Item 8. Financial Statements and Supplementary Data.

Index to the Consolidated Financial Statements

	Page
LYONDELLBASELL INDUSTRIES N.V.
Management’s Report on Internal Control Over Financial Reporting	64
Report of Independent Registered Public Accounting Firm	65
Consolidated Financial Statements:
Consolidated Statements of Income	67
Consolidated Statements of Comprehensive Income	68
Consolidated Balance Sheets	69
Consolidated Statements of Cash Flows	71
Consolidated Statements of Stockholders’ Equity	73
Notes to the Consolidated Financial Statements	74

MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, 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. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

We conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018 based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2018.

We completed the acquisition of A. Schulman Inc. (“A. Schulman”) on August 21, 2018. We are in the process of assessing the internal controls of A. Schulman as part of the post-close integration process and have excluded A. Schulman from our assessment of internal control over financial reporting as of December 31, 2018. The total assets and revenues excluded from management’s assessment represent 5% and 2%, respectively, of the related consolidated financial statements as of and for the year ended December 31, 2018.

The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of LyondellBasell Industries N.V.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of LyondellBasell Industries N.V. and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded A. Schulman Inc. (“A. Schulman”) from its assessment of internal control over financial reporting as of December 31, 2018, because it was acquired by the Company in a purchase business combination during 2018. We have also excluded A. Schulman from our audit of internal control over financial reporting. A. Schulman is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 5% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2018.

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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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/ PricewaterhouseCoopers LLP

Houston, Texas

February 21, 2019

We have served as the Company’s auditor since 2008.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
Millions of dollars, except earnings per share	2018				2017				2016
Sales and other operating revenues:
Trade	$	38,126			$	33,705			$	28,454
Related parties	878				779				729
	39,004				34,484				29,183
Operating costs and expenses:
Cost of sales	32,529				28,059				23,191
Selling, general and administrative expenses	1,129				859				833
Research and development expenses	115				106				99
	33,773				29,024				24,123
Operating income	5,231				5,460				5,060
Interest expense	(360		)		(491		)		(322		)
Interest income	45				24				17
Other income, net	106				179				111
Income from continuing operations before equity investments and income taxes	5,022				5,172				4,866
Income from equity investments	289				321				367
Income from continuing operations before income taxes	5,311				5,493				5,233
Provision for income taxes	613				598				1,386
Income from continuing operations	4,698				4,895				3,847
Loss from discontinued operations, net of tax	(8		)		(18		)		(10		)
Net income	4,690				4,877				3,837
Net (income) loss attributable to non-controlling interests	—				2				(1		)
Net income attributable to LyondellBasell Industries N.V.	4,690				4,879				3,836
Dividends on A. Schulman Special Stock	(2		)		—				—
Net income attributable to the Company shareholders	$	4,688			$	4,879			$	3,836
Earnings per share:
Net income (loss) attributable to the Company shareholders —
Basic:
Continuing operations	$	12.06			$	12.28			$	9.17
Discontinued operations	(0.02		)		(0.05		)		(0.02		)
	$	12.04			$	12.23			$	9.15
Diluted:
Continuing operations	$	12.03			$	12.28			$	9.15
Discontinued operations	(0.02		)		(0.05		)		(0.02		)
	$	12.01			$	12.23			$	9.13

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Net income	$	4,690			$	4,877			$	3,837
Other comprehensive income (loss), net of tax—
Financial derivatives	54				(45		)		4
Unrealized gains (losses) on available-for-sale debt securities	—				(1		)		6
Unrealized gains on equity securities and equity securities held by equity investees	—				17				—
Defined benefit pension and other postretirement benefit plans	30				77				(70		)
Foreign currency translations	(92		)		178				(13		)
Total other comprehensive income (loss), net of tax	(8		)		226				(73		)
Comprehensive income	4,682				5,103				3,764
Dividends on A. Schulman Special Stock	(2		)		—				—
Comprehensive (income) loss attributable to non-controlling interests	—				2				(1		)
Comprehensive income attributable to the Company shareholders	$	4,680			$	5,105			$	3,763

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

	December 31,
Millions of dollars	2018				2017
ASSETS
Current assets:
Cash and cash equivalents	$	332			$	1,523
Restricted cash	69				5
Short-term investments	892				1,307
Accounts receivable:
Trade, net	3,355				3,359
Related parties	148				180
Inventories	4,515				4,217
Prepaid expenses and other current assets	1,255				1,147
Total current assets	10,566				11,738
Property, plant and equipment, net	12,477				10,997
Investments and long-term receivables:
Investment in PO joint ventures	469				420
Equity investments	1,611				1,635
Other investments and long-term receivables	23				17
Goodwill	1,814				570
Intangible assets, net	965				568
Other assets	353				261
Total assets	$	28,278			$	26,206

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

	December 31,
Millions of dollars, except shares and par value data	2018				2017
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	5			$	2
Short-term debt	885				68
Accounts payable:
Trade	2,560				2,258
Related parties	527				637
Accrued liabilities	1,536				1,812
Total current liabilities	5,513				4,777
Long-term debt	8,497				8,549
Other liabilities	1,897				2,275
Deferred income taxes	1,975				1,655
Commitments and contingencies
Redeemable non-controlling interests	116				—
Stockholders’ equity:
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 375,696,661 and 394,512,054 shares outstanding, respectively	22				31
Additional paid-in capital	7,041				10,206
Retained earnings	6,763				15,746
Accumulated other comprehensive loss	(1,363		)		(1,285		)
Treasury stock, at cost, 24,513,619 and 183,928,109 ordinary shares, respectively	(2,206		)		(15,749		)
Total Company share of stockholders’ equity	10,257				8,949
Non-controlling interests	23				1
Total equity	10,280				8,950
Total liabilities, redeemable non-controlling interests and equity	$	28,278			$	26,206

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Cash flows from operating activities:
Net income	$	4,690			$	4,877			$	3,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,241				1,174				1,064
Amortization of debt-related costs	14				15				16
Charges related to repayment of debt	—				49				—
Share-based compensation	39				55				38
Inventory valuation adjustment	—				—				29
Equity investments—
Equity income	(289		)		(321		)		(367		)
Distribution of earnings, net of tax	307				309				385
Deferred income taxes	260				(587		)		357
Gain on sales of business and equity investments	(36		)		(108		)		(84		)
Changes in assets and liabilities that provided (used) cash:
Accounts receivable	433				(521		)		(383		)
Inventories	(141		)		(237		)		123
Accounts payable	(199		)		165				383
Other, net	(848		)		336				208
Net cash provided by operating activities	5,471				5,206				5,606
Cash flows from investing activities:
Expenditures for property, plant and equipment	(2,105		)		(1,547		)		(2,243		)
Acquisition of A. Schulman, net of cash acquired	(1,776		)		—				—
Payments for repurchase agreements	—				(512		)		(674		)
Proceeds from repurchase agreements	—				381				685
Purchases of available-for-sale debt securities	(50		)		(653		)		(688		)
Proceeds from sales and maturities of available-for-sale debt securities	423				499				674
Purchases of held-to-maturity securities	—				—				(76		)
Proceeds from maturities of held-to-maturity securities	—				75				—
Purchases of equity securities	(64		)		—				—
Proceeds from sales and maturities of equity securities	97				—				—
Net proceeds from sales of business and equity investments	37				155				209
Proceeds from settlement of net investment hedges	1,108				609				1,295
Payments for settlement of net investment hedges	(1,078		)		(658		)		(1,356		)
Other, net	(151		)		(105		)		(127		)
Net cash used in investing activities	(3,559		)		(1,756		)		(2,301		)

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Cash flows from financing activities:
Repurchases of Company ordinary shares	(1,854		)		(866		)		(2,938		)
Dividends paid - common stock	(1,554		)		(1,415		)		(1,395		)
Issuance of long-term debt	—				990				812
Repayment of long-term debt	(394		)		(1,000		)		—
Debt extinguishment costs	—				(65		)		—
Payments of debt issuance costs	—				(8		)		(5		)
Net proceeds from (repayments of) commercial paper	810				(493		)		177
Other, net	(16		)		(2		)		—
Net cash used in financing activities	(3,008		)		(2,859		)		(3,349		)
Effect of exchange rate changes on cash	(31		)		59				(9		)
(Decrease) increase in cash and cash equivalents and restricted cash	(1,127		)		650				(53		)
Cash and cash equivalents and restricted cash at beginning of period	1,528				878				931
Cash and cash equivalents and restricted cash at end of period	$	401			$	1,528			$	878
Supplemental Cash Flow Information:
Interest paid, net of capitalized interest	$	333			$	333			$	313
Net income taxes paid	$	1,209			$	1,044			$	741

