consolidated financial statements, all components of the Company’s net periodic pension and postretirement benefit costs, aside from service cost, are recorded to Other income, net on its consolidated income statements for all periods presented. Revisions of prior-year amounts were estimated based upon previously disclosed amounts.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

On October 1, 2018, the Company adopted an accounting standard update which requires that the income tax effects of intercompany sales or transfers of assets, except those involving inventory, be recognized in the income statement as income tax expense (or benefit) in the period that the sale or transfer occurs. The Company adopted this accounting standard update, which did not have a material impact on its consolidated financial statements, using the modified retrospective method.

In the second quarter of its fiscal year 2018, the Company prospectively adopted an accounting standard update relating to the stranded income tax effects on items within Accumulated other comprehensive income (loss) resulting from the enactment of new U.S. tax legislation, which legislation is further discussed in Note 17. Additional disclosures regarding this accounting standard adoption are provided in Note 3.

New Accounting Principle Not Yet Adopted

In June 2016, the FASB issued a new accounting standard which requires earlier recognition of credit losses on loans and other financial instruments held by entities, including trade receivables. The new standard requires entities to measure all expected credit losses for financial assets held at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Adoption of this new accounting standard on October 1, 2020 will not have a material impact on the Company's consolidated financial statements.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 3 — Shareholders’ Equity

Changes in certain components of shareholders’ equity were as follows:

			Common Stock Issued at Par Value						Capital in Excess of Par Value						Retained Earnings						Deferred Compensation						Treasury Stock
(Millions of dollars)			Shares (in thousands)						Amount
Balance at September 30, 2017			$	347					$	9,619					$	13,111					$	19					(118,745)						$	(8,427)
Net income			—						—						311						—						—						—
Cash dividends:
Common ($3.00 per share)			—						—						(775)						—						—						—
Preferred			—						—						(152)						—						—						—
Common stock issued for:
Acquisition (see Note 10)			—						6,478						—						—						37,306						2,121
Share-based compensation and other plans, net			—						(246)						(2)						3						2,982						62
Share-based compensation			—						328						—						—						—						—
Common stock held in trusts, net (a)			—						—						—						—						(6)						—
Effect of change in accounting principle (see Note 2 and further discussion below)			—						—						103						—						—						—
Balance at September 30, 2018			$	347					$	16,179					$	12,596					$	22					(78,463)						$	(6,243)
Net income			—						—						1,233						—						—						—
Cash dividends:
Common ($3.08 per share)			—						—						(832)						—						—						—
Preferred			—						—						(152)						—						—						—
Common stock issued for share-based compensation and other plans, net			—						(170)						(1)						1						2,155						53
Share-based compensation			—						261						—						—						—						—
Common stock held in trusts, net (a)			—						—						—						—						48						—
Effect of change in accounting principle (see Note 2)			—						—						68						—						—						—
Balance at September 30, 2019			$	347					$	16,270					$	12,913					$	23					(76,260)						$	(6,190)
Net income			—						—						874						—						—						—
Cash dividends:
Common ($3.16 per share)			—						—						(888)						—						—						—
Preferred			—						—						(107)						—						—						—
Common stock issued for:
Preferred shares converted to common shares			12						(9)						—						—						—						—
Public equity offerings			6						2,909						—						—						—						—
Share-based compensation and other plans, net			—						(143)						—						—						1,597						52
Share-based compensation			—						244						—						—						—						—
Common stock held in trusts, net (a)			—						—						—						—						41						—
Balance at September 30, 2020			$	365					$	19,270					$	12,791					$	23					(74,623)						$	(6,138)

(a)Common stock held in trusts represents rabbi trusts in connection with deferred compensation under the Company’s employee salary and bonus deferral plan and directors’ deferral plan.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Common and Preferred Stock Conversions and Offerings

In accordance with their terms, the Company's 2.475 million mandatory convertible preferred shares that were issued in May 2017 in connection with the Company's acquisition of Bard were converted into 11.703 million shares of BD common stock on the mandatory conversion date of May 1, 2020.

Also in May 2020, the Company completed registered public offerings of equity securities including:

• 6.250 million shares of the Company's common stock for net proceeds of $1.459 billion (gross proceeds of $1.500 billion).

• 1.500 million shares of the Company's mandatory convertible preferred stock (ownership is held in the form of depositary shares, each representing a 1/20th interest in a share of preferred stock) for net proceeds of $1.459 billion (gross proceeds of $1.500 billion). If and when declared, dividends on the mandatory convertible preferred stock will be payable on a cumulative basis at an annual rate of 6.00% on the liquidation preference of $1,000 per preferred share ($50 per depositary share). The shares of preferred stock are convertible to a minimum of 5.2 million and up to a maximum of 6.2 million shares of Company common stock at an exchange ratio, based on the market price of the Company’s common stock at the date of conversion, and no later than the mandatory conversion date of June 1, 2023.

The net proceeds from these offerings have been and will be used by the Company for general corporate purposes, which may include funding for the Company's growth strategy through organic investments and acquisitions, working capital, capital expenditures and repayment of outstanding indebtedness.

The components and changes of Accumulated other comprehensive income (loss) were as follows:

(Millions of dollars)			Total						Foreign Currency Translation						Benefit Plans						Cash Flow Hedges
Balance at September 30, 2017			$	(1,723)					$	(1,001)					$	(703)					$	(18)
Other comprehensive (loss) income before reclassifications, net of taxes			(142)						(161)						19						—
Amounts reclassified into income, net of taxes			57						—						52						5
Tax effects reclassified to retained earnings			(103)						—						(99)						(4)
Balance at September 30, 2018			$	(1,909)					$	(1,162)					$	(729)					$	(17)
Other comprehensive loss before reclassifications, net of taxes			(427)						(93)						(325)						(9)
Amounts reclassified into income, net of taxes			52						—						49						3
Balance at September 30, 2019			$	(2,283)					$	(1,256)					$	(1,005)					$	(23)
Other comprehensive loss before reclassifications, net of taxes			(338)						(161)						(101)						(76)
Amounts reclassified into income, net of taxes			74						—						66						8
Balance at September 30, 2020			$	(2,548)					$	(1,416)					$	(1,040)					$	(91)

The amount of foreign currency translation recognized in other comprehensive income during the years ended September 30, 2020, 2019 and 2018 included net gains (losses) relating to net investment hedges, as further discussed in Note 14. The amounts recognized in other comprehensive income relating to cash flow hedges in 2020 and 2019 related to forward starting interest rate swaps. Additional disclosures regarding the Company's derivatives are provided in Note 14.

During the second quarter of fiscal 2018, as permitted under U.S. GAAP, the Company reclassified stranded income tax effects on items within Accumulated other comprehensive income (loss) resulting from the enactment of new U.S. tax legislation, which legislation is further discussed in Note 17, to Retained earnings. The reclassified tax effects related to prior service credits and net actuarial losses relating to benefit plans, as

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

well as to terminated cash flow hedges. The tax effects relating to these items are generally recognized as such amounts are amortized into earnings.

The tax impacts for amounts recognized in other comprehensive income before reclassifications were as follows:

(Millions of dollars)			2020						2019						2018
Benefit Plans
Income tax benefit (provision) for net (losses) gains recorded in other comprehensive income			$	30					$	91					$	(19)

The tax impacts for cash flow hedges recognized in other comprehensive income before reclassifications in 2020 were $25 million. The tax impacts recognized in 2019 for cash flow hedges were immaterial to the Company's consolidated financial results. Reclassifications out of Accumulated other comprehensive income (loss) and the related tax impacts relating to benefit plans and cash flow hedges in 2020, 2019 and 2018 were also immaterial to the Company's consolidated financial results.

Note 4 — Earnings per Share

The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) for the years ended September 30 were as follows:

			2020						2019						2018
Average common shares outstanding			278,971						269,943						258,354
Dilutive share equivalents from share-based plans (a)			3,431						4,832						6,267
Average common and common equivalent shares outstanding — assuming dilution			282,402						274,775						264,621

(a)For the years ended September 30, 2020, 2019 and 2018, dilutive share equivalents associated with mandatory convertible preferred stock of 9 million, 12 million and 12 million, respectively, were excluded from the diluted shares outstanding calculation because the result would have been antidilutive. The issuance of the convertible preferred stock is further discussed in Note 3. For the years ended September 30, 2020, 2019 and 2018, there were no options to purchase shares of common stock which were excluded from the diluted earnings per share calculation.

Note 5 — Commitments and Contingencies

Commitments

The Company has certain future purchase commitments entered in the normal course of business to meet operational and capital requirements. As of September 30, 2020, these commitments aggregated to approximately $1.436 billion and will be expended over the next several years.

Contingencies

Given the uncertain nature of litigation generally, the Company is not able, in all cases, to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which the Company is a party. In accordance with U.S. GAAP, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). With respect to putative class action lawsuits in the United States and certain of the Canadian lawsuits described below relating to product liability matters, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; (ii) the Company has not received and reviewed complete information regarding all or certain of the plaintiffs and their medical conditions; and/or (iii) there are significant factual issues to be resolved. In addition, there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class. With respect to the civil investigative

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

demand served by the Department of Justice, as discussed below, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; and/or (ii) there are significant factual and legal issues to be resolved.

In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows.

Product Liability Matters

The Company believes that certain settlements and judgments, as well as legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers, or, in some circumstances, indemnification obligations to the Company from other parties, which if disputed, the Company intends to vigorously contest. Amounts recovered under the Company’s product liability insurance policies or indemnification arrangements may be less than the stated coverage limits or less than otherwise expected and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers or other parties will pay claims or that coverage or indemnity will be otherwise available.

Hernia Product Claims

As of September 30, 2020, the Company is defending approximately 21,370 product liability claims involving the Company’s line of hernia repair devices (collectively, the “Hernia Product Claims”). The majority of those claims are currently pending in a coordinated proceeding in Rhode Island State Court, but claims are also pending in other state and/or federal court jurisdictions. In addition, those claims include multiple putative class actions in Canada. Generally, the Hernia Product Claims seek damages for personal injury allegedly resulting from use of the products. From time to time, the Company engages in resolution discussions with plaintiffs’ law firms regarding certain of the Hernia Product Claims, but the Company also intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months. In August 2018, a hernia multi-district litigation (“MDL”) was ordered to be established in the Southern District of Ohio. Trials are scheduled throughout fiscal year 2021 in various state and/or federal courts, with the first trial currently scheduled for April 2021 in the MDL. A second trial is likely to be scheduled for April 2021 in Rhode Island. The Company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

Women’s Health Product Claims

As of September 30, 2020, the Company is defending approximately 525 product liability claims involving the Company’s line of pelvic mesh devices. The majority of those claims are currently pending in various federal court jurisdictions, and a coordinated proceeding in New Jersey State Court, but claims are also pending in other state court jurisdictions. In addition, those claims include putative class actions filed in the United States. Not included in the figures above are approximately 980 filed and unfiled claims that have been asserted or threatened against the Company but lack sufficient information to determine whether a pelvic mesh device of the Company is actually at issue.

The claims identified above also include products manufactured by both the Company and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (“Medtronic”), each a supplier of the Company. Medtronic has an obligation to defend and indemnify the Company with respect to any product defect liability relating to products its subsidiaries had manufactured. In July 2015, the Company reached an agreement with Medtronic in which Medtronic agreed to take responsibility for pursuing settlement of certain of the Women’s Health Product Claims that relate to products distributed by the Company under supply agreements with Medtronic. In June 2017, the Company amended the agreement with Medtronic to transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on terms similar to the

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

July 2015 agreement, including with respect to the obligation to make payments to Medtronic towards these potential settlements. As of September 30, 2020, the Company has paid Medtronic $148 million towards these potential settlements. The Company also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms. The agreements do not resolve the dispute between the Company and Medtronic with respect to Women’s Health Product Claims that do not settle, if any. The foregoing lawsuits, unfiled claims, putative class actions, and other claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as the “Women’s Health Product Claims.” The Women’s Health Product Claims generally seek damages for personal injury allegedly resulting from use of the products.

As of September 30, 2020, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 15,235 of the Women’s Health Product Claims. The Company believes that these Women’s Health Product Claims are not the subject of Medtronic’s indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs’ law firms, which are not included in the approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. The Company continues to engage in discussions with other plaintiffs’ law firms regarding potential resolution of unsettled Women’s Health Product Claims, which may include additional inventory settlements.

Starting in 2014 in the MDL, the court entered certain pre-trial orders requiring trial work up and remand of a significant number of Women’s Health Product Claims, including an order entered in the MDL on January 30, 2018, that requires the work up and remand of all remaining unsettled cases (the “WHP Pre-Trial Orders”). The WHP Pre-Trial Orders may result in material additional costs or trial verdicts in future periods in defending Women’s Health Product Claims. Trials are anticipated throughout 2021 in state and federal courts. A trial in the New Jersey coordinated proceeding began in March 2018, and in April 2018 a jury entered a verdict against the Company in the total amount of $68 million ($33 million compensatory; $35 million punitive). The Company is in the process of appealing that verdict. The Company expects additional trials of Women’s Health Product Claims to take place over the next 12 months, which may potentially include consolidated trials.

During the course of engaging in settlement discussions with plaintiffs’ law firms, the Company has learned, and may in future periods learn, additional information regarding these and other unfiled claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company.

Filter Product Claims

As of September 30, 2020, the Company is defending approximately 1,650 product liability claims involving the Company’s line of inferior vena cava filters (collectively, the “Filter Product Claims”). The majority of those claims were previously pending in an MDL in the United States District Court for the District of Arizona, but those MDL claims either have been, or are in the process of being, remanded to various federal jurisdictions. Filter Product Claims are also pending in various state court jurisdictions, including a coordinated proceeding in Arizona State Court. In addition, those claims include putative class actions filed in the United States and Canada. The Filter Product Claims generally seek damages for personal injury allegedly resulting from use of the products. The Company has limited information regarding the nature and quantity of certain of the Filter Product Claims. The Company continues to receive claims and lawsuits and may in future periods learn additional information regarding other unfiled or unknown claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company. On May 31, 2019, the MDL Court ceased accepting direct filings or transfers into the Filter Product Claims MDL and, as noted above, remands for non-settled cases have begun and are expected to continue over the next three months. Federal and state court trials are scheduled throughout fiscal year 2021. As of September 30, 2020, the Company entered into settlement agreements and/or settlement agreements in principle for approximately 8,120 cases. On March 30, 2018, a jury in the first MDL trial found the Company liable for negligent failure to warn and entered a verdict in favor of plaintiffs. The jury found the Company was not liable for (a) strict liability

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

design defect; (b) strict liability failure to warn; and (c) negligent design. In August 2020, the Ninth Circuit affirmed that verdict on appeal. On June 1, 2018, a jury in the second MDL trial unanimously found in favor of the Company on all claims. On August 17, 2018, the Court entered summary judgment in favor of the Company on all claims in the third MDL trial. On October 5, 2018, a jury in the fourth MDL trial unanimously found in favor of the Company on all claims. The Company expects additional trials of Filter Product Claims may take place over the next 12 months.

In most product liability litigations (like those described above), plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the Company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions and, consequently, is unable to fully evaluate the claims. The Company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.

In connection with the settlement of a prior litigation with certain of the Company's insurance carriers, an agreement with the Company's insurance carriers was reached to reimburse the Company for certain future costs incurred in connection with Filter Product Claims up to an agreed amount. For certain product liability claims or lawsuits, the Company does not maintain or has limited remaining insurance coverage.

Other Legal Matters

Since early 2013, the Company has received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the Company’s products that are the subject of the Hernia Product Claims and the Women’s Health Product Claims. On September 24, 2020, the Company and the State Attorneys General announced that this matter has been resolved for a total of $60 million payable by the Company, which is included in Accrued expenses and Deferred Income Taxes and Other Liabilities on the Company's consolidated balance sheet as of September 30, 2020.

The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs. While it is not feasible to predict the outcome of these proceedings, based upon the Company’s experience, current information and applicable law, the Company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the Company’s business and/or results of operations.

On February 27, 2020, a putative class action captioned Kabak v. Becton, Dickinson and Company, et al., Civ. No. 2:20-cv-02155 (SRC) (CLW), was filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers. The complaint, which purports to be brought on behalf of all persons (other than defendants) who purchased or otherwise acquired the Company's common stock from November 5, 2019 through February 5, 2020, asserts claims for purported violations of Sections 10 and 20 of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, and seeks, among other things, damages and costs. The complaint alleges that defendants concealed material information regarding AlarisTM infusion pumps, including that (1) certain pumps exhibited software errors, (2) the Company was investing in remediation efforts as opposed to other enhancements and (3) the Company was thus reasonably likely to recall certain pumps and/or experience regulatory delays. These alleged omissions, the complaint asserts, rendered certain public statements about the Company’s business, operations and prospects false or misleading, causing investors to purchase stock at an inflated price. The Company believes these claims are without merit and intends to vigorously defend this action.

On November 2, 2020, a civil action captioned Jankowski v. Forlenza, et al., Civ. No. 2:20-cv-15474, was filed in the U.S. District Court for the District of New Jersey by a shareholder, Ronald Jankowski, derivatively on behalf of the Company, against its individual directors and certain of its officers. The complaint seeks

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

recovery for breach of fiduciary duties by directors and various officers; violations of the Securities Exchange Act of 1934; and insider trading. In general, the complaint alleges, among other things, that various directors and/or officers (1) caused the Company to issue purportedly misleading statements and SEC filings regarding Alaris infusion pumps (2) issued a misleading proxy statement (3) engaged in improper insider trading and (4) caused or contributed to various violations of the Securities Exchange Act of 1934, including sections 10(b), 14(a) and 21D. The complaint seeks damages, including restitution and disgorgement of profits, and an injunction requiring the Company to undertake remedial measures with respect to certain corporate governance and internal procedures. The Company believes these claims are without merit and intends to vigorously defend this action. Consistent with New Jersey law, this action will be stayed pending a formal response by the Board of Directors to the shareholder’s presuit demand for an investigation of his claims.

The Company is also involved both as a plaintiff and a defendant in other legal proceedings and claims that arise in the ordinary course of business. The Company believes that it has meritorious defenses to these suits pending against the Company and is engaged in a vigorous defense of each of these matters.

Litigation Accruals

The Company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time.

During fiscal years 2020 and 2019, the Company recorded pre-tax charges to Other operating expense, net, of approximately $378 million and $914 million, respectively, related to certain of the product liability matters discussed above under the heading “Product Liability Matters,” including the related legal defense costs. The Company recorded these charges based on additional information obtained during fiscal years 2020 and 2019 including but not limited to: the nature and quantity of unfiled and filed claims and the continued rate of claims being filed in certain product liability matters; the status of certain settlement discussions with plaintiffs’ counsel; the allegations and documentation supporting or refuting such allegations; publicly available information regarding similar medical device mass tort settlements; historical information regarding other product liability settlements involving the Company; and the stage of litigation.

Accruals for the Company's product liability claims which are discussed above, as well as the related legal defense costs, amounted to approximately $2.5 billion at September 30, 2020 and 2019. These accruals, which are generally long-term in nature, are largely recorded within Deferred Income Taxes and Other Liabilities on the Company's consolidated balance sheets. As of September 30, 2020 and 2019, the Company had $92 million and $53 million, respectively, in qualified settlement funds (“QSFs”), subject to certain settlement conditions, for certain product liability matters. Payments to QSFs are recorded as a component of Restricted cash. The Company's expected recoveries related to product liability claims and related legal defense costs were approximately $139 million and $150 million at September 30, 2020 and 2019, respectively. A substantial amount of these expected recoveries at September 30, 2020 and 2019 related to the Company’s agreements with Medtronic related to certain Women’s Health Product Claims.

The expected recoveries at September 30, 2020 related to the indemnification obligation are not in dispute with respect to claims that Medtronic settles pursuant to the agreements.

Note 6 — Revenues

As previously discussed in Note 2, the Company adopted ASC 606 in fiscal year 2019 using the modified retrospective method. The Company sells a broad range of medical supplies, devices, laboratory equipment and diagnostic products which are distributed through independent distribution channels and directly by BD through

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

sales representatives. End-users of the Company's products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry and the general public.

Timing of Revenue Recognition

The Company's revenues are primarily recognized when the customer obtains control of the product sold, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. Revenues associated with certain instruments and equipment for which installation is complex, and therefore significantly affects the customer’s ability to use and benefit from the product, are recognized when customer acceptance of these installed products has been confirmed. For certain service arrangements, including extended warranty and software maintenance contracts, revenue is recognized ratably over the contract term. The majority of revenues relating to extended warranty contracts associated with certain instruments and equipment is generally recognized within a few years whereas deferred revenue relating to software maintenance contracts is generally recognized over a longer period.

Measurement of Revenues

The Company acts as the principal in substantially all of its customer arrangements and as such, generally records revenues on a gross basis. Revenues exclude any taxes that the Company collects from customers and remits to tax authorities. The Company considers its shipping and handling costs to be costs of contract fulfillment and has made the accounting policy election to record these costs within Selling and administrative expense.

Payment terms extended to the Company's customers are based upon commercially reasonable terms for the markets in which the Company's products are sold. Because the Company generally expects to receive payment within one year or less from when control of a product is transferred to the customer, the Company does not generally adjust its revenues for the effects of a financing component. The Company’s estimate of probable credit losses relating to trade receivables is determined based on historical experience and other specific account data. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectable. Such amounts are not material to the Company's consolidated financial results.

The Company's gross revenues are subject to a variety of deductions which are recorded in the same period that the underlying revenues are recognized. Such variable consideration includes rebates, sales discounts and sales returns. Because these deductions represent estimates of the related obligations, judgment is required when determining the impact of these revenue deductions on gross revenues for a reporting period. Rebates provided by the Company are based upon prices determined under the Company's agreements with its end-user customers. Additional factors considered in the estimate of the Company's rebate liability include the quantification of inventory that is either in stock at or in transit to the Company's distributors, as well as the estimated lag time between the sale of product and the payment of corresponding rebates. The impact of other forms of variable consideration, including sales discounts and sales returns, is not material to the Company's revenues. Additional disclosures relating to sales discounts and sales returns are provided in Note 19.

The Company's agreements with customers within certain organizational units including Medication Management Solutions, Integrated Diagnostic Solutions and Biosciences, contain multiple performance obligations including both products and certain services noted above. The transaction price for these agreements is allocated to each performance obligation based upon its relative standalone selling price. Standalone selling price is the amount at which the Company would sell a promised good or service separately to a customer. The Company generally estimates standalone selling prices using its list prices and a consideration of typical discounts offered to customers.

Effects of Revenue Arrangements on Consolidated Balance Sheets

Due to the nature of the majority of the Company's products and services, the Company typically does not incur costs to fulfill a contract in advance of providing the customer with goods or services. Capitalized

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

contract costs associated with the costs to fulfill contracts for certain products in the Medication Management Solutions organizational unit are immaterial to the Company's consolidated balance sheets. The Company's costs to obtain contracts are comprised of sales commissions which are paid to the Company's employees or third party agents. The majority of the sales commissions incurred by the Company relate to revenue that is recognized over a period that is less than one year and as such, the Company has elected a practical expedient provided under ASC 606 to record the majority of its expense associated with sales commissions as it is incurred. Commissions relating to revenues recognized over a period longer than one year are recorded as assets which are amortized over the period over which the revenues underlying the commissions are recognized. Capitalized contract costs related to such commissions are immaterial to the Company's consolidated balance sheets.