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Ordinary Shares								Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Company Share of Stockholders’ Equity				Non- Controlling Interests
Millions of dollars	Issued				Treasury
Balance, December 31, 2015	$	31			$	(12,086	)		$	10,202			$	9,841			$	(1,438	)		$	6,550			$	24
Net income	—				—				—				3,836				—				3,836				1
Other comprehensive loss	—				—				—				—				(73		)		(73		)		—
Share-based compensation	—				55				(11		)		—				—				44				—
Dividends- common stock ($3.33 per share)	—				—				—				(1,395		)		—				(1,395		)		—
Repurchases of Company ordinary shares	—				(2,914		)		—				—				—				(2,914		)		—
Balance, December 31, 2016	$	31			$	(14,945	)		$	10,191			$	12,282			$	(1,511	)		$	6,048			$	25
Net income (loss)	—				—				—				4,879				—				4,879				(2		)
Other comprehensive income	—				—				—				—				226				226				—
Share-based compensation	—				41				14				—				—				55				—
Dividends- common stock ($3.55 per share)	—				—				—				(1,415		)		—				(1,415		)		—
Repurchases of Company ordinary shares	—				(845		)		—				—				—				(845		)		—
Purchase of non-controlling interests	—				—				1				—				—				1				(22		)
Balance, December 31, 2017	$	31			$	(15,749	)		$	10,206			$	15,746			$	(1,285	)		$	8,949			$	1
Adoption of accounting standards	—				—				—				95				(70		)		25				—
Net income	—				—				—				4,690				—				4,690				—
Other comprehensive loss	—				—				—				—				(8		)		(8		)		—
Share-based compensation	—				37				28				(2		)		—				63				—
Dividends- common stock ($4.00 per share)	—				—				—				(1,554		)		—				(1,554		)		—
Dividends- A. Schulman Special Stock ($15.00 per share)	—				—				—				(2		)		—				(2		)		—
Repurchases of Company ordinary shares	—				(1,878		)		—				—				—				(1,878		)		—
Purchase of non-controlling interests	—				—				(28		)		—				—				(28		)		—
Cancellation of Treasury shares	(9		)		15,384				(3,165		)		(12,210		)		—				—				—
Acquisition of A. Schulman	—				—				—				—				—				—				22
Balance, December 31, 2018	$	22			$	(2,206	)		$	7,041			$	6,763			$	(1,363	)		$	10,257			$	23

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

		Page
1.	Description of Company and Operations	75
2.	Summary of Significant Accounting Policies	75
3.	Business Combination and Dispositions	86
4.	Revenues	89
5.	Related Party Transactions	91
6.	Accounts Receivable	91
7.	Inventories	92
8.	Property, Plant and Equipment, Goodwill and Intangible Assets	92
9.	Investment in PO Joint Ventures	94
10.	Equity Investments	96
11.	Prepaid Expenses, Other Current Assets and Other Assets	97
12.	Accrued Liabilities	98
13.	Debt	99
14.	Lease Commitments	104
15.	Financial Instruments and Fair Value Measurements	104
16.	Pension and Other Postretirement Benefits	111
17.	Incentive and Share-Based Compensation	124
18.	Income Taxes	127
19.	Commitments and Contingencies	133
20.	Stockholders’ Equity	134
21.	Per Share Data	139
22.	Segment and Related Information	140
23.	Unaudited Quarterly Results	143

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Company and Operations

LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to LyondellBasell Industries N.V. together with its consolidated subsidiaries (“LyondellBasell N.V.”).

LyondellBasell N.V. is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for the production of polymers.

2. Summary of Significant Accounting Policies

The following significant accounting policies were applied in the preparation of these Consolidated Financial Statements:

Basis of Preparation and Consolidation

The accompanying Consolidated Financial Statements have been prepared from the books and records of LyondellBasell N.V. under accounting principles generally accepted in the U.S. (“U.S. GAAP”). Subsidiaries are defined as being those companies over which we, either directly or indirectly, have control through a majority of the voting rights or the right to exercise control or to obtain the majority of the benefits and be exposed to the majority of the risks. Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases. All intercompany transactions and balances have been eliminated in consolidation.

The Consolidated Financial Statements have been prepared under the historical cost convention, as modified for the accounting of certain financial assets and financial liabilities (including derivative instruments) at fair value. Consolidated financial information, including subsidiaries and equity investments, has been prepared using uniform accounting policies for similar transactions and other events in similar circumstances.

Cash and Cash Equivalents

Our cash equivalents consist of highly liquid debt instruments such as certificates of deposit, commercial paper and money market accounts with major international banks and financial institutions. Cash equivalents include instruments with maturities of three months or less when acquired and exclude restricted cash.

Although, we have no current requirements for compensating balances in a specific amount at a specific point in time, we maintain compensating balances at our discretion for some of our banking services and products.

Short-Term Investments

Investments in debt securities are classified as available-for-sale and held-to-maturity. Investments classified as available-for-sale are carried at estimated fair value with unrealized gains and losses recorded as a component of Accumulated other comprehensive income (“AOCI”). Investments classified as held-to-maturity are carried at amortized cost. We periodically review our available-for-sale and held-to-maturity securities for other-than-temporary declines in fair value below the cost basis, and when events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the investment is written down to fair value, establishing a new cost basis.

We account for investments in equity securities at fair value with changes in fair value recognized in the Consolidated Statements of Income.

Trade Receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We calculate provisions for doubtful accounts receivable based on our estimates of amounts that we believe are unlikely to be collected. Collectability of receivables is reviewed and the provision calculated for doubtful accounts is adjusted at least quarterly, based on aging of specific accounts and other available information about the associated customers. Provisions for doubtful accounts are included in Selling, general and administrative expenses.

Loans Receivable

We invest in tri-party repurchase agreements. Under these agreements, we make cash purchases of securities according to a pre-agreed profile from our counterparties. The counterparties have an obligation to repurchase, and we have an obligation to sell, the same or substantially the same securities at a pre-defined date for a price equal to the purchase price plus interest. These securities, which pursuant to our internal policies are held by a third-party custodian and must generally have a minimum collateral value of 102%, secure the counterparty’s obligation to repurchase the securities. These tri-party repurchase agreements are carried at amortized cost. Depending upon maturity, these agreements are treated as short-term loans receivable and are reflected in Prepaid expenses and other current assets or as long-term loans receivable reflected in Other investments and long-term receivables on our Consolidated Balance Sheets.

Inventories

Cost of our raw materials, work-in-progress and finished goods inventories is determined using the last-in, first-out (“LIFO”) method and is carried at the lower of cost or market value. Cost of our materials and supplies inventory is determined using the moving average cost method and is carried at the lower of cost and net realizable value.

Inventory exchange transactions, which involve fungible commodities, are not accounted for as purchases and sales. Any resulting volumetric exchange balances are accounted for as inventory, with cost determined using the LIFO method.

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Costs may also include borrowing costs incurred on debt during construction or major projects exceeding one year, costs of major maintenance arising from turnarounds of major units and committed decommission costs. Routine maintenance costs are expensed as incurred. Land is not depreciated. Depreciation is computed using the straight-line method over the estimated useful asset lives to their residual values.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

We evaluate property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which, for us, is generally at the plant group level (or, at times, individual plants in certain circumstances where we have isolated production units with separately identifiable cash flows). When it is probable that an asset or asset group’s undiscounted future cash flows will not be sufficient to recover the carrying amount, the asset is written down to its estimated fair value.

Upon retirement or sale, we remove the cost of the asset and the related accumulated depreciation from the accounts and reflect any resulting gain or loss in the Consolidated Statements of Income.

Equity Investments

We account for equity method investments (“equity investments”) using the equity method of accounting if we have the ability to exercise significant influence over, but not control of, an investee. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting rights. Under the equity method of accounting, investments are stated initially at cost and are adjusted for subsequent additional investments and our proportionate share of profit or losses and distributions.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We record our share of the profits or losses of the equity investments, net of income taxes, in the Consolidated Statements of Income. When our share of losses in an equity investment equals or exceeds our interest in the equity investment, including any other unsecured receivables, we do not recognize further losses, unless we have incurred obligations or made payments on behalf of the equity investments.

We evaluate our equity investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of investment to the carrying value of investment to determine whether an impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other-than temporary, the excess of the carrying value over the estimated fair value is recognized in the Consolidated Financial Statements as an impairment.

Business Combination

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference compared to the purchase consideration recorded as goodwill or gain from a bargain purchase. Subsequent to the acquisition, and no later than one year from the acquisition date, we may record adjustments to the estimated fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments of the estimated fair values are recorded to earnings. Acquisition-related costs are expensed as incurred.

Redeemable Non-controlling Interests

Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“A. Schulman Special Stock”) issued by our consolidated subsidiary, A. Schulman, Inc. (“A. Schulman”). Holders of A. Schulman Special Stock are entitled to receive cumulative dividends at the rate of 6% per share on the liquidation preference of $1,000 per share. A. Schulman Special Stock may be redeemed at any time at the discretion of the holders and is reported in the Consolidated Balance Sheets outside of permanent equity.

The redeemable non-controlling interests were recorded at fair value at the date of acquisition and is subsequently carried at the greater of estimated redemption value at the end of each reporting period or the initial amount recorded at the date of acquisition adjusted for subsequent redemptions. Dividends on these shares are deducted from or added to the amount of Income (loss) attributable to the Company shareholders if and when declared by the Company.

Goodwill

Goodwill is not amortized, but is tested annually for impairment. We assess the recoverability of the carrying value of goodwill during the fourth quarter of each year or whenever events or changes in circumstances indicate that the carrying amount of the goodwill of a reporting unit may not be fully recoverable.

We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the reporting units include, but are not limited to, changes in long-term commodity prices, discount rates, competitive environments, planned capacity, cost factors such as raw material prices, and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required. If the carrying value of goodwill exceeds its fair value, an impairment charge equal to the excess would be recognized up to a maximum amount of goodwill allocated to that reporting unit.

In 2018 and 2017, management performed qualitative impairment assessments of our reporting units which indicated that the fair value of our reporting units was greater than their carrying value. Accordingly, a quantitative goodwill impairment test was not required and no goodwill impairment was recognized.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible Assets

Intangible Assets—Intangible assets consist of customer relationships, trade names and trademarks, know-how, emission allowances, various contracts, in-process research and development and software costs. These assets are amortized using the straight-line method over their estimated useful lives or over the term of the related agreement. We evaluate definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

Research and Development—Research and development (“R&D”) costs are expensed when incurred. Subsidies for research and development are included in Other income (expense), net. Depreciation expense related to assets employed in R&D is included as a cost of R&D.