The Company records contract liabilities for unearned revenue that is allocable to performance obligations, such as extended warranty and software maintenance contracts, which are performed over time as discussed further above. These contract liabilities are immaterial to the Company's consolidated financial results. The Company's liability for product warranties provided under its agreements with customers is not material to its consolidated balance sheets.

Remaining Performance Obligations

The Company's obligations relative to service contracts, which are further discussed above, and pending installations of equipment, primarily in the Company's Medication Management Solutions unit, represent unsatisfied performance obligations of the Company. The revenues under existing contracts with original expected durations of more than one year, which are attributable to products and/or services that have not yet been installed or provided, are estimated to be approximately $1.9 billion at September 30, 2020. The Company expects to recognize the majority of this revenue over the next three years.

Within the Company's Medication Management Solutions, Medication Delivery Solutions, Integrated Diagnostic Solutions, and Biosciences units, some contracts also contain minimum purchase commitments of reagents or other consumables and the future sales of these consumables represent additional unsatisfied performance obligations of the Company. The revenue attributable to the unsatisfied minimum purchase commitment-related performance obligations, for contracts with original expected durations of more than one year, is estimated to be approximately $2.6 billion at September 30, 2020. This revenue will be recognized over the customer relationship periods.

Disaggregation of Revenues

A disaggregation of the Company's revenues by segment, organizational unit and geographic region is provided in Note 7.

Note 7 — Segment Data

The Company's organizational structure is based upon three worldwide business segments: BD Medical (“Medical”), BD Life Sciences (“Life Sciences”) and BD Interventional ("Interventional"). The Company’s segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services.

Medical

Medical produces a broad array of medical technologies and devices that are used to help improve healthcare delivery in a wide range of settings. The primary customers served by Medical are hospitals and clinics; physicians’ office practices; consumers and retail pharmacies; governmental and nonprofit public health agencies; pharmaceutical companies; and healthcare workers. Medical consists of the following organizational units: Medication Delivery Solutions; Medication Management Solutions; Diabetes Care; Pharmaceutical Systems.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Life Sciences

Life Sciences provides products for the safe collection and transport of diagnostics specimens, and instruments and reagent systems to detect a broad range of infectious diseases, healthcare-associated infections and cancers. In addition, Life Sciences produces research and clinical tools that facilitate the study of cells, and the components of cells, to gain a better understanding of normal and disease processes. That information is used to aid the discovery and development of new drugs and vaccines, and to improve the diagnosis and management of diseases. The primary customers served by Life Sciences are hospitals, laboratories and clinics; blood banks; healthcare workers; public health agencies; physicians’ office practices; retail pharmacies; academic and government institutions; and pharmaceutical and biotechnology companies.

Effective October 1, 2019, Life Sciences joined its former Preanalytical Systems and Diagnostic Systems organizational units to create a new Integrated Diagnostic Solutions organizational unit which focuses on driving growth and innovation around integrated specimen management to diagnostic solutions. Life Sciences consists of the following organizational units: Integrated Diagnostic Solutions and Biosciences.

Interventional

Interventional provides vascular, urology, oncology and surgical specialty products that are intended, with the exception of the V. MullerTM surgical and laparoscopic instrumentation products, to be used once and then discarded or are either temporarily or permanently implanted. The primary customers served by Interventional are hospitals, individual healthcare professionals, extended care facilities, alternate site facilities and patients via the segment's Homecare business. The Interventional segment consists of the following organizational units: Surgery; Peripheral Intervention; Urology and Critical Care.

Additional Segment Information

Distribution of products is primarily through independent distribution channels, and directly to end-users by BD and independent sales representatives. No customer accounted for 10% or more of revenues in any of the three years presented.

Segment disclosures are on a performance basis consistent with internal management reporting. The Company evaluates performance of its business segments and allocates resources to them primarily based upon operating income, which represents revenues reduced by product costs and operating expenses.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Financial information for the Company’s segments is detailed below. The Company has no material intersegment revenues. As discussed in Note 10, the Company completed its acquisition of Bard on December 29, 2017. Bard's operating results were included in the Company’s consolidated results of operations beginning on January 1, 2018.

(Millions of dollars)			2020																		2019																		2018
			United States						International						Total						United States						International						Total						United States						International						Total
Medical
Medication Delivery Solutions (a)			$	1,972					$	1,583					$	3,555					$	2,037					$	1,811					$	3,848					$	1,875					$	1,752					$	3,627
Medication Management Solutions (a)			1,865						589						2,454						2,115						525						2,640						1,974						513						2,487
Diabetes Care			562						522						1,084						573						538						1,110						564						541						1,105
Pharmaceutical Systems			404						1,184						1,588						392						1,073						1,465						357						1,040						1,397
Total segment revenues			$	4,802					$	3,878					$	8,680					$	5,116					$	3,947					$	9,064					$	4,770					$	3,846					$	8,616
Life Sciences
Integrated Diagnostic Solutions
Preanalytical Systems			$	769					$	718					$	1,487					$	774					$	784					$	1,558					$	761					$	792					$	1,553
Diagnostic Systems			1,103						941						2,045						672						875						1,547						678						858						1,536
Total Integrated Diagnostic Solutions			1,872						1,659						3,532						1,446						1,659						3,106						1,438						1,651						3,089
Biosciences			465						678						1,143						485						709						1,194						475						766						1,241
Total segment revenues			$	2,337					$	2,337					$	4,675					$	1,931					$	2,368					$	4,300					$	1,914					$	2,416					$	4,330
Interventional
Surgery (b)			$	891					$	230					$	1,121					$	977					$	264					$	1,242					$	820					$	202					$	1,022
Peripheral Intervention (b)			871						640						1,511						917						657						1,574						728						511						1,239
Urology and Critical Care (b)			815						315						1,130						787						323						1,110						536						240						777
Total segment revenues			$	2,577					$	1,186					$	3,762					$	2,682					$	1,244					$	3,926					$	2,084					$	953					$	3,037
Total Company revenues			$	9,716					$	7,401					$	17,117					$	9,730					$	7,560					$	17,290					$	8,768					$	7,215					$	15,983

(a)The amounts in fiscal years 2019 and 2018 reflect the reclassification of U.S. revenues of $11 million and $17 million, respectively, associated with the movement, effective on October 1, 2019, of certain products from the Medication Delivery Solutions unit to the Medication Management Solutions unit.

(b)The amounts in fiscal years 2019 and 2018 reflect the total reclassifications of $130 million and $134 million, respectively, of U.S. revenues and $55 million and $60 million, respectively, of international revenues associated with the movement, effective on October 1, 2019, of certain products from the Surgery unit and the Urology and Critical Care unit to the Peripheral Intervention unit.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

(Millions of dollars)			2020						2019						2018
Income Before Income Taxes
Medical (a) (b) (c) (d)			$	2,274					$	2,824					$	2,624
Life Sciences (e)			1,405						1,248						1,207
Interventional (c) (f)			724						903						306
Total Segment Operating Income			4,403						4,976						4,137
Acquisitions and other restructurings			(309)						(480)						(740)
Net interest expense			(521)						(627)						(641)
Other unallocated items (g)			(2,587)						(2,693)						(1,583)
Total Income Before Income Taxes			$	985					$	1,176					$	1,173
Assets
Medical			$	23,007					$	22,925					$	23,493
Life Sciences			4,713						4,135						4,225
Interventional			21,619						22,157						23,219
Total Segment Assets			49,339						49,217						50,938
Corporate and All Other (h)			4,673						2,548						2,966
Total Assets			$	54,012					$	51,765					$	53,904
Capital Expenditures
Medical			$	477					$	577					$	560
Life Sciences			192						230						255
Interventional			119						120						65
Corporate and All Other			22						30						14
Total Capital Expenditures			$	810					$	957					$	895
Depreciation and Amortization
Medical			$	1,104					$	1,073					$	1,028
Life Sciences			286						284						275
Interventional			750						881						658
Corporate and All Other			14						14						17
Total Depreciation and Amortization			$	2,154					$	2,253					$	1,978

(a)The amount in 2020 includes a probable estimate of future costs within the Medication Management Solutions unit associated with remediation efforts related to BD AlarisTM infusion pumps of $244 million, which was recorded to Cost of products sold. Based on the course of remediation efforts, it is possible that the estimate of future costs could increase over time.

(b)The amounts in 2019 included $75 million of estimated remediation costs recorded to Other operating expense, net relating to a recall of a product component, which generally pre-dated the Company's acquisition of CareFusion in fiscal year 2015, within the Medication Management Solutions unit's infusion systems platform.

(c)The amounts in 2018 included expense related to the recognition of a $478 million fair value step-up adjustment related to Bard's inventory on the acquisition date. The step-up adjustments recognized by the Medical and Interventional segments in 2018 were $60 million and $418 million, respectively.

(d)The amounts in 2020 included $41 million of charges to Cost of products sold to write down the value of fixed assets primarily in the Medication Delivery Solutions and Pharmaceutical Systems units; 2018

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

included $58 million of charges to Cost of products sold to write down the value of fixed assets primarily in the Diabetes Care unit.

(e)The amounts in 2020 included charges of $57 million to write down the carrying value of certain intangible and other assets in the Biosciences and Integrated Diagnostic Solutions units; 2018 included charges of $81 million to write down the carrying value of certain intangible and other assets in the Biosciences unit.

(f)The amount in 2019 included a charge of $30 million recorded to write down the carrying value of certain intangible assets in the Surgery unit.

(g)Primarily comprised of foreign exchange, certain general and administrative expenses and share-based compensation expense. The amounts in 2020 and 2019 included pre-tax charges of $378 million and $914 million, respectively, related to certain product liability matters, which is further discussed in Note 5. The 2019 amount also included the pre-tax gain recognized on the Company's sale of its Advanced Bioprocessing business of approximately $336 million, which is further discussed in Note 11. The amount in 2018 included the pre-tax gain recognized on the Company's sale of its non-controlling interest in Vyaire Medical of approximately $303 million.

(h)Includes cash and investments and corporate assets.

Geographic Information

The countries in which the Company has local revenue-generating operations have been combined into the following geographic areas: the United States (including Puerto Rico); Europe; Greater Asia (which includes countries in Greater China, Japan, South Asia, Southeast Asia, Korea, and Australia and New Zealand); and Other, which is comprised of Latin America (which includes Mexico, Central America, the Caribbean and South America), Canada, and EMA (which includes the Commonwealth of Independent States, Middle East and Africa).

Revenues to unaffiliated customers are generally based upon the source of the product shipment. Long-lived assets, which include net property, plant and equipment, are based upon physical location.

(Millions of dollars)			2020						2019						2018
Revenues
United States			$	9,716					$	9,730					$	8,768
Europe			3,480						3,359						3,298
Greater Asia			2,568						2,726						2,460
Other			1,353						1,476						1,457
			$	17,117					$	17,290					$	15,983
Long-Lived Assets
United States			$	36,468					$	37,053					$	38,982
Europe			5,835						5,483						5,640
Greater Asia			1,521						1,328						851
Other			808						861						645
Corporate			411						377						375
			$	45,043					$	45,101					$	46,494

Note 8 — Share-Based Compensation

The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (“2004 Plan”), which provides long-term incentive compensation to employees and directors consisting of: stock appreciation rights (“SARs”), performance-based restricted stock units, time-vested restricted stock units and other stock awards.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The fair value of share-based payments is recognized as compensation expense in net income. The amounts and location of compensation cost relating to share-based payments included in the consolidated statements of income is as follows:

(Millions of dollars)			2020						2019						2018
Cost of products sold			$	40					$	37					$	36
Selling and administrative expense			150						145						136
Research and development expense			34						32						29
Acquisitions and other restructurings			20						50						130
			$	245					$	265					$	332
Tax benefit associated with share-based compensation costs recognized			$	57					$	62					$	79

Upon the Company's acquisition of Bard in 2018, certain pre-acquisition equity awards of Bard were converted into either BD SARs or BD restricted stock awards, as applicable. These awards have substantially the same terms and conditions as the converted Bard awards immediately prior to the acquisition date. Compensation expense of $16 million, $40 million and $126 million associated with these replacement awards was recorded in Acquisitions and other restructurings in 2020, 2019 and 2018, respectively.