Income Taxes

The income tax for the period comprises current and deferred tax. Income tax is recognized in the Consolidated Statements of Income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In these cases, the applicable tax amount is recognized in other comprehensive income or directly in equity, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net tax effects of net operating loss carryforwards. Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We recognize uncertain income tax positions in our financial statements when we believe it is more likely than not, based on the technical merits, that the position or a portion thereof will be sustained upon examination. For a position that is more likely than not to be sustained, the benefit recognized is measured at the largest cumulative amount that is greater than 50 percent likely of being realized.

Other Provisions

Environmental Remediation Costs—Environmental remediation liabilities include liabilities related to sites we currently own, sites we no longer own, as well as sites where we have operated that belong to other parties. Liabilities for anticipated expenditures related to investigation and remediation of contaminated sites are accrued when it is probable a liability has been incurred and the amount of the liability can be reasonably estimated. Only ongoing operating and monitoring costs, the timing of which can be determined with reasonable certainty, are discounted to present value. Future legal costs associated with such matters, which generally are not estimable, are not included in these liabilities.

Asset Retirement Obligations—At some sites, we are contractually obligated to decommission our plants upon site exit. Asset retirement obligations are recorded at the present value of the estimated costs to retire the asset at the time the obligation is incurred. That cost, which is capitalized as part of the related long-lived asset, is depreciated on a straight-line basis over the remaining useful life of the related asset. Accretion expense in connection with the discounted liability is also recognized over the remaining useful life of the related asset. Such depreciation and accretion expenses are included in Cost of sales.

Foreign Currency Translation and Remeasurement

Functional and Reporting Currency—Items included in the financial information of each of LyondellBasell N.V.’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”) and then translated to the U.S. dollar (“the reporting currency”) through Other comprehensive income as follows:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

•	Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

•	Income and expenses for each income statement are translated at monthly average exchange rates; and

•	All resulting exchange differences are recognized as a separate component within Other comprehensive income (foreign currency translation).

Transactions and Balances—Foreign currency transactions are recorded in their respective functional currency using exchange rates prevailing at the dates of the transactions. Exchange gains and losses resulting from the settlement of such transactions and from remeasurement of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognized in the Consolidated Statements of Income.

Revenue Recognition

Substantially all our revenues are derived from contracts with customers. We account for contracts when both parties have approved the contract and are committed to perform, the rights of the parties and payment terms have been identified, the contract has commercial substance, and collectability is probable.

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. This generally occurs at the point in time when performance obligations are fulfilled and control transfers to the customer. In most instances, control transfers upon transfer of risk of loss and title to the customer, which usually occurs when we ship products to the customer from our manufacturing facility. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Customer incentives are generally based on volumes purchased and recognized over the period earned. Sales, value added, and other taxes that we collect concurrent with revenue-producing activities are excluded from the transaction price as they represent amounts collected on behalf of third parties. We apply the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Shipping and handling costs are treated as a fulfillment cost and not a separate performance obligation.

Payments are typically required within a short period following the transfer of control of the product to the customer. We occasionally require customers to prepay purchases to ensure collectability. Such prepayments do not represent financing arrangements, since payment and fulfillment of the performance obligation occurs within a short time frame. We apply the practical expedient which permits us not to adjust the promised amount of consideration for the effects of a significant financing component when, at contract inception, we expect that payment will occur in one year or less.

Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. Our contract liabilities, which are reflected in our Consolidated Financial Statements as Accrued liabilities and Other liabilities, consist primarily of customer payments for products or services received before the transfer of control to the customer occurs.

Share-Based Compensation

The Company recognizes compensation expense in the financial statements for share-based compensation awards based upon the grant date fair value over the vesting period.

Contingent share awards are recognized ratably over the vesting period as a liability and re-measured, at fair value, at the balance sheet date, see Note 17 to the Consolidated Financial Statements.

Leases

We lease land and other assets for use in our operations. All lease agreements are evaluated and classified as either an operating lease or a capital lease. A lease is classified as a capital lease if any of the following criteria are met: transfer of ownership to the lessee by the end of the lease term; the lease contains a bargain purchase option; the lease term is equal to 75% or greater of the asset’s useful economic life; or the present value of the future minimum lease payments is equal to or greater than 90% of

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the asset’s fair market value. Capital leases are recorded at the lower of the net present value of the total amount of rent payable under the leasing agreement (excluding finance charges) or fair market value of the leased asset. Capital lease assets are depreciated on a straight-line basis, over a period consistent with our normal depreciation policy for tangible fixed assets, but generally not exceeding the lease term. Operating lease expense is recognized ratably over the entire lease term.

Financial Instruments and Hedging Activities

Pursuant to our risk management policies, we selectively enter into derivative transactions to manage market risk volatility associated with changes in commodity pricing, currency exchange rates and interest rates. Derivatives used for this purpose are generally designated as net investment hedges, cash flow hedges or fair value hedges. Derivative instruments are recorded at fair value on the balance sheet. Gains and losses related to changes in the fair value of derivative instruments not designated as hedges are recorded in earnings. For derivatives designated as net investment hedges and cash flow hedges, the gains and losses are recorded in Other comprehensive income (loss) and released to earnings in the period when the hedged item affects earnings in the same line item. For derivatives designated as net investment hedges, gains or losses are reflected in foreign currency translations adjustments in Other comprehensive income (loss). For derivatives that have been designated as fair value hedges, the gains and losses of the derivatives and hedged items are recorded in earnings.

Net Investment Hedges—We enter into foreign currency contracts and foreign currency denominated debt to reduce the volatility in stockholders’ equity resulting from changes in currency exchange rates of our foreign subsidiaries with respect to the U.S. dollar. Our foreign currency derivatives consist of cross-currency basis swap contracts and forward exchange contracts.

We use the spot method to assess hedge effectiveness. Changes to the value from changes in spot foreign exchange rates over the designation period and recorded within Other comprehensive income. For our basis swaps, the associated interest receipts and payments are recorded to Interest expense. For our foreign currency forward contracts, we amortize initial forward point values on a straight-line basis to Interest expense over the tenor of the hedge accounting designation. We monitor on a quarterly basis for any over-hedged positions requiring de-designation and re-designation of the hedge to remove such over-hedged condition.

Cash flows related to our foreign currency contracts are reported in Cash flows from investing activities and related interest payments are reported in Cash flows from operating activities in the Consolidated Statements of Cash Flows. Cash flows related to our foreign currency denominated debt designated as net investment hedges are reported in Cash flows from financing activities and related interest payments are reported in Cash flows from operating activities in the Consolidated Statements of Cash Flows.

Cash Flow Hedges—Our cash flow hedges include cross currency swaps, forward starting interest rate swaps and commodity futures and swaps.

We have cross-currency swap contracts designated as cash flow hedges to reduce our exposure to the foreign currency exchange risk associated with certain intercompany loans. Under the terms of these contracts, we make interest payments in euros and receive interest in U.S. dollars. Upon the maturities of these contracts, we will pay the principal amount of the loans in euros and receive U.S. dollars from our counterparties.

We enter into forward-starting interest rate contracts to mitigate the risk of adverse changes in benchmark interest rates on future anticipated debt issuances.

We also execute commodity futures and swaps to manage the volatility of the commodity price related to anticipated purchases of raw materials and product sales. We enter into over-the-counter commodity swaps with one or more counterparties whereby we pay a predetermined fixed price and receive a price based on the average monthly rate of a specified index for the specified nominated volumes.

We use the critical terms and the quantitative long haul methods to assess hedge effectiveness and monitor, at least quarterly, any change in effectiveness.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value Hedges—We use interest rate swaps as part of our current interest rate risk management strategy to achieve a desired proportion of variable versus fixed rate debt. Under these arrangements, we exchange fixed-rate for floating-rate interest payments to effectively convert our fixed-rate debt to floating-rate debt.

These payments are classified as Other, net, in the Cash flows from operating activities section of the Consolidated Statements of Cash Flows. We use the long-haul method to assess hedge effectiveness using a regression analysis approach. We perform the regression analysis over an observation period of three years, utilizing data that is relevant to the hedge duration.

We evaluate these hedging relationships for effectiveness utilizing the quantitative long haul approach at least quarterly and calculate the changes in the fair value of the derivatives and the underlying hedged items separately.

Fair Value Measurements

We categorize assets and liabilities, measured at fair value, into one of three different levels depending on the observability of the inputs employed in the measurement:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable.

Level 3—Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Changes in fair value levels—Management reviews the disclosures regarding fair value measurements at least quarterly. If an instrument classified as Level 1 subsequently ceases to be actively traded, it is transferred out of Level 1. In such cases, instruments are reclassified as Level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it is reclassified as Level 3.

We use the following inputs and valuation techniques to estimate the fair value of our financial instruments disclosed in Note 15 to the Consolidated Financial Statements:

Basis Swaps—The fair value of our basis swap contracts is calculated using the present value of future cash flows discounted using observable inputs such as known notional value amounts, yield curves, and spot and forward exchange rates.

Cross-Currency Swaps—The fair value of our cross-currency swaps is calculated using the present value of future cash flows discounted using observable inputs with the foreign currency leg revalued using published spot and future exchange rates on the valuation date.

Forward-Starting Interest Rate Swaps—The fair value of our forward-starting interest rate swaps is calculated using the present value of future cash flows method and based on observable inputs such as benchmark interest rates.

Fixed-for-Floating Interest Rate Swaps—The fair value of our fixed-for-floating interest rate swaps is calculated using the present value of future cash flows using observable inputs such as interest rates and market yield curves.

Commodity and Embedded Derivatives—The fair values of our commodity derivatives classified as Level 1 and embedded derivatives are measured using closing market prices of public exchanges and from third-party broker quotes and pricing providers.

The fair value of our commodity swaps classified as Level 2 is determined using a combination of observable and unobservable inputs. The observable inputs consist of future market values of various crude and heavy fuel oils, which are readily available through public data sources. The unobservable input, which is the estimated discount or premium used in the market pricing, is

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

calculated using an internally-developed, multi-linear regression model based on the observable prices of the known components and their relationships to historical prices. A significant change in this unobservable input would not have a material impact on the fair value measurement of our Level 2 commodity swaps.

Forward Exchange Contracts—The fair value of our forward exchange contracts is based on forward market rates.

Available-for-Sale and Equity Securities—The fair value of our available-for-sale securities is calculated using observable market data for similar securities and broker quotes from recognized purveyors of market data or the net asset value for limited partnership investments provided by the fund administrator. Our limited partnership investments include investments in, among other things, equities and equity related securities, debt securities, credit instruments, global interest rate products, currencies, commodities, futures, options, warrants and swaps. These investments, which include both long and short positions, may be redeemed at least monthly with advance notice ranging up to ninety days.

Loans Receivable—The fair value of our tri-party repurchase agreements are based on discounted cash flows, which consider prevailing market rates for the respective instrument maturity in addition to corroborative support from the minimum underlying collateral requirements.

Short-Term Debt—Fair values of short-term borrowings related to precious metal financing arrangements are determined based on the current market price of the associated precious metal.

Long-Term Debt—Fair value is calculated using pricing data obtained from well-established and recognized vendors of market data for debt valuations.

Due to the short maturity, the fair value of all non-derivative financial instruments included in Current assets and Current liabilities approximates the applicable carrying value. Current assets include Cash and cash equivalents, Restricted cash, held-to-maturity time deposits and Accounts receivable. Current liabilities include Accounts payable and Short-term debt excluding precious metal financings.

We use the following inputs and valuation techniques to estimate the fair value of our pension assets disclosed in Note 16 to the Consolidated Financial Statements:

Common and preferred stock—Valued at the closing price reported on the market on which the individual securities are traded.

Fixed income securities—Certain securities that are not traded on an exchange are valued at the closing price reported by pricing services. Other securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Commingled funds—Valued based upon the unit values of such collective trust funds held at year end by the pension plans. Unit values are based on the fair value of the underlying assets of the fund derived from inputs principally from, or corroborated by, observable market data by correlation or other means.

Real estate—Valued on the basis of a discounted cash flow approach, which includes the future rental receipts, expenses, and residual values as the highest and best use of the real estate from a market participant view as rental property.

Hedge funds—Valued based upon the unit values of such alternative investments held at year end by the pension plans. Unit values are based on the fair value of the underlying assets of the fund.

Private equity—Valued based upon the unit values of such alternative investments held at year end by the pension plans. Unit values are based on the fair value of the underlying assets of the fund. Certain securities held in the fund are valued at the closing price reported on the exchange or other established quotation service for over-the-counter securities. Other assets held in the fund are valued based on the most recent financial statements prepared by the fund manager.

Convertible securities—Valued at the quoted prices for similar assets or liabilities in active markets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. government securities—Certain securities are valued at the closing price reported on the active market on which the individual securities are traded. Other securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Cash and cash equivalents—Valued at the quoted prices for similar assets or liabilities in active markets.

Non-U.S. insurance arrangements—Valued based upon the estimated cash surrender value of the underlying insurance contract, which is derived from an actuarial determination of the discounted benefits cash flows.

Employee Benefits

Pension Plans—We have both defined benefit (funded and unfunded) and defined contribution plans. For the defined benefit plans, a projected benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Pension costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of expected return on plan assets.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity and are reflected in Accumulated other comprehensive income in the period in which they arise.

Other Post-Employment Obligations—Certain employees are entitled to postretirement medical benefits upon retirement. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment applying the same accounting methodology used for defined benefit plans.

Termination Benefits—Contractual termination benefits are payable when employment is terminated due to an event specified in the provisions of a social/labor plan or statutory law. A liability is recognized for one-time termination benefits when we are committed to i) make payments and the number of affected employees and the benefits received are known to both parties, and ii) terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal and can reasonably estimate such amount. Benefits falling due more than 12 months after the balance sheet date are discounted to present value.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Recently Adopted Guidance

Revenue Recognition—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The FASB has also issued several amendments (ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20) clarifying different aspects of Topic 606. The new guidance requires entities to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those goods and services. The guidance also enhances related disclosures and is effective for annual and interim periods beginning after December 15, 2017.

We adopted the new standard and all related amendments from January 1, 2018 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We recognized an $18 million adjustment to the beginning retained earnings balance for the cumulative effect of initially applying the new standard. Comparative information has not been restated and is reported under the accounting standards in effect for those periods. The impact of the adoption of

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

this new standard was immaterial for the year end December 31, 2018, and we expect the impact to be immaterial to our Consolidated Financial Statements on an ongoing basis.

Financial Instruments—In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance requires equity securities to be measured at fair value with changes in fair value recognized in net income. We adopted this guidance prospectively from January 1, 2018 and recorded a cumulative effect adjustment of $15 million to beginning retained earnings.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments- Overall (Subtopic 825-10) as a part of its ongoing agenda to make improvements clarifying the ASC and provides technical corrections and improvements related to ASU 2016-01. The adoption of the new guidance from January 1, 2018 did not have a material impact on our Consolidated Financial Statements.

Income Taxes—In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. Under current accounting standards, the tax effects of intra entity asset transfers (intercompany sales) are deferred until the transferred asset is sold to a third party or otherwise recovered through use. This new guidance eliminates the exception for all intra-entity sales of assets other than inventory. A reporting entity is required to recognize tax expense from the sale of assets in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction is also be recognized at the time of the transfer. We early adopted this guidance from January 1, 2018 using the modified-retrospective method and recorded a cumulative-effect adjustment of $9 million to beginning retained earnings.

Business Combinations—In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. This guidance clarifies the definition of a business in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of an asset or a business. The prospective adoption of this guidance from January 1, 2018 did not have a material impact on our Consolidated Financial Statements.

Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets—In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The guidance provides clarification about the term in substance nonfinancial asset, other aspects of the scope of Subtopic 610-20 Other Income, and how an entity should account for partial sales of nonfinancial assets once the amendments in ASU 2014-09 become effective. The retrospective adoption of this guidance from January 1, 2018 did not have a material impact on our Consolidated Financial Statements.

Compensation—Retirement Benefits—In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance requires changes in presentation of current service cost and other components of net benefit cost. The retrospective adoption of this guidance from January 1, 2018 did not have a material impact on our Consolidated Financial Statements.

Derivatives and Hedging—In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. This guidance makes more financial and nonfinancial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and changes how companies assess effectiveness. The early adoption of this guidance from January 1, 2018 did not have a material impact on our Consolidated Financial Statements.

Accumulated Other Comprehensive Income—In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance permits entities to reclassify tax effects stranded in accumulated other comprehensive income as a result of the U.S.-enacted “H.R.1,” also known as the “Tax Cuts and Jobs Act” (the “Tax Act”) to retained earnings. We early adopted this guidance from January 1, 2018 using the specific identification method and recorded a cumulative-effect adjustment of $52 million to beginning retained earnings.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Guidance Issued But Not Adopted as of December 31, 2018

Leases—In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB has also issued subsequent amendments: ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-10, Codification Improvements to Topic 842, and ASU 2018-11, Leases, Targeted Improvements. The new guidance establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the timing and classification of expense recognition.

The standard is effective from January 1, 2019 and requires a modified retrospective transition approach applying to all leases existing at the date of initial application. We adopted the new standard from January 1, 2019, using the effective date as our date of initial application. Comparative financial information will not be restated and the disclosures required under the new standard will not be presented for periods prior to January 1, 2019.

We have elected the practical expedients that permit us not to reassess our prior conclusions about lease identification, lease classification, initial direct costs and whether existing land easements that were not previously accounted for as leases under current accounting standards are or contain a lease under the new standard. We did not elect the hindsight practical expedient in determining the lease term of existing leases in assessing impairment of our ROU assets. We have implemented a lease accounting software solution and made the required updates to our systems and processes, including our internal control framework.

The adoption of the new standard resulted in recording of additional ROU assets and lease liabilities of approximately $1.5 billion each, as of January 1, 2019. The new standard will not have a material impact our Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity on an ongoing basis.

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This amendment requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, resulting in the use of a current expected credit loss (“CECL”) model when measuring an impairment of financial instruments. Credit losses related to available-for-sale securities should be recorded in the consolidated income statement through an allowance for credit losses. Estimated credit losses utilizing the CECL model are based on historical experience, current conditions and forecasts that affect the collectability. This ASU also modifies the impairment model for available-for-sale debt securities by eliminating the concept of “other than temporary” as well as providing a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance will be effective for annual and interim periods beginning after December 15, 2019. We early adopted the standard from January 1, 2019 and its adoption did not have a material impact on our Consolidated Financial Statements.

Codification improvements—In July 2018, FASB issued ASU 2018-09, Codification Improvements. This guidance makes minor improvements in various subtopics. Many of the amendments within the ASU do not require transition and are effective upon issuance. However, some amendments are not effective until fiscal years beginning after December 15, 2018. We do not expect the adoption of the new guidance to have a material impact on our Consolidated Financial Statements.

Fair Value Measurement—In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Change to the Disclosure Requirements for Fair Value Measurement. This guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. It removes transfer disclosures between Level 1 and Level 2 of the fair value hierarchy, and adds disclosures for the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance will be effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the amendment on our Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Compensation—In August 2018, FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans— General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This guidance changes disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. It provides clarification on certain disclosure requirements within Topic 715, eliminates certain disclosures that are no longer considered cost beneficial and add disclosures considered more pertinent. The guidance will be effective for public entities for annual periods ending after December 15, 2020. Early adoption is permitted. We are currently assessing the impact of the amendment on our Consolidated Financial Statements.