Stock Appreciation Rights

SARs represent the right to receive, upon exercise, shares of common stock having a value equal to the difference between the market price of common stock on the date of exercise and the exercise price on the date of grant. SARs vest over a period of four years and have a term of ten years. The fair value was estimated on the date of grant using a lattice-based binomial option valuation model that uses the following weighted-average assumptions:

			2020						2019						2018
Risk-free interest rate			1.69%						3.05%						2.32%
Expected volatility			19.0%						18.0%						19.0%
Expected dividend yield			1.24%						1.27%						1.33%
Expected life			7.4 years						7.2 years						7.4 years
Fair value derived			$48.82						$51.86						$46.10

Expected volatility is based upon historical volatility for the Company’s common stock and other factors. The expected life of SARs granted is derived from the output of the lattice-based model, using assumed exercise rates based on historical exercise and termination patterns, and represents the period of time that SARs granted are expected to be outstanding. The risk-free interest rate used is based upon the published U.S. Treasury yield curve in effect at the time of grant for instruments with a similar life. The dividend yield is based upon the most recently declared quarterly dividend as of the grant date. The Company issued 0.8 million shares during 2020 to satisfy the SARs exercised.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

A summary of SARs outstanding as of September 30, 2020 and changes during the year then ended is as follows:

			SARs (in thousands)						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1			6,899						$	144.84
Granted			874						255.22
Exercised			(1,295)						101.81
Forfeited, canceled or expired			(140)						220.82
Balance at September 30			6,337						$	167.17					5.66						$	441
Vested and expected to vest at September 30			6,152						$	165.02					5.58						$	440
Exercisable at September 30			4,483						$	137.60					4.59						$	429

A summary of SARs exercised 2020, 2019 and 2018 is as follows:

(Millions of dollars)			2020						2019						2018
Total intrinsic value of SARs exercised			$	212					$	260					$	333
Total fair value of SARs vested			$	46					$	66					$	107

Performance-Based and Time-Vested Restricted Stock Units

Performance-based restricted stock units cliff vest three years after the date of grant. These units are tied to the Company’s performance against pre-established targets over a performance period of three years. The performance measures for fiscal year 2020 were average annual currency-neutral revenue growth and average annual return on invested capital, with the combined factor subject to adjustment based on the Company's relative total shareholder return (measures the Company’s stock performance during the performance period against that of peer companies). For fiscal years 2019 and 2018, the performance measures were relative total shareholder return and average annual return on invested capital. Under the Company’s long-term incentive program, the actual payout under these awards may vary from zero to 200% of an employee’s target payout, based on the Company’s actual performance over the performance period of three years. In fiscal year 2020, the Company also issued additional performance-based time-vested units to certain key executives, which cliff vest three years after the date of grant and are tied to the Company’s performance against average annual growth in the Company’s Adjusted EPS over a performance period of three years. No shares will be issuable if the performance targets have not been met. The fair value is based on the market price of the Company’s stock on the date of grant. Compensation cost initially recognized assumes that the target payout level will be achieved and is adjusted for subsequent changes in the expected outcome of performance-related conditions. For units for which the performance conditions are modified after the date of grant, any incremental increase in the fair value of the modified units, over the original units, is recorded as compensation expense on the date of the modification for vested units, or over the remaining performance period for units not yet vested.

Time-vested restricted stock unit awards vest on a graded basis over a period of three years, except for certain key executives of the Company, including the executive officers, for which such units generally vest one year following the employee’s retirement. The related share-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility. The fair value of all time-vested restricted stock units is based on the market value of the Company’s stock on the date of grant.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

A summary of restricted stock units outstanding as of September 30, 2020 and changes during the year then ended is as follows:

			Performance-Based															Time-Vested
			Stock Units (in thousands)									Weighted Average Grant Date Fair Value						Stock Units (in thousands)						Weighted Average Grant Date Fair Value
Balance at October 1			955									$	221.73					2,068						$	210.48
Granted			371									245.06						736						249.94
Distributed			(77)									174.92						(676)						211.19
Forfeited or canceled			(286)									188.32						(431)						215.56
Balance at September 30			962			(a)						$	244.42					1,697						$	226.01
Expected to vest at September 30			241			(b)						$	244.82					1,622						$	225.22

(a)Based on 200% of target payout for performance based restricted units and 100% of the performance based time-vested units.

(b)Net of expected forfeited units and units in excess of the expected performance payout of 66 thousand and 655 thousand shares, respectively.

The weighted average grant date fair value of restricted stock units granted during the years 2020, 2019 and 2018 are as follows:

			Performance-Based																		Time-Vested
			2020						2019						2018						2020						2019						2018
Weighted average grant date fair value of units granted			$	245.06					$	237.55					$	251.75					$	249.94					$	235.50					$	216.06

The total fair value of stock units vested during 2020, 2019 and 2018 was as follows:

			Performance-Based																		Time-Vested
(Millions of dollars)			2020						2019						2018						2020						2019						2018
Total fair value of units vested			$	27					$	33					$	31					$	211					$	254					$	362

At September 30, 2020, the weighted average remaining vesting term of performance-based and time vested restricted stock units is 1.26 and 0.84 years, respectively.

Unrecognized Compensation Expense and Other Stock Plans

The amount of unrecognized compensation expense for all non-vested share-based awards as of September 30, 2020, is approximately $245 million, which is expected to be recognized over a weighted-average remaining life of approximately 1.89 years. At September 30, 2020, 10.2 million shares were authorized for future grants under the 2004 Plan. The Company has a policy of satisfying share-based payments through either open market purchases or shares held in treasury. At September 30, 2020, the Company has sufficient shares held in treasury to satisfy these payments.

As of September 30, 2020, 96 thousand shares were held in trust relative to a Director's Deferral plan, which provides a means to defer director compensation, from time to time, on a deferred stock or cash basis. Also as of September 30, 2020, 289 thousand shares were issuable under a Deferred Compensation Plan that allows certain highly-compensated employees, including executive officers, to defer salary, annual incentive awards and certain equity-based compensation.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 9 — Benefit Plans

The Company has defined benefit pension plans covering certain employees in the United States and certain international locations. Postretirement healthcare and life insurance benefits provided to qualifying domestic retirees as well as other postretirement benefit plans in international countries are not material. The measurement date used for the Company’s employee benefit plans is September 30.

As a result of the Company’s conclusion to merge the legacy Bard pension plan into the BD defined benefit cash balance pension plan, the assets and liabilities of the legacy Bard U.S. defined pension benefit plan will be remeasured as of October 31, 2020. Amendments to this plan were approved and communicated to affected employees in the first quarter of fiscal year 2021. The legacy Bard U.S. pension plan has been frozen to prevent new participants since January 1, 2011.

Effective January 1, 2018, the legacy BD U.S. pension plan was frozen to limit the participation of employees who are hired or re-hired by the Company, or who transfer employment to the Company, on or after January 1, 2018.

Net pension cost for the years ended September 30 included the following components:

			Pension Plans
(Millions of dollars)			2020						2019						2018
Service cost			$	153					$	134					$	136
Interest cost			84						107						90
Expected return on plan assets			(188)						(180)						(154)
Amortization of prior service credit			(13)						(13)						(13)
Amortization of loss			97						78						78
Settlements			4						10						2
Net pension cost			$	137					$	135					$	137
Net pension cost included in the preceding table that is attributable to international plans			$	41					$	32					$	34

The amounts provided above for amortization of prior service credit and amortization of loss represent the reclassifications of prior service credits and net actuarial losses that were recognized in Accumulated other comprehensive income (loss) in prior periods. The settlement losses recorded in 2020, 2019 and 2018 included lump sum benefit payments associated with certain plans. The Company recognizes pension settlements when payments from the plan exceed the sum of service and interest cost components of net periodic pension cost associated with the plan for the fiscal year.

All components of the Company’s net periodic pension and postretirement benefit costs, aside from service cost, are recorded to Other income, net on its consolidated statements of income.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The change in benefit obligation, change in fair value of pension plan assets, funded status and amounts recognized in the Consolidated Balance Sheets for these plans were as follows:

			Pension Plans
(Millions of dollars)			2020						2019
Change in benefit obligation:
Beginning obligation			$	3,731					$	3,246
Service cost			153						134
Interest cost			84						107
Plan amendments			—						3
Benefits paid			(186)						(153)
Impact of acquisitions (divestitures)			10						(9)
Actuarial loss			104						514
Settlements			(17)						(63)
Other, includes translation			74						(49)
Benefit obligation at September 30			$	3,953					$	3,731
Change in fair value of plan assets:
Beginning fair value			$	2,926					$	2,642
Actual return on plan assets			222						279
Employer contribution			42						258
Benefits paid			(186)						(153)
Impact of acquisitions (divestitures)			7						(7)
Settlements			(17)						(63)
Other, includes translation			51						(30)
Plan assets at September 30			$	3,045					$	2,926
Funded Status at September 30:
Unfunded benefit obligation			$	(908)					$	(804)
Amounts recognized in the Consolidated Balance Sheets at September 30:
Other			$	16					$	11
Salaries, wages and related items			(23)						(22)
Long-term Employee Benefit Obligations			(901)						(793)
Net amount recognized			$	(908)					$	(804)
Amounts recognized in Accumulated other comprehensive income (loss) before income taxes at September 30:
Prior service credit			$	31					$	44
Net actuarial loss			(1,281)						(1,289)
Net amount recognized			$	(1,250)					$	(1,246)

International pension plan assets at fair value included in the preceding table were $935 million and $859 million at September 30, 2020 and 2019, respectively. The international pension plan projected benefit obligations were $1.321 billion and $1.244 billion at September 30, 2020 and 2019, respectively.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The benefit obligation associated with postretirement healthcare and life insurance plans provided to qualifying domestic retirees, which was largely recorded to Long-Term Employee Benefit Obligations, was $148 million and $153 million at September 30, 2020 and 2019, respectively.

Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consist of the following at September 30:

			Accumulated Benefit Obligation Exceeds the Fair Value of Plan Assets												Projected Benefit Obligation Exceeds the Fair Value of Plan Assets
(Millions of dollars)			2020						2019						2020						2019
Projected benefit obligation			$	3,844					$	3,623					$	3,920					$	3,698
Accumulated benefit obligation			$	3,703					$	3,476
Fair value of plan assets			$	2,936					$	2,821					$	2,996					$	2,882

The estimated net actuarial loss and prior service credit that will be amortized from Accumulated other comprehensive income (loss) into net pension costs over the next fiscal year for pension benefits and other postretirement benefits are not material.

The weighted average assumptions used in determining pension plan information were as follows:

			2020						2019						2018
Net Cost
Discount rate:
U.S. plans (a)			3.21		%				4.26		%				3.71		%
International plans			1.39						2.30						2.30
Expected return on plan assets:
U.S. plans			7.25						7.25						7.20
International plans			5.05						4.98						4.95
Rate of compensation increase:
U.S. plans			4.29						4.29						4.51
International plans			2.35						2.36						2.31
Benefit Obligation
Discount rate:
U.S. plans			2.80						3.21						4.26
International plans			1.44						1.39						2.30
Rate of compensation increase:
U.S. plans			4.30						4.29						4.29
International plans			2.20						2.35						2.36

(a)The Company calculated the service and interest components utilizing an approach that discounts the individual expected cash flows using the applicable spot rates derived from the yield curve over the projected cash flow period.

Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based upon expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, the Company considers many factors, including historical assumptions compared with actual results; benchmark data; expected returns on various plan asset classes, as well as current and expected asset allocations.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Expected Funding

The Company’s funding policy for its defined benefit pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that may be appropriate considering the funded status of the plans, tax consequences, the cash flow generated by the Company and other factors. The Company made a discretionary contribution of $200 million to its BD U.S. pension in October 2018. The Company did not make any required contributions in 2020 and does not anticipate any significant required contributions to its pension plans in 2021.

Expected benefit payments are as follows:

(Millions of dollars)			Pension Plans
2021			$	209
2022			162
2023			171
2024			176
2025			186
2026-2030			1,068

Expected benefit payments associated with postretirement healthcare plans are immaterial to the Company's consolidated financial results.

Investments

The Company’s primary objective is to achieve returns sufficient to meet future benefit obligations. It seeks to generate above market returns by investing in more volatile asset classes such as equities while at the same time controlling risk through diversification in non-correlated asset classes and through allocations to more stable asset classes like fixed income.

U.S. Plans

The Company’s U.S. pension plans comprise 69% of total benefit plan investments, based on September 30, 2020 market values, and have a target asset mix of 40% fixed income, 25% diversifying investments and 35% equities. This mix was established based on an analysis of projected benefit payments and estimates of long-term returns, volatilities and correlations for various asset classes. The asset allocations to diversifying investments include high-yield bonds, hedge funds, real estate, infrastructure, leveraged loans and emerging markets bonds.

The actual portfolio investment mix may, from time to time, deviate from the established target mix due to various factors such as normal market fluctuations, the reliance on estimates in connection with the determination of allocations and normal portfolio activity such as additions and withdrawals. Rebalancing of the asset portfolio on a quarterly basis is required to address any allocations that deviate from the established target allocations in excess of defined allowable ranges. The target allocations are subject to periodic review, including a review of the asset portfolio’s performance, by the named fiduciary of the plans. Any tactical deviations from the established asset mix require the approval of the named fiduciary.

The U.S. plans may enter into both exchange traded and non-exchange traded derivative transactions in order to manage interest rate exposure, volatility, term structure of interest rates, and sector and currency exposures within the fixed income portfolios. The Company has established minimum credit quality standards for counterparties in such transactions.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The following table provides the fair value measurements of U.S. plan assets, as well as the measurement techniques and inputs utilized to measure fair value of these assets, at September 30, 2020 and 2019. The categorization of fund investments is based upon the categorization of these funds’ underlying assets.

(Millions of dollars)			Total U.S. Plan Asset Balances												Investments Measured at Net Asset Value (a)												Quoted Prices in Active Markets for Identical Assets (Level 1)												Significant Other Observable Inputs (Level 2)												Significant Unobservable Inputs (Level 3)
			2020						2019						2020						2019						2020						2019						2020						2019						2020						2019
Fixed Income:
Corporate bonds			656						401						—						—						273						48						383						353						—						—
Government and agency-U.S.			95						108						—						—						74						85						21						23						—						—
Government and agency-Foreign			40						85						—						—						—						69						40						16						—						—
Other fixed income			141						37						—						—						—						—						141						37						—						—
Equity securities			737						922						43						782						694						140						—						—						—						—
Cash and cash equivalents			147						254						—						—						147						254						—						—						—						—
Other			291						261						151						124						141						138						—						—						—						—
Fair value of plan assets			$	2,108					$	2,068					$	193					$	906					$	1,330					$	733					$	584					$	429					$	—					$	—

(a)As per applicable disclosure requirements, certain investments that were measured at net asset value per share or its equivalent have not been categorized within the fair value hierarchy. Values of such assets are based on the corroborated net asset value provided by the fund administrator.

Fixed Income Securities

U.S. pension plan assets categorized above as fixed income securities include fund investments comprised of corporate and government and agency investments. Investments in corporate bonds are diversified across industry and sector and consist of investment-grade, as well as high-yield debt instruments. U.S. government investments consist of obligations of the U.S. Treasury, other U.S. government agencies, state governments and local municipalities. Assets categorized as foreign government and agency debt securities included investments in developed and emerging markets.

The values of fixed income investments classified within Level 1 are based on the closing price reported on the major market on which the investments are traded. A portion of the fixed income instruments classified within Level 2 are valued based upon estimated prices from independent vendors’ pricing models and these prices are derived from market observable sources including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and other market-related data.

Equity Securities

U.S. pension plan assets categorized as equity securities consist of fund investments in publicly-traded U.S. and non-U.S. equity securities. In order to achieve appropriate diversification, these portfolios are invested across market sectors, investment styles, capitalization weights and geographic regions. The values of equity securities classified within Level 1 are based on the closing price reported on the major market on which the investments are traded. Upon the adoption of ASU 2018-09, as previously discussed in Note 2, equity securities measured at NAV in prior periods have been classified within Level 1 at September 30, 2020. These assets have a readily determinable fair value based on published prices obtained from fund managers which represent

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

the price at which the instruments can be redeemed at period end. The U.S. pension plan has no future funding commitments associated with these investments and has the right to redeem them upon one day’s notice, at any time and without restriction.

Cash and Cash Equivalents

A portion of the U.S. plans’ assets consists of investments in cash and cash equivalents, primarily to accommodate liquidity requirements relating to trade settlement and benefit payment activity, and the values of these assets are based upon quoted market prices.

Other Securities

Other U.S. pension plan assets include fund investments comprised of hedge funds. The values of such instruments classified within Level 1 are based on the closing price reported on the major market on which the investments are traded.

International Plans

International plan assets comprise 31% of the Company’s total benefit plan assets, based on market value at September 30, 2020. Such plans have local independent fiduciary committees, with responsibility for development and oversight of investment policy, including asset allocation decisions. In making such decisions, consideration is given to local regulations, investment practices and funding rules.

The following table provides the fair value measurements of international plan assets, as well as the measurement techniques and inputs utilized to measure fair value of these assets, at September 30, 2020 and 2019.

(Millions of dollars)			Total International Plan Asset Balances												Investments Measured at Net Asset Value (a)												Quoted Prices in Active Markets for Identical Assets (Level 1)												Significant Other Observable Inputs (Level 2)												Significant Unobservable Inputs (Level 3) (b)
			2020						2019						2020						2019						2020						2019						2020						2019						2020						2019
Fixed Income:
Corporate bonds			$	34					$	33					$	—					$	—					$	15					$	15					$	19					$	18					$	—					$	—
Government and agency-U.S.			3						3						—						—						—						—						3						3						—						—
Government and agency-Foreign			212						199						—						—						115						105						97						94						—						—
Other fixed income			102						100						—						—						63						63						39						37						—						—
Equity securities			335						319						—						14						335						305						—						—						—						—
Cash and cash equivalents			12						8						—						—						12						8						—						—						—						—
Real estate			34						30						—						—						—						—						24						30						10						—
Insurance contracts			131						113						—						—						—						—						—						—						131						113
Other			72						53						—						—						70						52						1						1						—						—
Fair value of plan assets			$	935					$	859					$	—					$	14					$	611					$	549					$	183					$	182					$	141					$	113

(a)As per applicable disclosure requirements, certain investments that were measured at net asset value per share or its equivalent have not been categorized within the fair value hierarchy. Values of such assets are based on the corroborated net asset value provided by the fund administrator.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

(b)Changes in the fair value of international pension assets measured using Level 3 inputs for the years ended September 30, 2020 and 2019 were immaterial.

Fixed Income Securities

Fixed income investments held by international pension plans include corporate, U.S. government and non-U.S. government securities. The values of fixed income securities classified within Level 1 are based on the closing price reported on the major market on which the investments are traded. Values of investments classified within Level 2 are based upon estimated prices from independent vendors’ pricing models and these prices are derived from market observable sources.

Equity Securities

Equity securities included in the international plan assets consist of publicly-traded U.S. and non-U.S. equity securities. The values of equity securities classified within Level 1 are based on the closing price reported on the major market on which the investments are traded. As noted above, equity securities measured at NAV in prior periods have been classified within Level 1 at September 30, 2020 as these assets have a readily determinable fair value based on published prices obtained from fund managers which represent the price at which the instruments can be redeemed at period end. The international plans holding these securities have no future funding commitments associated with these investments and has the right to redeem them upon one day’s notice, at any time and without restriction.

Other Securities

The international plans hold a portion of assets in cash and cash equivalents, in order to accommodate liquidity requirements and the values are based upon quoted market prices. Real estate investments consist of investments in funds holding an interest in real properties and the corresponding values represent the estimated fair value based on the fair value of the underlying investment value or cost, adjusted for any accumulated earnings or losses. The values of insurance contracts approximately represent cash surrender value. Other investments include fund investments for which values are based upon either quoted market prices or market observable sources.

Defined Contribution Plans

The cost of voluntary defined contribution plans which provide for a Company match or contribution was $111 million in 2020, $126 million in 2019 and $108 million in 2018. As a short term measure to preserve cash and reduce costs, the Company's matching contributions were temporarily suspended effective May 1, 2020 and matching contributions were reinstated in October 2020.

Note 10 – Acquisitions

Bard

On December 29, 2017, the Company completed its acquisition of Bard, to create a medical technology company which is uniquely positioned to improve both the treatment of disease for patients and the process of care for health care providers. The operating activities of Bard from the acquisition date through December 31,

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

2017 were not material to the Company’s consolidated results of operations. As such, Bard's operating results were included in the Company’s consolidated results of operations beginning on January 1, 2018.

The acquisition-date fair value of consideration transferred consisted of the components below. The fair value of the shares and equity awards issued as consideration was recognized as a $6.5 billion increase to Capital in excess of par value and a $2.1 billion decrease to Common stock in treasury.

(Millions of dollars)
Cash consideration			$	16,400
Non-cash consideration-fair value of shares issued			8,004
Non-cash consideration-fair value of equity awards issued			613
Total consideration transferred			$	25,017

Transaction Costs

Transaction costs related to this acquisition incurred during the years ended September 30, 2018 were approximately $56 million. These transaction costs were recorded as Acquisitions and other restructurings and consisted of legal, advisory and other costs. See Note 12 for discussion regarding restructuring costs incurred relative to the Bard acquisition.

Unaudited Pro Forma Information

As noted above, Bard's operating activities from the acquisition date through December 31, 2017 were not material and the Company included Bard in its consolidated results of operations beginning on January 1, 2018. Revenues in 2018 were $3 billion. Net Income in 2018 included loss attributable to Bard of $(107) million. The following table provides the pro forma results for the fiscal year 2018 as if Bard had been acquired as of October 1, 2016.

(Millions of dollars, except per share data)
			2018
Revenues			$	16,947
Net Income			$	390
Diluted Earnings per Share			$	0.90

The pro forma results above include the impact of the following adjustments, as necessary: additional amortization and depreciation expense relating to assets acquired; interest and other financing costs relating to the acquisition transaction; and the elimination of one-time or nonrecurring items. The one-time or nonrecurring items eliminated for the year ended September 30, 2018 were primarily comprised of fair value step-up adjustments of $478 million recorded relative to Bard's inventory on the acquisition date, the transaction costs discussed above, as well as certain Bard-related restructuring costs disclosed in Note 12. In addition, amounts previously reported by Bard as revenues related to a royalty income stream have been reclassified to Other income (expense), net to conform to the Company's reporting classification.