Intangibles—In August 2018, FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires a customer in a hosted, cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets (e.g. prepayment) or expense as incurred. Capitalized costs are amortized over the term of the hosting arrangement when the recognized asset is ready for its intended use. The guidance will be effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the amendment on our Consolidated Financial Statements.

3. Business Combination and Dispositions

Business Combination

On August 21, 2018, through an indirect wholly owned subsidiary, we acquired all of the outstanding common stock of A. Schulman, a Delaware corporation for an aggregate purchase price of approximately $1,940 million, including a $1,240 million cash payment to the former common stock holders, $594 million for the repayment of A. Schulman debt and $106 million for the settlement of stock-based compensation plans and other purchase consideration. As of December 31, 2018, there has been no material changes in purchase consideration.

The acquisition of A. Schulman, a global supplier of high-performance plastic compounds, composites and powders, builds upon our already existing platform in this space, allowing us to create our Advanced Polymer Solutions business with broad geographic reach, leading technologies and a diverse product portfolio.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Preliminary Purchase Price Allocation—The following table summarizes the allocation of the purchase price based on the fair value of the assets acquired and liabilities, redeemable non-controlling interests and non-controlling interests assumed on the acquisition date, as adjusted for all measurement period adjustments.

Millions of dollars
Cash and cash equivalents	$	71
Restricted cash	10
Accounts receivable	407
Prepaid expenses and other current assets	100
Inventories	300
Property, plant and equipment	448
Equity investments	16
Goodwill	1,271
Intangible assets	505
Other assets	58
Total assets	$	3,186
Current maturities of long-term debt	$	397
Accounts payable	317
Accrued liabilities	109
Other liabilities	164
Deferred income taxes	112
Total liabilities	1,099
Redeemable non-controlling interests	125
Non-controlling interests	22
Total liabilities, redeemable non-controlling interests and non-controlling interests	$	1,246
Total net assets acquired	$	1,940

In determining the fair value, we utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued, primarily using Level 3 inputs. The estimation of fair value required significant judgment related to future net cash flows (including net sales, cost of products sold, selling and marketing costs, and working capital/contributory asset charges), discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparisons and other factors. Inputs were generally determined by taking into account historical data, supplemented by current and anticipated market conditions, and growth rates.

The primary areas of the preliminary purchase price allocation that have not been finalized relate to the fair value of property, plant and equipment, intangible assets, contingencies and the related impacts on deferred income taxes and cumulative translation adjustments.

During the fourth quarter of 2018, we made certain measurement period adjustments resulting in a $12 million increase of goodwill. This was primarily due to changes in intangible assets, property, plant and equipment and deferred taxes.

Inventories—The acquired inventory of $300 million comprises $180 million of finished goods, $8 million of work-in-process and $112 million of raw materials and supplies. Fair value of finished goods was based on the estimated selling price of finished goods on hand less costs to sell, including disposal and holding period costs, and a reasonable profit margin on the selling and disposal effort for each specific category of finished goods being evaluated. Fair value of work in process was based

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

on the estimated selling price once completed less total costs to complete the manufacturing process, costs to sell including disposal and holding period costs, a reasonable profit margin on the remaining manufacturing, selling, and disposal effort. Raw materials were valued based on current replacement cost.

Other Current Assets and Current Liabilities—Due to the short maturity of these assets and liabilities, their fair values closely approximate their carrying values; therefore, their fair values are deemed to be their respective carrying values.

The gross contractual amount of the receivables presented in the table above is $415 million.

Property, Plant and Equipment—The fair value of the components of property, plant and equipment acquired are represented in the table below:

Millions of dollars
Land	$	56
Major manufacturing equipment	211
Buildings	141
Light equipment and instrumentation	13
Office furniture	9
Information system equipment	2
Construction in progress	16
Total	$	448

Fair value for the acquired property, plant and equipment was determined using two valuation methods: the market approach and the replacement cost approach. The market approach represents a sales comparison that measures the value of an asset through an analysis of sales and offerings of comparable assets. The replacement cost approach measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for the age and condition of the asset.

Goodwill—Goodwill represents the excess of consideration over the net fair value of the acquired assets and liabilities, redeemable non-controlling interest and non-controlling interest assumed. The acquisition resulted in $1,271 million of goodwill, most of which will not be deductible for tax purposes. The goodwill recognized in this transaction largely consists of the acquired workforce and expected synergies resulting from the acquisition. Cost synergies will be achieved through a combination of workforce consolidations, savings from procurement synergies, optimizing warehouse and logistic footprints, implementing systems and processes best practices and leveraging existing research and development knowledge management systems. All of the goodwill was assigned to our APS segment. As a result of the reorganization of our operating segments, an additional $41 million of goodwill attributed to the polypropylene compounds, Catalloy and polybutene-1 businesses previously reported in our O&P–EAI segment was assigned to our APS segment at the acquisition date.

Intangible Assets—The fair value, weighted average useful life and useful life of each class of intangible asset acquired are presented in the following table:

Millions of dollars		Fair Value				Weighted Average Life (Years)		Useful Life (Years)
Customer relationships		$	300			15		15
Trade name and trademarks		104				5		5
Know-how		84				8		5-8
Various contracts		17				1		1-2
Total		$	505

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Know-how in the table above represents formulations, know-how and trade secrets associated with manufacturing processes. The fair values of know-how and trade name and trademarks were determined using the relief from royalty method. The excess earnings method was used to determine the fair value of customer relationships. These methods are all variations of the income approach.

The total weighted-average life of the acquired intangible assets that are subject to amortization is 11 years.

Other Assets and Other Liabilities—Other assets include deferred tax assets and pension assets while other liabilities are primarily related to pension and other postretirement benefit plans.

Long-Term Debt—In August 2018, we notified bondholders that we would call the assumed $375 million 6.875% Senior Notes due June 2023 at a price of 105.156% of par. In conjunction with the repayment of the debt in September 2018, we paid a make-whole premium of $19 million. These notes were recognized at redemption value which approximates fair value at the acquisition date.

Redeemable Non-controlling Interests—Our redeemable non-controlling interests relate to 124,347 shares of cumulative perpetual special stock issued by our consolidated subsidiary, A. Schulman, Inc. acquired in the acquisition. Holders of A. Schulman Special Stock are entitled to receive cumulative dividends at the rate of 6% per share on the liquidation preference of $1,000 per share. These shares may be redeemed at any time at the discretion of the holders. In 2018, 8,973 shares of A. Schulman Special Stock were redeemed for approximately $9 million. As of December 31, 2018, 115,374 shares of A. Schulman Special Stock were outstanding.

At the acquisition date, the fair value was estimated using the Black Derman Toy binomial lattice technique, which models the decision to redeem or hold by considering the maximum of the redemption value and the hold value throughout the term of the instrument and chooses the action that maximizes the return to the holder. This model requires assumptions on credit spread, yield volatility and risk-free rates.

Acquisition Costs—We incurred approximately $30 million of acquisition-related transaction costs in connection with the acquisition of A. Schulman during the year ended December 31, 2018. These costs comprising banker, legal and consulting fees were classified in our Consolidated Statements of Income for the year ended December 31, 2018, as selling, general and administrative expenses.

Pro forma Information—Our Consolidated Financial Statements include the operating results of A. Schulman from August 21, 2018 to December 31, 2018, including revenues of $846 million and loss from continuing operations before income taxes of $6 million. Pro forma results of operations for this acquisition have not been presented because the effects of the acquisition were not material to our pre-acquisition financial results.

Dispositions

In October 2018, we received net cash proceeds of $37 million, upon the sale of our carbon black subsidiary in France. The net cash proceeds are reflected in Cash flows from investing activities in the Consolidated Statements of Cash Flows. In connection with the sale, we recognized a pre-tax gain of $36 million, which is reflected in Other Income, net in the Consolidated Income Statements.

Upon the sale of our wholly owned subsidiary, Petroken Petroquimica Ensenada S.A. in February 2016, we received net proceeds of $137 million, which is reflected in Cash flows from investing activities in the Consolidated Statement of Cash Flows. In connection with the sale, we recognized a pre-tax gain of $78 million, which is reflected in Other Income, net in the Consolidated Income Statements.

4. Revenues

We adopted ASC 606, Revenue from Contracts with Customers on January 1, 2018. For further information related to the adoption of the new standard, see Note 2 to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Contract Balances—Our contract liabilities were $138 million as of December 31, 2018. Revenue recognized in the reporting period included in the contract liability balance at the beginning of the period was immaterial.

Disaggregation of Revenues—We participate globally across the petrochemical value chain and are an industry leader in many of our product lines. Our chemical businesses consist primarily of large processing plants that convert large volumes of liquid and gaseous hydrocarbon feedstocks into plastic resins and other chemicals. Our chemical products tend to be basic building blocks for other chemicals and plastics, while our plastic products are typically used in large volume applications as well as smaller specialty applications. Our refining business consists of our Houston refinery, which processes crude oil into refined products such as gasoline, diesel and jet fuel.

Revenues disaggregated by key products are summarized below:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues:
Olefins & co-products	$	3,679			$	4,304			$	3,215
Polyethylene	7,439				7,368				6,903
Polypropylene	5,703				5,005				4,414
PO & derivatives	2,530				2,204				1,852
Oxyfuels and related products	3,399				3,022				2,676
Intermediate chemicals	3,416				3,051				2,483
Compounding and solutions	3,091				2,139				1,910
Advanced polymers	930				783				692
Refined products	8,221				6,165				4,559
Other	596				443				479
Total	$	39,004			$	34,484			$	29,183

Compounding and solutions revenues include the product portfolio from the A. Schulman acquisition and legacy polypropylene compounds. Polybutene-1 and Catalloy revenues are now reflected in our new advanced polymers revenue stream. To reflect this change, polypropylene compounds and Catalloy have been recast from the polypropylene product line to the compounding and solutions and advanced polymers respectively for the periods presented. Additionally, polybutene-1 has been moved from other revenues to advanced polymers.

The following table presents our revenues disaggregated by geography, based upon the location of the customer:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues:
United States	$	18,671			$	16,618			$	13,962
Germany	2,949				2,746				2,474
Mexico	2,308				1,504				1,026
Italy	1,582				1,352				1,203
France	1,460				1,306				1,055
Japan	1,257				1,185				934
China	1,137				1,024				939
The Netherlands	1,050				1,069				727
Other	8,590				7,680				6,863
Total	$	39,004			$	34,484			$	29,183

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Transaction Price Allocated to the Remaining Performance Obligations—We have elected to exclude contracts which have an initial term of one year or less from this disclosure. Our contracts with customers are commodity supply arrangements that settle based on market prices at future delivery dates; therefore, transaction prices are entirely variable. Transaction prices are known at the time revenue is recognized since they are generally determined by the commodity price index at a specific date, at month-end or at the month average once products are shipped to our customers. Future estimates of transaction prices for disclosure purposes are substantially constrained as they are highly susceptible to factors outside our influence, including volatility in commodity markets, industry production capacities and operating rates, planned and unplanned industry operating interruptions, foreign exchange rates and worldwide geopolitical trends.

5. Related Party Transactions

We have related party transactions with our joint venture partners, which are classified as equity investees (see Notes 9 and 10 to the Consolidated Financial Statements). These related party transactions include the sales and purchases of goods in the normal course of business as well as certain financing arrangements. In addition, under contractual arrangements with certain of our equity investees, we receive certain services, utilities and materials at some of our manufacturing sites and we provide certain services to our equity investees.

We have guaranteed $34 million of the indebtedness of two of our joint ventures as of December 31, 2018.

Related party transactions are summarized as follows:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
The Company billed related parties for:
Sales of products—
Joint venture partners	$	878			$	779			$	729
Shared service agreements—
Joint venture partners	9				16				18
Related parties billed the Company for:
Sales of products—
Joint venture partners	$	2,999			$	2,759			$	2,402
Shared service agreements—
Joint venture partners	70				75				71

6. Accounts Receivable

We sell our products primarily to other industrial concerns in the petrochemicals and refining industries. We perform ongoing credit evaluations of our customers’ financial conditions and, in certain circumstances, require letters of credit or corporate guarantees from them. Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, was $16 million and $17 million at December 31, 2018 and 2017, respectively. We recorded provisions for doubtful accounts receivable, which are reflected in the Consolidated Statements of Income, of less than $1 million in 2018, 2017 and 2016.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Inventories

Inventories consisted of the following components at December 31:

Millions of dollars	2018				2017
Finished goods	$	3,066			$	2,932
Work-in-process	138				142
Raw materials and supplies	1,311				1,143
Total inventories	$	4,515			$	4,217

At December 31, 2018 and 2017, approximately 85% and 86%, respectively, of our inventories were valued using the last in, first out (“LIFO”) method and the remaining inventories, consisting primarily of materials and supplies, were valued at the moving average cost method. At December 31, 2018 and 2017, our LIFO cost exceeded current replacement cost under the first-in first-out method. The excess of our inventories at estimated net realizable value over LIFO cost after lower of cost or market charges was approximately $798 million and $1,194 million at December 31, 2018 and 2017, respectively.

8. Property, Plant and Equipment, Goodwill and Intangible Assets

Property, Plant and Equipment—The components of property, plant and equipment, at cost, and the related accumulated depreciation are as follows at December 31:

Millions of dollars	Estimated Useful Lives (in Years)		2018				2017
Land			$	364			$	313
Major manufacturing equipment	25		10,684				10,029
Buildings	30		924				826
Light equipment and instrumentation	5 - 20		2,639				2,141
Office furniture	15		25				16
Major turnarounds	4 - 7		1,750				1,765
Information system equipment	3 - 5		60				59
Construction in progress			2,255				1,421
Total property, plant and equipment			18,701				16,570
Less accumulated depreciation			(6,224		)		(5,573		)
Property, plant and equipment, net			$	12,477			$	10,997

Capitalized Interest—We capitalize interest costs incurred on funds used to construct property, plant and equipment. In 2018, 2017 and 2016, we capitalized interest of $45 million, $20 million and $33 million, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible Assets—The components of identifiable intangible assets, at cost, and the related accumulated amortization are as follows at December 31:

		2018												2017
Millions of dollars		Cost				Accumulated Amortization				Net				Cost				Accumulated Amortization				Net
Emission allowances		$	807			$	(531	)		$	276			$	786			$	(468	)		$	318
Various contracts		508				(329		)		179				552				(356		)		196
Customer relationships		300				(8		)		292				—				—				—
In-process research and development costs		111				(75		)		36				117				(70		)		47
Trade name and trademarks		104				(7		)		97				—				—				—
Know-how		84				(4		)		80				—				—				—
Software costs		64				(59		)		5				73				(66		)		7
Total intangible assets		$	1,978			$	(1,013	)		$	965			$	1,528			$	(960	)		$	568

Amortization of these identifiable intangible assets for the next five years is expected to be $163 million in 2019, $141 million in 2020, $87 million in 2021, $82 million in 2022 and $70 million in 2023.

Depreciation and Amortization Expense—Depreciation and amortization expense is summarized as follows:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Property, plant and equipment	$	1,075			$	1,023			$	920
Investment in PO joint ventures	41				41				40
Emission allowances	63				67				62
Various contracts	31				27				27
Customer relationships	8				—				—
In-process research and development costs	7				9				8
Trade name and trademarks	7				—				—
Know-how	4				—				—
Software costs	5				7				7
Total depreciation and amortization	$	1,241			$	1,174			$	1,064

Asset Retirement Obligations—In certain cases, we are contractually obligated to decommission our plants upon site exit. In such cases, we have accrued the net present value of the estimated costs. The majority of our asset retirement obligations are related to facilities in Europe. The changes in our asset retirement obligations are as follows:

	Year Ended December 31,
Millions of dollars	2018				2017
Beginning balance	$	58			$	77
Payments	(2		)		(3		)
Changes in estimates	2				(26		)
Accretion expense	2				2
Effects of exchange rate changes	(2		)		8
Ending balance	$	58			$	58

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Although, we may have asset retirement obligations associated with some of our other facilities, the present value of those obligations is not material in the context of an indefinite expected life of the facilities. We continually review the optimal future alternatives for our facilities. Any decision to retire one or more facilities may result in an increase in the present value of such obligations.

In May 2016, we received a notice pertaining to the final closure of our Berre refinery from the Prefect of Bouches du Rhone. This notice outlines the requirements to dismantle the refinery facilities. At this time, the estimated cost and associated cash flows to fulfill these requirements are not deemed to be material. We began reporting the Berre refinery as a discontinued operation in the second quarter of 2012. The impact of this discontinued operation is immaterial to our consolidated results.

Goodwill—The changes in the carrying amount of goodwill in each of the Company’s reportable segments for the years ended December 31, 2018 and 2017 were as follows:

Millions of dollars	O&P – Americas				O&P – EAI				I&D				APS				Technology				Total
December 31, 2016	$	162			$	98			$	219			$	41			$	8			$	528
Foreign currency translation adjustments	—				23				18				—				1				42
December 31, 2017	$	162			$	121			$	237			$	41			$	9			$	570
Acquisition of A. Schulman	—				—				—				1,259				—				1,259
Measurement period adjustments	—				—				—				12				—				12
Foreign currency translation adjustments	—				(7		)		(8		)		(12		)		—				(27		)
December 31, 2018	$	162			$	114			$	229			$	1,300			$	9			$	1,814

For additional information related to goodwill, see Note 3 to the Consolidated Financial Statements.

9. Investment in PO Joint Ventures

We, together with Covestro PO LLC, a subsidiary of Covestro AG (collectively “Covestro”), share ownership in a U.S. propylene oxide (“PO”) manufacturing joint venture (the “U.S. PO joint venture”). The U.S. PO joint venture owns a PO/styrene monomer (“SM” or “styrene”) and a PO tertiary butyl alcohol (“TBA”) manufacturing facility. Covestro’s ownership interest represents an undivided interest in certain U.S. PO joint venture assets with correlative PO capacity reservation that resulted in ownership of annual in-kind cost-based PO production of approximately 1.5 billion pounds in 2018 and 2017. We take in-kind the remaining cost-based PO and co-product production.

In addition, we and Covestro each have a 50% interest in a separate manufacturing joint venture (the “European PO joint venture”), which owns a PO/SM plant at Maasvlakte near Rotterdam, The Netherlands. In substance, each partner’s ownership interest represents an undivided interest in all of the European PO joint venture assets with correlative capacity reservation that resulted in ownership of annual in-kind cost-based PO and SM production.

We and Covestro do not share marketing or product sales under the U.S. PO joint venture. We operate the U.S. PO joint venture’s and the European PO joint venture’s (collectively the “PO joint ventures”) plants and arrange and coordinate the logistics of product delivery. The partners share in the cost of production and logistics is based on their product offtake.

We account for both the U.S. PO joint venture and the European PO joint venture using the equity method. We report the cost of our product offtake as inventory and equity loss as cost of sales in our Consolidated Financial Statements. Related production cash flows are reported in the operating cash flow section of the Consolidated Statements of Cash Flows.