The pro forma results do not include any anticipated cost savings or other effects of the planned integration of Bard. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 11 — Divestitures

Advanced Bioprocessing

In October 2018, the Company completed the sale of its Life Sciences segment's Advanced Bioprocessing business. The Company recognized a pre-tax gain on the sale of approximately $336 million which was recorded as a component of Other operating expense, net in fiscal year 2019.

Vyaire Medical

In April 2018, the Company completed the sale of its non-controlling interest in Vyaire Medical. The Company received gross cash proceeds of approximately $435 million and recognized a pre-tax gain on the sale of approximately $303 million, which was recognized in Other income, net.

Note 12 — Business Restructuring Charges

In connection with the Company's 2018 acquisition of Bard, the 2015 acquisition of CareFusion and portfolio rationalization initiatives, the Company incurred restructuring costs which were largely recorded within Acquisitions and other restructurings on its consolidated statements of income. Restructuring liability activity in 2020, 2019 and 2018 was as follows:

			Employee Termination												Other												Total
(Millions of dollars)			Bard						Other Initiatives (a)						Bard (b)						Other Initiatives (a)						Bard						Other Initiatives (a)
Balance at September 30, 2017			$	—					$	49					$	—					$	6					$	—					$	55
Charged to expense			136						30						156						22						292						52
Cash payments			(103)						(56)						(3)						(23)						(106)						(79)
Non-cash settlements			—						—						(153)						(1)						(153)						(1)
Balance at September 30, 2018			$	33					$	23					$	—					$	4					$	33					$	27
Charged to expense			23						29						95						33						118						62
Cash payments			(34)						(21)						(5)						(31)						(39)						(52)
Non-cash settlements			—						—						(89)						(3)						(89)						(3)
Balance at September 30, 2019			$	22					$	31					$	1					$	3					$	23					$	34
Charged to expense			7						13						42						33						49						46
Cash payments			(14)						(27)						(18)						(31)						(32)						(58)
Non-cash settlements			—						—						(24)						(2)						(24)						(2)
Balance at September 30, 2020			$	15					$	17					$	1					$	3					$	16					$	20

(a)Restructuring costs in 2020 primarily related to simplification and other cost saving initiatives implemented in fiscal 2020, while 2019 and 2018 included expenses related to the Company's acquisition of CareFusion in fiscal year 2015 and other initiatives.

(b)Expenses in 2020, 2019 and 2018 largely represented the costs associated with the conversion of certain pre-acquisition equity awards of Bard which, to encourage post-acquisition employee retention, were converted to BD equity awards with substantially the same terms and conditions as were applicable under such Bard awards immediately prior to the acquisition date. Expenses in 2018 also included costs relating to Bard’s pension plan, partially offset by a gain on the sale of the Company's soft tissue core needle biopsy product line recorded in fiscal year 2018.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 13 — Intangible Assets

Intangible assets at September 30 consisted of:

			2020												2019
(Millions of dollars)			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Amortized intangible assets
Developed technology			$	14,105					$	3,959					$	13,960					$	2,906
Customer relationships			4,616						1,509						4,608						1,183
Product rights			119						73						110						60
Trademarks			408						120						407						102
Patents and other			500						320						445						305
Amortized intangible assets			$	19,748					$	5,981					$	19,530					$	4,555
Unamortized intangible assets
Acquired in-process research and development (a)			$	44											$	1
Trademarks			2												2
Unamortized intangible assets			$	46											$	3

(a)The increase in the carrying value of assets in 2020 was attributable to an immaterial acquisition which occurred during the second quarter of fiscal year 2020.

Intangible amortization expense was $1.384 billion, $1.497 billion and $1.255 billion in 2020, 2019 and 2018, respectively. The increase in intangible amortization expense beginning in 2019 was attributable to the first full year amortization of assets acquired in the Bard transaction, which is further discussed in Note 10. The estimated aggregate amortization expense for the fiscal years ending September 30, 2021 to 2025 are as follows: 2021 — $1.387 billion; 2022 — $1.377 billion; 2023 — $1.359 billion; 2024 — $1.357 billion; 2025 — $1.357 billion.

The following is a reconciliation of goodwill by business segment:

(Millions of dollars)			Medical						Life Sciences						Interventional						Total
Goodwill as of September 30, 2018			$	10,054					$	775					$	12,771					$	23,600
Divestitures and related adjustments (a)			—						3						—						3
Purchase price allocation adjustments (b)			(15)						—						(75)						(90)
Currency translation			(50)						(6)						(81)						(137)
Goodwill as of September 30, 2019			$	9,989					$	772					$	12,615					$	23,376
Acquisitions (c)			10						58						49						117
Purchase price allocation adjustments			—						1						4						5
Currency translation			44						7						71						122
Goodwill as of September 30, 2020			$	10,044					$	837					$	12,739					$	23,620

(a)Represents adjustments to goodwill derecognized upon the Company's sale of certain businesses, as further discussed in Note 11.

(b)The purchase price allocation adjustments were primarily driven by adjustments to tax-related balances recorded upon the finalization of the Bard acquisition allocation within one year of the transaction's closing.

(c)Represents goodwill recognized relative to certain acquisitions which were not material individually or in the aggregate.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 14 — Derivative Instruments and Hedging Activities

The Company uses derivative instruments to mitigate certain exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes. The effects these derivative instruments and hedged items have on financial position, financial performance, and cash flows are provided below.

Foreign Currency Risks and Related Strategies

The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts. In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, the Company has hedged the currency risk associated with those investments with instruments, such as foreign currency-denominated debt, cross-currency swaps and currency exchange contracts, which are designated as net investment hedges.

Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments. The net amounts recognized in Other income, net, during the years ending September 30, 2020, 2019 and 2018 were immaterial to the Company's consolidated financial results. The total notional amounts of the Company’s outstanding foreign exchange contracts as of September 30, 2020 and 2019 were $2.5 billion and $2.3 billion, respectively.

Certain of the Company's foreign currency-denominated long-term notes outstanding, which had a total carrying value of $1.5 billion and $1.4 billion, as of September 30, 2020 and 2019, respectively, were designated as, and were effective as, economic hedges of net investments in certain of the Company's foreign subsidiaries. The Company has entered into cross-currency swaps, all of which are designated and effective as economic hedges of net investments in certain of the Company's foreign subsidiaries. The notional amounts of the cross-currency swaps were $3.0 billion and $2.3 billion as of September 30, 2020 and 2019, respectively.

Net gains or losses relating to the net investment hedges, which are attributable to changes in the foreign currencies to U.S. dollar spot exchange rates, are recorded as accumulated foreign currency translation in Other comprehensive income (loss). Upon the termination of a net investment hedge, any net gain or loss included in Accumulated other comprehensive income (loss) relative to the investment hedge remains until the foreign subsidiary investment is disposed of or is substantially liquidated.

Net (losses) gains recorded to Accumulated other comprehensive income (loss) relating to the Company's net investment hedges as of September 30, 2020, 2019 and 2018 were as follows:

(Millions of dollars)			2020						2019						2018
Foreign currency-denominated debt			$	(106)					$	138					81
Cross-currency swaps			$	(109)					$	73					—
Foreign currency forward contract (a)			$	—					$	(9)					—

(a)Represented a loss recognized on a forward contract which was entered into and terminated in fiscal year 2019.

Interest Rate Risks and Related Strategies

The Company’s policy is to manage interest rate exposure using a mix of fixed and variable rate debt. The Company periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Company exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates.

The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $375 million at September 30, 2020 and 2019. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into to convert the interest payments on certain long-term notes from the fixed rate to a floating interest rate based on LIBOR. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt. The amounts recorded during the years ended September 30, 2020 and 2019 for changes in the fair value of these hedges were immaterial to the Company's consolidated financial results.

Changes in the fair value of the interest rate swaps designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are recorded in Other comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance in Accumulated other comprehensive income (loss) attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The net realized loss related to terminated interest rate swaps expected to be reclassified and recorded in Interest expense within the next 12 months is $6 million, net of tax.

The total notional amount of the Company's outstanding forward starting interest rate swaps was $1.5 billion at September 30, 2020 and 2019. The Company entered into these contracts in the fourth quarter of fiscal year 2019 to mitigate its exposure to interest rate risk. The Company recorded after-tax losses of $75 million in Other comprehensive income (loss) relating to these interest rate hedges during the year ended September 30, 2020. The amounts recognized in other comprehensive income relating to interest rate hedges during the year ended 2019 were immaterial.

Other Risk Exposures

The Company purchases resins, which are oil-based components used in the manufacture of certain products. Significant increases in world oil prices that lead to increases in resin purchase costs could impact future operating results. From time to time, the Company has managed price risks associated with these commodity purchases through commodity derivative forward contracts. The Company had no outstanding commodity derivative forward contracts at September 30, 2020. The Company's outstanding commodity derivative forward contracts at September 30, 2019 were immaterial to the Company's consolidated financial results.

Financial Statement Effects

The fair values of derivative instruments outstanding at September 30, 2020 and 2019 were not material to the Company's consolidated balance sheets.

The amounts reclassified from accumulated other comprehensive income relating to cash flow hedges during 2020, 2019 and 2018 were not material to the Company's consolidated financial results.

Note 15 — Financial Instruments and Fair Value Measurements

The following reconciles cash and equivalents and restricted cash reported within the Company's consolidated balance sheets at September 30, 2020 and 2019 to the total of these amounts shown on the Company's consolidated statements of cash flows:

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

(Millions of dollars)			September 30, 2020						September 30, 2019
Cash and equivalents			$	2,825					$	536
Restricted cash			92						54
Cash and equivalents and restricted cash			$	2,917					$	590

The Company’s cash and equivalents include institutional money market accounts, which permit daily redemption, and an ultra-short bond fund. The fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions, which are considered Level 1 inputs in the fair value hierarchy. The fair values of these accounts were $1.549 billion and $39 million at September 30, 2020 and 2019, respectively. The Company’s remaining cash and equivalents, excluding restricted cash, were $1.276 billion and $497 million at September 30, 2020 and 2019, respectively.

Short-term investments are held to their maturities and are carried at cost, which approximates fair value. The short-term investments consist of instruments with maturities greater than three months and less than one year.

Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was $19.0 billion and $19.2 billion at September 30, 2020 and 2019, respectively. The fair value of the current portion of long-term debt was $702 million and $1.3 billion at September 30, 2020 and 2019, respectively.

All other instruments measured by the Company at fair value, including derivatives and contingent consideration liabilities, are immaterial to the Company's consolidated balance sheets.

Nonrecurring Fair Value Measurements

In fiscal year 2020, the Company recorded charges to Cost of products sold of $57 million to write down the carrying values of certain intangible and other assets in the Biosciences and Integrated Diagnostic Solutions units, and $41 million to write down the value of fixed assets primarily in the Medication Delivery Solutions and Pharmaceutical Systems units. In fiscal years 2019, the Company recorded a charge to Research and development expense of $30 million to Cost of products sold to write down the carrying values of certain intangible assets in the Surgery unit. In fiscal year 2018, the Company recorded charges of $58 million to write down the value of fixed assets, primarily in the Diabetes Care unit, as well as charges of $81 million to write down the carrying value of certain intangible and other assets in the Biosciences unit. The amounts recognized in 2020, 2019 and 2018 were recorded to adjust the carrying amount of assets to the assets' fair values, which were estimated, based upon a market participant's perspective, using either Level 2 inputs, including quoted prices for similar assets, or Level 3 inputs, including values estimated using the income approach.