Our equity investment in the PO joint ventures represents our share of the manufacturing plants and is decreased by recognition of our share of equity loss, which is equal to the depreciation and amortization of the assets of the PO joint ventures. Other changes in the investment balance are principally due to our additional capital contributions to the PO joint ventures to fund

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

capital expenditures. Such contributions are reported in the investing cash flow section of the Consolidated Statements of Cash Flows.

Our product offtake of PO and its co-products was 5,783 million pounds in 2018, 6,189 million pounds in 2017 and 6,024 million pounds in 2016.

Changes in our investments in the U.S. and European PO joint ventures for 2018 and 2017 are summarized below:

Millions of dollars	U.S. PO Joint Venture				European PO Joint Venture				Total PO Joint Ventures
Investments in PO joint ventures—January 1, 2018	$	310			$	110			$	420
Cash contributions	85				10				95
Depreciation and amortization	(32		)		(9		)		(41		)
Effect of exchange rate changes	—				(5		)		(5		)
Investments in PO joint ventures—December 31, 2018	$	363			$	106			$	469
Investments in PO joint ventures—January 1, 2017	$	316			$	99			$	415
Cash contributions	26				6				32
Depreciation and amortization	(32		)		(9		)		(41		)
Effect of exchange rate changes	—				14				14
Investments in PO joint ventures—December 31, 2017	$	310			$	110			$	420

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Equity Investments

Our PO joint ventures, which are also accounted for using the equity method of accounting, are discussed in Note 9 to the accompanying Consolidated Financial Statements and are, therefore, not included in the following discussion.

Our remaining principal direct and indirect equity investments are as follows at December 31:

Percent of Ownership	2018			2017
Basell Orlen Polyolefins Sp. Z.o.o.	50.00	%		50.00	%
PolyPacific Pty. Ltd.	50.00	%		50.00	%
Saudi Polyolefins Company	25.00	%		25.00	%
Saudi Ethylene & Polyethylene Company Ltd.	25.00	%		25.00	%
Al-Waha Petrochemicals Ltd.	25.00	%		25.00	%
Polymirae Co. Ltd.	50.00	%		50.00	%
HMC Polymers Company Ltd.	28.56	%		28.56	%
Indelpro S.A. de C.V.	49.00	%		49.00	%
Ningbo ZRCC Lyondell Chemical Co. Ltd.	26.65	%		26.65	%
Ningbo ZRCC Lyondell Chemical Marketing Co.	50.00	%		50.00	%
NOC Asia Ltd.	40.00	%		40.00	%

The changes in our equity investments are as follows:

	Year Ended December 31,
Millions of dollars	2018				2017
Beginning balance	$	1,635			$	1,575
Income from equity investments	289				321
Distribution of earnings, net of tax	(307		)		(309		)
Business combination	16				—
Sale of equity investments	—				(35		)
Unrealized gain on available-for-sale securities	—				19
Currency exchange effects	(28		)		68
Other	6				(4		)
Ending balance	$	1,611			$	1,635

In September 2017, we sold our 27% interest in our Geosel joint venture and received proceeds of $155 million.

Summarized balance sheet information of the Company’s investments accounted for under the equity method are as follows at December 31:

	Year Ended December 31,
Millions of dollars	2018				2017
Current assets	$	2,824			$	2,844
Noncurrent assets	4,625				4,541
Total assets	7,449				7,385
Current liabilities	1,485				1,607
Noncurrent liabilities	1,592				1,418
Net assets	$	4,372			$	4,360

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized income statement information of the Company’s investments accounted for under the equity method are set forth below:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Revenues	$	7,449			$	6,632			$	6,608
Cost of sales	(5,899		)		(5,119		)		(4,933		)
Gross profit	1,550				1,513				1,675
Net operating expenses	(310		)		(223		)		(229		)
Operating income	1,240				1,290				1,446
Interest income	6				7				8
Interest expense	(70		)		(74		)		(79		)
Foreign currency translation	1				11				(13		)
Other income, net	25				11				23
Income before income taxes	1,202				1,245				1,385
Provision for income taxes	(260		)		(153		)		(303		)
Net income	$	942			$	1,092			$	1,082

The difference between our carrying value and the underlying equity in the net assets of our equity investments are assigned to the investment’s assets and liabilities based on an analysis of the factors giving rise to the basis difference. The amortization of the basis difference is included in Income from equity investments in the Consolidated Statements of Income.

11. Prepaid Expenses, Other Current Assets and Other Assets

The components of Prepaid expenses and Other current assets were as follows at December 31:

Millions of dollars	2018				2017
Loans receivable	$	544			$	570
Renewable identification numbers	65				117
Advances to suppliers	57				35
Income tax receivable	169				29
VAT receivables	218				184
Prepaid insurance	25				25
Financial derivatives	80				66
Other	97				121
Total prepaid expenses and other current assets	$	1,255			$	1,147

The renewable identification numbers reflected above represent a U.S. government established credit used to show compliance in meeting the Environmental Protection Agency’s Renewable Fuel Standard.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of Other assets were as follows at December 31:

Millions of dollars	2018				2017
Deferred tax assets	$	31			$	90
Debt issuance costs	12				15
Company-owned life insurance	62				56
Derivative contracts	118				26
Pension assets	39				33
Other	91				41
Total other assets	$	353			$	261

12. Accrued Liabilities

Accrued liabilities consisted of the following components at December 31:

Millions of dollars	2018				2017
Payroll and benefits	$	534			$	442
Renewable identification numbers	72				130
Product sales rebates	163				166
Taxes other than income taxes	186				199
Income taxes	16				386
Interest	154				151
Deferred revenues	128				61
Other	283				277
Total accrued liabilities	$	1,536			$	1,812

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Debt

Long-term loans, notes and other long-term debt net of unamortized discount and debt issuance cost consisted of the following as of December 31:

Millions of dollars	2018				2017
Senior Notes due 2019, $1,000 million, 5.0% ($1 million of debt issuance cost)	$	988			$	961
Senior Notes due 2021, $1,000 million, 6.0% ($5 million of debt issuance cost)	975				981
Senior Notes due 2024, $1,000 million, 5.75% ($7 million of debt issuance cost)	993				992
Senior Notes due 2055, $1,000 million, 4.625% ($16 million of discount; $11 million of debt issuance cost)	973				973
Guaranteed Notes due 2022, €750 million, 1.875% ($2 million of discount; $2 million of debt issuance cost)	855				894
Guaranteed Notes due 2023, $750 million, 4.0% ($5 million of discount; $3 million of debt issuance cost)	742				740
Guaranteed Notes due 2027, $1,000 million, 3.5% ($8 million of discount; $7 million of debt issuance cost)	964				984
Guaranteed Notes due 2027, $300 million, 8.1%	300				300
Guaranteed Notes due 2043, $750 million, 5.25% ($21 million of discount; $7 million of debt issuance cost)	722				722
Guaranteed Notes due 2044, $1,000 million, 4.875% ($11 million of discount; $9 million of debt issuance cost)	980				979
Other	10				25
Total	8,502				8,551
Less current maturities	(5		)		(2		)
Long-term debt	$	8,497			$	8,549

Fair value hedging adjustments associated with the fair value hedge accounting of our fixed-for-floating interest rate swaps for the applicable periods are as follows:

	Millions of dollars	Inception Year		Gains (Losses)								Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt
	Year Ended December 31,							Year Ended December 31,
	2018				2017				2018				2017
	Senior Notes due 2019, 5.0%	2014		$	(25	)		$	(48	)		$	11			$	36
	Senior Notes due 2021, 6.0%	2016		8				9				20				12
	Guaranteed Notes due 2027, 3.5%	2017		22				(1		)		21				(1		)
	Guaranteed Notes due 2022, 1.875%	2018		(1		)		—				(1		)		—
	Total			$	4			$	(40	)		$	51			$	47

The cumulative fair value hedging adjustments remaining at December 31, 2018 and 2017 associated with our Senior Notes due 2019 included $7 million and $31 million, respectively, for hedges that have been discontinued. The $48 million loss in the year ended December 31, 2017 included a $44 million charge for the write-off of the cumulative fair value hedging adjustment related to our 5% Senior Notes due 2019 described below. These fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Short-term loans, notes and other short-term debt consisted of the following as of December 31:

Millions of dollars	2018				2017
$2,500 million Senior Revolving Credit Facility	$	—			$	—
$900 million U.S. Receivables Facility	—				—
Commercial paper	809				—
Precious metal financings	71				64
Other	5				4
Total short-term debt	$	885			$	68

After giving consideration to the refinancing in February 2019 of our 5% Senior Notes due 2019 with our new Senior Credit Agreement discussed below, the aggregate maturities of debt during the next five years are $891 million in 2019, $1,001 million in 2020, $1,001 million in 2021, $859 million in 2022, $751 million in 2023 and $5,051 million thereafter.

Long-Term Debt

Guaranteed Notes due 2027—In March 2017, LYB International Finance II B.V. (“LYB Finance II”), a direct, 100% owned finance subsidiary of LyondellBasell Industries N.V., as defined in Rule 3-10(b) of Regulation S-X, issued $1,000 million of 3.5% guaranteed notes due 2027 at a discounted price of 98.968%. In March 2017, the net proceeds from these notes, together with available cash, were used to redeem $1,000 million aggregate principal amount of our outstanding 5% senior notes due 2019.

These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB Finance II’s existing and future unsecured indebtedness and to all of LyondellBasell N.V.’s existing and future unsubordinated indebtedness. There are no significant restrictions that would impede LyondellBasell N.V., as guarantor, from obtaining funds by dividend or loan from its subsidiaries.

The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.

The notes may be redeemed before the date that is three months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the applicable Treasury Yield plus 20 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is three months prior to the scheduled maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.