Concentration of Credit Risk

The Company maintains cash deposits in excess of government-provided insurance limits. Such cash deposits are exposed to loss in the event of nonperformance by financial institutions. Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry. Due to the large size and diversity of the Company’s customer base, concentrations of credit risk with respect to trade receivables are limited. The Company does not normally require collateral. The Company is exposed to credit loss in the event of nonperformance by financial institutions with which it conducts business. However, this loss is limited to the amounts, if any, by which the obligations of the counterparty to the financial instrument contract exceed the obligations of the Company. The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.

The Company continually evaluates its accounts receivables for potential collection risks particularly those resulting from sales to government-owned or government-supported healthcare facilities in certain countries as payment may be dependent upon the financial stability and creditworthiness of those countries’ national economies. The Company continually evaluates all governmental receivables for potential collection

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

risks associated with the availability of government funding and reimbursement practices. The Company believes the current reserves related to all governmental receivables are adequate and that this concentration of credit risk will not have a material adverse impact on its financial position or liquidity.

Transfers of trade receivables

Over the normal course of its business activities, the Company transfers certain trade receivable assets to third parties under factoring agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer. Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to Cash and equivalents and a decrease to Trade receivables, net when proceeds from the transactions are received. During 2020, the Company transferred $2.2 billion of its trade receivables to third parties under factoring arrangements and the Company’s balance of Trade receivables, net at September 30, 2020 excluded transferred trade receivables, which were yet to be remitted to the third parties, of $256 million. The costs incurred by the Company in connection with factoring activities were not material to its consolidated financial results. The Company’s transfers of trade receivables during fiscal year 2019 were not material to its consolidated financial results.

Note 16 — Debt

Short-term debt

The carrying value of Short-term debt, net of unamortized debt issuance costs, at September 30 consisted of:

(Millions of dollars)									2020						2019
Current portion of long-term debt
0.174% Notes due June 4, 2021									701						—
2.404% Notes due June 5, 2020									—						999
2.675% Notes due December 15, 2019									—						300
Other									5						10
Total short-term debt									$	707					$	1,309

The weighted average interest rates for short-term debt were 0.20% and 2.48% at September 30, 2020 and 2019, respectively.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Long-term debt

The carrying value of Long-Term Debt, net of unamortized debt issuance costs, at September 30 consisted of:

(Millions of dollars)									2020						2019
3.250% Notes due November 12, 2020			(a)						—						699
Floating Rate Notes due December 29, 2020			(a)						—						748
0.174% Notes due June 4, 2021									—						651
3.125% Notes due November 8, 2021									1,008						1,004
2.894% Notes due June 6, 2022									1,797						1,795
Floating Rate Notes due June 6, 2022									499						498
1.000% Notes due December 15, 2022									584						542
Revolving Credit Facility due December 29, 2022									—						480
3.300% Notes due March 1, 2023									295						295
1.401% Notes due May 24, 2023									350						325
0.632% Notes due June 4, 2023									933						867
3.875% Notes due May 15, 2024									180						181
3.363% Notes due June 6, 2024									1,742						1,740
3.734% Notes due December 15, 2024									1,370						1,369
3.020% Notes due May 24, 2025									320						306
1.208% Notes due June 4, 2026									699						649
6.700% Notes due December 1, 2026									172						174
1.900% Notes due December 15, 2026									582						541
3.700% Notes due June 6, 2027									1,715						1,714
7.000% Debentures due August 1, 2027									175						175
6.700% Debentures due August 1, 2028									174						175
2.823% Notes due May 20, 2030			(b)						743						—
6.000% Notes due May 15, 2039									246						246
5.000% Notes due November 12, 2040									124						124
4.875% Notes due May 15, 2044									247						248
4.685% Notes due December 15, 2044									1,044						1,045
4.669% Notes due June 6, 2047									1,485						1,485
3.794% Notes due May 20, 2050			(b)						742						—
Other long-term debt									—						5
Total Long-Term Debt									$	17,224					$	18,081

(a)All of the aggregate principal amount outstanding was redeemed during 2020, as further discussed below.

(b)Represents notes issued during 2020, as further discussed below.

The aggregate annual maturities of debt including interest during the fiscal years ending September 30, 2021 to 2025 are as follows: 2021 — $1.2 billion; 2022 — $3.8 billion; 2023 — $2.6 billion; 2024 — $2.3 billion; 2025 — $2.0 billion.

Other current credit facilities

The Company has a five-year senior unsecured revolving credit facility in place which will expire in December 2022. The facility agreement includes a provision that enabled BD, subject to additional

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

commitments made by the lenders, to access up to an additional $500 million in financing through the facility for a maximum aggregate commitment of $2.75 billion. In April 2020, the Company entered into a supplement to the facility agreement which increased the revolving commitments available under the facility by $381 million. As such, borrowings provided for under the agreement increased from $2.25 billion to $2.63 billion. The Company is also able to issue up to $100 million in letters of credit under this revolving credit facility. Proceeds from this facility are used to fund general corporate needs. There were no borrowings outstanding under the revolving credit facility at September 30, 2020 and borrowings outstanding at September 30, 2019 were $485 million. In addition, the Company has informal lines of credit outside of the United States.

The Company had no commercial paper borrowings outstanding as of September 30, 2020.

2020 Debt-Related Transactions

In March 2020, the Company entered into a 364-day senior unsecured term loan facility with borrowing capacity available of $2.0 billion. During the third quarter of fiscal year 2020, the Company repaid $1.9 billion of borrowings outstanding under this term loan with cash on hand and terminated the facility.

In May 2020, the Company issued $750 million of 2.823% notes due May 20, 2030 and $750 million of 3.794% notes due May 20, 2050. The Company used the net proceeds from this long-term debt offering, together with cash on hand, to repay the entire $1.000 billion aggregate principal outstanding on the 2.404% notes due June 5, 2020, and to redeem $500 million of the aggregate principal outstanding on the 3.250% notes due November 12, 2020, as well as accrued interest, related premiums, fees and expenses related to these repaid amounts. The Company redeemed this long-term debt at an aggregate market price of $506 million. The carrying value of these long-term notes was $500 million, and the Company recognized a loss on this debt extinguishment of $6 million, which was recorded in June 2020 within Other income, net, on the Company’s consolidated statements of income.

In September 2020, the Company redeemed the remaining $200 million of its outstanding 3.25% notes due November 12, 2020, and $750 million of its floating rate notes due December 29, 2020. Based upon the aggregate $950 million carrying value of the notes redeemed and the $951 million the Company paid to redeem the aggregate principal amount of the notes, the Company recorded a loss on these debt extinguishment transactions in the fourth quarter of fiscal year 2020 of $1 million within Other income, net, on its consolidated statements of income.

2019 Debt-Related Transactions

In March 2019, the Company redeemed an aggregate principal amount of $250 million of its outstanding floating rate senior unsecured U.S. notes due December 29, 2020. Based upon the $249 million carrying value of the notes redeemed and the $250 million the Company paid to redeem the aggregate principal amount of the notes, the Company recorded a loss on this debt extinguishment transaction in the second quarter of fiscal year 2019 of $1 million within Other income, net, on its consolidated statements of income.

In June 2019, Becton Dickinson Euro Finance S.à r.l., a private limited liability company (société à responsabilité limitée), which is an indirect, wholly-owned finance subsidiary of the Company, issued Euro-denominated debt consisting of 600 million Euros ($672 million) of 0.174% notes due June 4, 2021, 800 million Euros ($896 million) of 0.632% notes due June 4, 2023, and 600 million Euros ($672 million) of 1.208% notes due June 4, 2026. The notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company. No other of the Company's subsidiaries provide any guarantees with respect to these notes. The indenture covenants included a limitation on liens and a restriction on sale and leasebacks, change of control and consolidation, merger and sale of assets covenants. These covenants are subject to a number of exceptions, limitations and qualifications. The indenture did not restrict the Company, Becton Dickinson Euro Finance S.à r.l., or any other of the Company's subsidiaries from incurring additional debt or other liabilities, including additional senior debt. Additionally, the indenture did not restrict Becton Dickinson Euro Finance S.à r.l. and the Company from granting security interests over its assets.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The Company used the net proceeds from this long-term debt offering, together with cash on hand, to repay all the 1.000 billion Euros ($1.120 billion) of principal outstanding on 0.368% notes due June 6, 2019, as well as to fund the Company's repurchase of certain of its long-term senior notes outstanding. Under this cash tender offer, the Company repurchased the following aggregate principal amounts of its long-term debt at an aggregate market price of $1.169 billion:

Interest Rate and Maturity						Aggregate Principal Amount (Millions of dollars)
3.700% Notes due June 6, 2027						$	675
5.000% Notes due November 12, 2040						175
4.875% Notes due May 15, 2044						75
4.685% Notes due December 15, 2044						175
Total notes purchased						$	1,100

The carrying value of these long-term notes was $1.112 billion, and the Company recognized a loss on this debt extinguishment of $57 million, which was recorded in June 2019 within Other income, net, on the Company’s consolidated statements of income.

In September 2019, the Company redeemed an aggregate principal amount of $825 million of its outstanding 2.675% notes due December 15, 2019. Based upon the $825 million carrying value of the notes redeemed and the $826 million the Company paid to redeem the aggregate principal amount of the notes, the Company recorded a loss on this debt extinguishment transaction in the fourth quarter of fiscal year 2019 of $1 million within Other income, net, on its consolidated statements of income.

During the fourth quarter of 2019, the Company fully repaid its borrowings outstanding on a 364-day senior unsecured term loan facility that the Company entered in September 2018.

Capitalized interest

The Company capitalizes interest costs as a component of the cost of construction in progress. A summary of interest costs and payments for the years ended September 30 is as follows:

(Millions of dollars)			2020						2019						2018
Charged to operations			$	528					$	639					$	706
Capitalized			43						44						42
Total interest costs			$	571					$	683					$	748
Interest paid, net of amounts capitalized			$	515					$	658					$	674

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 17 — Income Taxes

Provision for Income Taxes

The provision (benefit) for income taxes the years ended September 30 consisted of:

(Millions of dollars)			2020						2019						2018
Current:
Federal			$	(50)					$	235					$	665
State and local, including Puerto Rico			47						41						73
Foreign			400						300						387
			$	397					$	576					$	1,124
Deferred:
Domestic			$	(184)					$	(577)					$	(201)
Foreign			(101)						(56)						(61)
			(286)						(633)						(262)
Income tax provision (benefit)			$	111					$	(57)					$	862

The components of Income Before Income Taxes for the years ended September 30 consisted of:

(Millions of dollars)			2020						2019						2018
Domestic, including Puerto Rico			$	(489)					$	799					$	(135)
Foreign			1,474						377						1,308
Income Before Income Taxes			$	985					$	1,176					$	1,173

U.S. tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Act"), was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign-sourced earnings. The Act subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The Company has elected to account for its GILTI tax due as a period expense in the year the tax is incurred.

During fiscal year 2019, the Company finalized its accounting for the income tax effects of the Act, and all adjustments related to finalization of its calculations were included as a component of Income tax provision (benefit) in fiscal year 2019. The Company recognized additional tax benefit of $50 million and additional tax cost of $640 million in 2019 and 2018, respectively, as a result of this legislation. These amounts are reflected in the Company's consolidated statements of income within Income tax provision (benefit). During fiscal year 2019, the Company also changed its assertion with respect to historical unremitted foreign earnings, which resulted in a total tax benefit of $138 million, of which $67 million is related to the tax legislation benefit previously recorded, and is included as a component of Income tax provision (benefit) in fiscal 2019. The Company asserts indefinite reinvestment for all historical unremitted foreign earnings as of September 30, 2020.

Unrecognized Tax Benefits

The table below summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled. The Company believes it is reasonably possible that the amount of unrecognized benefits will change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, other activity, or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

(Millions of dollars)			2020						2019						2018
Balance at October 1			$	577					$	601					$	407
Increase due to acquisitions			1						3						140
Increase due to current year tax positions			35						11						43
Increase due to prior year tax positions			76						6						43
Decreases due to prior year tax positions			(49)						(39)						—
Decrease due to settlements with tax authorities			(4)						—						(29)
Decrease due to lapse of statute of limitations			(16)						(5)						(3)
Balance at September 30			$	620					$	577					$	601

Upon the Company's acquisition of CareFusion in 2015, the Company became a party to a tax matters agreement with Cardinal Health resulting from Cardinal Health's spin-off of CareFusion in fiscal year 2010. Under the tax matters agreement, the Company is obligated to indemnify Cardinal Health for certain tax exposures and transaction taxes prior to CareFusion’s spin-off from Cardinal Health. The indemnification payable is approximately $164 million at September 30, 2020 and is included in Deferred Income Taxes and Other Liabilities on the consolidated balance sheet.

At September 30, 2020, 2019 and 2018, there are $719 million, $624 million and $632 million of unrecognized tax benefits that if recognized, would affect the effective tax rate. During the fiscal years ended September 30, 2020, 2019 and 2018, the Company reported interest and penalties associated with unrecognized tax benefits of $1 million, $26 million and $20 million on the consolidated statements of income as a component of Income tax provision (benefit). The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. The IRS has completed its audit for fiscal year 2014 for the BD business prior to its acquisition of CareFusion. The IRS has also completed its audit for fiscal years 2015 and 2017 for the combined BD and CareFusion business. The IRS is currently examining the CareFusion legacy fiscal year 2014 and short period 2015, as well as BD's combined company for fiscal years 2016, 2018, and 2019. With regard to Bard, all examinations have been completed through calendar year 2014, and calendar years 2015, 2016, and 2017 are currently under examination by the IRS. For the other major tax jurisdictions where the Company conducts business, tax years are generally open after 2012.

Deferred Income Taxes

Deferred income taxes at September 30 consisted of:

			2020												2019
(Millions of dollars)			Assets						Liabilities						Assets						Liabilities
Compensation and benefits			$	554					$	—					$	513					$	—
Property and equipment			—						361						—						312
Intangibles			—						2,408						—						2,624
Loss and credit carryforwards			1,900						—						1,327						—
Product recall and liability reserves			241						—						182						—
Other			501						137						396						74
			3,196						2,906						2,417						3,011
Valuation allowance			(1,820)						—						(1,240)						—
Net (a)			$	1,376					$	2,906					$	1,177					$	3,011

(a)Net deferred tax assets are included in Other Assets and net deferred tax liabilities are included in Deferred Income Taxes and Other Liabilities on the consolidated balance sheets*.*

Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. Deferred taxes have not been provided on undistributed earnings of foreign subsidiaries as of September 30, 2020 since the determination of the total amount of unrecognized deferred tax liability is not practicable.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Generally, deferred tax assets have been established as a result of net operating losses and credit carryforwards with expiration dates from 2021 to an unlimited expiration date. Valuation allowances have been established as a result of an evaluation of the uncertainty associated with the realization of certain deferred tax assets on these losses and credit carryforwards. The valuation allowance at September 30, 2020 is primarily the result of foreign losses due to the Company’s global re-organization of its foreign entities and these generally have no expiration date. Valuation allowances are also maintained with respect to deferred tax assets for certain federal and state carryforwards that may not be realized and that principally expire in 2022.

Tax Rate Reconciliation

A reconciliation of the federal statutory tax rate to the Company’s effective income tax rate was as follows:

			2020						2019						2018
Federal statutory tax rate			21.0		%				21.0		%				24.5		%
New U.S. tax legislation (see discussion above)			—						(4.3)						54.6
State and local income taxes, net of federal tax benefit			(1.9)						0.1						0.8
Foreign income tax at rates other than 21%			(14.8)						(6.6)						(11.7)
Effect of foreign operations			19.1						(5.5)						19.0
Effect of Research Credits and FDII/Domestic Production Activities			(5.0)						(3.3)						(2.8)
Effect of tax benefit relating to share-based compensation			(4.5)						(3.9)						(6.1)
Effect of gain on divestitures			(4.5)						(2.0)						1.3
Effect of uncertain tax position			—						—						3.3
Effect of valuation allowance release			—						—						(4.8)
Effect of application for change in accounting method			—						—						(4.5)
Effect of nondeductible compensation			—						—						1.6
Other, net			1.9						(0.3)						(1.7)
Effective income tax rate			11.3		%				(4.8)		%				73.5		%

The fluctuations in the Company’s reported tax rates are primarily due to the Act, the effects of which were recorded in fiscal years 2018 and 2019, as well as the geographical mix of income attributable to foreign countries that have income tax rates that vary from the U.S. tax rate.

Tax Holidays and Payments

The approximate tax impact related to tax holidays in various countries in which the Company does business were $136 million, $(43) million and $107 million, in 2020, 2019 and 2018, respectively. The impact of the tax holiday on diluted earnings per share was approximately $0.48, $(0.16) and $0.40 for fiscal years 2020, 2019 and 2018, respectively. The tax holidays expire at various dates through 2028.

The Company made income tax payments, net of refunds, of $518 million in 2020, $536 million in 2019 and $235 million in 2018.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Note 18 — Leases

The Company leases real estate, vehicles and other equipment which are used in the Company’s manufacturing, administrative and research and development activities. The Company identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. The Company’s lease arrangements are generally classified as operating leases. These arrangements have remaining terms ranging from less than one year to approximately 25 years and the weighted-average remaining lease term of the Company’s leases is approximately 7.3 years. An option to renew or terminate the current term of a lease arrangement is included in the lease term if the Company is reasonably certain to exercise that option.

The Company does not recognize a right-of-use asset and lease liability for short-term leases, which have terms of 12 months or less, on its consolidated balance sheet. For the longer-term lease arrangements that are recognized on the Company’s consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs associated with the Company’s short-term leases, as well as variable costs relating to the Company’s lease arrangements, are not material to its consolidated financial results.

The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. The weighted-average incremental borrowing rate that has been applied to measure the Company’s lease liabilities is 2.2%.

The Company’s lease cost recorded in its consolidated statements of income for the year ended September 30, 2020 was $131 million under the new lease accounting standard. Rental expense for all operating leases amounted to $169 million and $149 million in 2019 and 2018, respectively, under the previous accounting standard. Cash payments arising from the Company’s lease arrangements are reflected on its consolidated statement of cash flows as outflows used for operating activities. The right-of-use assets and lease liabilities recognized on the Company’s consolidated balance sheet as of September 30, 2020 were as follows:

(Millions of dollars)			September 30, 2020
Right-of-use assets recorded in Other Assets			$	418
Current lease liabilities recorded in Accrued expenses			$	106
Non-current lease liabilities recorded in Deferred Income Taxes and Other Liabilities			$	336

The Company’s payments due under its operating leases are as follows:

(Millions of dollars)
2021			$	115
2022			96
2023			63
2024			41
2025			32
Thereafter			142
Total payments due			489
Less: imputed interest			47
Total			$	442

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

The Company’s future minimum rental commitments on non-cancelable leases at September 30, 2019, prior to the adoption of the new lease accounting standard, were estimated as follows:

(Millions of dollars)
2020			$	122
2021			103
2022			83
2023			57
2024			56
Thereafter			123
Total			$	546

Note 19 — Supplemental Financial Information

Other Income, Net

(Millions of dollars)			2020						2019						2018
Royalty and licensing income (a)			$	17					$	64					$	51
Other investment gains, net			13						18						8
Deferred compensation			24						6						3
Net pension and postretirement benefit cost (b)			7						(2)						(13)
Losses on undesignated foreign exchange derivatives, net			(17)						(23)						(14)
Losses on debt extinguishment (c)			(8)						(59)						(16)
Product related matters			(9)						—						—
Hurricane-related insurance proceeds			—						35						—
Vyaire Medical-related amounts and other income from divestitures (d)			—						6						288
Other			(3)						(2)						(3)
Other income, net			$	23					$	43					$	305

(a)The amount in 2020 primarily represents licensing income. The amounts in 2019 and 2018 primarily represent the royalty income stream acquired in the Bard transaction, net of non-cash purchase accounting amortization. The royalty income stream was previously reported by Bard as revenues.

(b)Represents all components of the Company’s net periodic pension and postretirement benefit costs, aside from service cost, as a result of the adoption of an accounting standard as further discussed in Note 2.

(c)Represents losses recognized upon the extinguishment of certain senior notes, as further discussed in Note 16.

(d)The amount in 2019 represents income from transition services agreements (“TSA”) related to the Company’s 2018 and 2017 divestitures. The amount in 2018 includes the gain on the sale of the remaining ownership interest in its former Respiratory Solutions business and subsequent TSA income, net of the Company's share of equity investee results in the business. Additional disclosures regarding the Company’s divestiture transactions are provided in Note 11.

Notes to Consolidated Financial Statements — (Continued)

Becton, Dickinson and Company

Trade Receivables, Net

The amounts recognized in 2020, 2019 and 2018 relating to allowances for doubtful accounts and cash discounts, which are netted against trade receivables, are provided in the following table:

(Millions of dollars)			Allowance for Doubtful Accounts						Allowance for Cash Discounts						Total
Balance at September 30, 2017			$	54					$	4					$	58
Additions charged to costs and expenses			31						58						89
Deductions and other			(11)			(a)			(50)						(61)
Balance at September 30, 2018			$	75					$	12					$	86
Additions charged to costs and expenses			31						94						125
Deductions and other			(31)			(a)			(92)						(123)
Balance at September 30, 2019			$	75					$	13					$	88
Additions charged to costs and expenses			40						39						78
Deductions and other			(35)			(a)			(38)						(73)
Balance at September 30, 2020			$	80					$	14					$	94

(a)Accounts written off.

Inventories

Inventories at September 30 consisted of:

(Millions of dollars)			2020						2019
Materials			$	602					$	544
Work in process			335						318
Finished products			1,806						1,717
			$	2,743					$	2,579

Property, Plant and Equipment, Net

Property, Plant and Equipment, Net at September 30 consisted of:

(Millions of dollars)			2020						2019
Land			$	166					$	164
Buildings			3,082						2,842
Machinery, equipment and fixtures			8,454						7,932
Leasehold improvements			216						190
			11,919						11,128
Less accumulated depreciation and amortization			5,996						5,469
			$	5,923					$	5,659

Becton, Dickinson and Company

SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)

Millions of dollars, except per share amounts						2020
						1****st						2****nd						3****rd						4****th						Year (a)
Revenues						$	4,225					$	4,253					$	3,855					$	4,784					$	17,117
Gross Profit						1,978						1,734						1,659						2,206						7,577
Net Income						278						183						286						128						874
Earnings per Share: (b)
Basic						0.88						0.53						0.98						0.36						2.75
Diluted						0.87						0.53						0.97						0.36						2.71

						2019
						1****st						2****nd						3****rd						4****th						Year (a)
Revenues						$	4,160					$	4,195					$	4,350					$	4,584					$	17,290
Gross Profit						1,974						1,974						2,074						2,266						8,288
Net Income						599						20						451						163						1,233
Earnings (loss) per Share:
Basic						2.09						(0.07)						1.53						0.46						4.01
Diluted						2.05						(0.07)						1.51						0.45						3.94

(a)Quarterly amounts may not add to the year-to-date totals due to rounding. Earnings per share amounts are calculated from the underlying whole-dollar amounts.

(b)The sum of diluted earnings per share for the quarters of 2020 do not equal the year-to-date amount due to the impact of shares issued during this fiscal year on the weighted average common shares included in the calculations of diluted earnings per share. Additional disclosures regarding shares issued are provided in Note 3.