Senior Notes due 2019, 2021 and 2024—In February 2019, proceeds from the new Senior Credit Agreement discussed below were used to redeem the remaining $1,000 million outstanding of our 5% Senior Notes due 2019 at par. In conjunction with the redemption of these notes, we recognized non-cash charges of less than $1 million of unamortized debt issuance costs and $8 million for the write-off of the cumulative fair value hedge accounting adjustment related to the redeemed notes.

In March 2017, we redeemed $1,000 million aggregate principal amount of our outstanding 5% senior notes due 2019, and paid $65 million in make-whole premiums. In conjunction with the redemption of these notes, we recognized non-cash charges of $4 million for the write-off of unamortized debt issuance costs and $44 million for the write-off of the cumulative fair value hedge accounting adjustment related to the redeemed notes.

We have outstanding $1,000 million aggregate principal amount of 5.75% senior notes due 2024, and $1,000 million of 6% senior notes due 2021.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The indentures governing the 5%, 5.75% and 6% Senior Notes contain limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by any property or assets, enter into certain sale and lease-back transactions with respect to any assets or enter into consolidations, mergers or sales of all or substantially all of our assets.

These notes may be redeemed and repaid, in whole or in part, at any time and from time to time prior to the date that is 90 days prior to the scheduled maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus a premium for each note redeemed equal to the greater of 1.00% of the then outstanding principal amount of the note and the excess of: (a) the present value at such redemption date of (i) the principal amount of the note at maturity plus (ii) all required interest payments due on the note through maturity (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the outstanding principal amount of the note. These notes may also be redeemed, in whole or in part, at any time on or after the date which is 90 days prior to the final maturity date of the notes, at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.

Guaranteed Notes due 2022—In March 2016, LYB Finance II issued €750 million of 1.875% guaranteed notes due 2022 at a discounted price of 99.607%.

These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB Finance II’s existing and future unsecured indebtedness and to all of LyondellBasell N.V.’s existing and future unsubordinated indebtedness. There are no significant restrictions that would impede LyondellBasell N.V., as guarantor, from obtaining funds by dividend or loan from its subsidiaries.

The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.

The notes may be redeemed before the date that is three months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the applicable Comparable Government Bond Rate plus 35 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is three months prior to the scheduled maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. The notes are also redeemable upon certain tax events.

Senior Notes due 2055—In March 2015, we issued $1,000 million of 4.625% Notes due 2055 at a discounted price of 98.353%. These unsecured notes rank equally in right of payment to all of LyondellBasell N.V.’s existing and future unsubordinated indebtedness.

The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.

The notes may be redeemed before the date that is six months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the applicable Treasury Yield plus 35 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is six months prior to the final maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.

Guaranteed Notes due 2044—In February 2014, LYB International Finance B.V. (“LYB Finance”), a direct, 100% owned finance subsidiary of LyondellBasell Industries N.V., as defined in Rule 3-10(b) of Regulation S-X, issued $1,000 million of 4.875% guaranteed notes due 2044 at a discounted price of 98.831%.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB Finance’s existing and future unsecured indebtedness and to all of LyondellBasell’s existing and future unsubordinated indebtedness. There are no significant restrictions that would impede the Guarantor from obtaining funds by dividend or loan from its subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to make dividends to or enter into loans with the Guarantor.

The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.

The notes may be redeemed before the date that is six months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the applicable Treasury Yield plus 20 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is six months prior to the final maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.

Guaranteed Notes due 2023 and 2043—In July 2013, LYB Finance issued $750 million of 4% guaranteed notes due 2023 and $750 million of 5.25% Notes due 2043 at discounted prices of 98.678% and 97.004%, respectively.

These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB Finance’s existing and future unsecured indebtedness and to all of LyondellBasell’s existing and future unsubordinated indebtedness. There are no significant restrictions that would impede the Guarantor from obtaining funds by dividend or loan from its subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to make dividends to or enter into loans with the Guarantor.

The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.

The notes may be redeemed and repaid, in whole or in part, at any time and from time to time prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed, and the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed. Such interest will be discounted to the date of redemption on a semi-annual basis at the applicable Treasury Yield plus 25 basis points in the case of the 4% Notes due 2023 and plus 30 basis points in the case of the 5.25% Notes due 2043.

Guaranteed Notes due 2027—We have outstanding $300 million aggregate principal amount of 8.1% Guaranteed Notes due 2027. These notes, which are guaranteed by LyondellBasell Industries Holdings B.V., a subsidiary of LyondellBasell N.V., contain certain restrictions with respect to the level of maximum debt that can be incurred and security that can be granted by certain operating companies that are direct or indirect wholly owned subsidiaries of LyondellBasell Industries Holdings B.V.

The 2027 Notes contain customary provisions for default, including, among others, the non-payment of principal and interest, certain failures to perform or observe obligations under the Agreement on the notes, the occurrence of certain defaults under other indebtedness, failure to pay certain indebtedness and the insolvency or bankruptcy of certain LyondellBasell N.V. subsidiaries.

Short-Term Debt

Senior Credit Agreement—In February 2019, LYB Americas Finance Company LLC (“LYB Americas Finance”), a wholly owned subsidiary of LyondellBasell Industries N.V., entered into a 364-day, $2,000 million senior unsecured term loan credit agreement and borrowed the entire amount. The proceeds of this term loan, which is fully and unconditionally guaranteed by LyondellBasell Industries N.V. are intended for general corporate purposes, including the repayment of debt.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Borrowings under the credit agreement will bear interest at either a LIBOR rate or a base rate, as defined, plus in each case, an applicable margin determined by reference to LyondellBasell Industries N.V.’s current credit ratings.

The credit agreement contains customary covenants and warranties, including specified restrictions on indebtedness, including secured and subsidiary indebtedness, and merger and sales of assets. In addition, we are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less.

Senior Revolving Credit Facility—In June 2017, the term of our $2,500 million revolving credit facility was extended for one year to June 2022 pursuant to a consent agreement. All other material terms of the revolving credit facility remained unchanged.

The revolving credit facility may be used for dollar and euro denominated borrowings, has a $500 million sublimit for dollar and euro denominated letters of credit, a $1,000 million uncommitted accordion feature, and supports our commercial paper program. The aggregate balance of outstanding borrowings and letters of credit under the facility may not exceed $2,500 million at any given time. Borrowings under the facility bear interest at a Base Rate or LIBOR, plus an applicable margin. Additional fees are incurred for the average daily unused commitments.

The facility contains customary covenants and warranties, including specified restrictions on indebtedness and liens. In addition, we are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less for the period covering the most recent four quarters. We are in compliance with these covenants as of December 31, 2018.

At December 31, 2018, we had $809 million of outstanding commercial paper, no outstanding letters of credit and no outstanding borrowings under the facility.

Commercial Paper Program—We have a commercial paper program under which we may issue up to $2,500 million of privately placed, unsecured, short-term promissory notes (“commercial paper”). The program is backed by our $2,500 million Senior Revolving Credit Facility. Proceeds from the issuance of commercial paper may be used for general corporate purposes, including dividends and share repurchases. Interest rates on the commercial paper outstanding at December 31, 2018 are based on the terms of the notes and range from 2.65% to 3.12%.

U.S. Receivables Facility—In July 2018, we amended our $900 million U.S. accounts receivable facility to, among other things, extend the term of the facility to July 2021. The facility has a purchase limit of $900 million in addition to a $300 million uncommitted accordion feature. This facility provides liquidity through the sale or contribution of trade receivables by certain of our U.S. subsidiaries to a wholly owned, bankruptcy-remote subsidiary on an ongoing basis and without recourse. The bankruptcy-remote subsidiary may then, at its option and subject to a borrowing base of eligible receivables, sell undivided interests in the pool of trade receivables to financial institutions participating in the facility. In the event of liquidation, the bankruptcy-remote subsidiary’s assets will be used to satisfy the claims of its creditors prior to any assets or value in the bankruptcy-remote subsidiary becoming available to us. We are responsible for servicing the receivables. This facility also provides for the issuance of letters of credit up to $200 million. The term of the facility may be extended in accordance with the provisions of the agreement. The facility is also subject to customary warranties and covenants, including limits and reserves and the maintenance of specified financial ratios. We are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less for the period covering the most recent four quarters. Performance obligations under the facility are guaranteed by our parent company. Additional fees are incurred for the average daily unused commitments.

At December 31, 2018, there were no borrowings or letters of credit outstanding under the facility.

Precious Metal Financings—We enter into lease agreements for precious metals which are used in our production processes. All precious metal borrowings are classified as Short-term debt.

Weighted Average Interest Rate—At December 31, 2018 and 2017, our weighted average interest rates on outstanding short-term debt were 3.1% and 1.8%, respectively.

Debt Discount and Issuance Costs—Amortization of debt discount and debt issuance costs resulted in amortization expense of $14 million, $15 million and $16 million for the years ended December 31, 2018, 2017 and 2016, respectively, which is included in Interest expense in the Consolidated Statements of Income.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Information—LYB International Finance III, LLC is a direct, 100% owned finance subsidiary of LyondellBasell N.V., as defined in Rule 3-10(b) of Regulation S-X. Any debt securities issued by LYB International Finance III, LLC will be fully and unconditionally guaranteed by LyondellBasell N.V.

14. Lease Commitments

We lease office facilities, railcars, vehicles, and other equipment under operating leases. Some leases contain renewal provisions, purchase options and escalation clauses.

The aggregate future estimated payments under these commitments are:

Millions of dollars
2019	$	365
2020	288
2021	256
2022	236
2023	204
Thereafter	1,126
Total minimum lease payments	$	2,475

Rental expense for the years ended December 31, 2018, 2017 and 2016 was $496 million, $440 million and $426 million, respectively.

15. Financial Instruments and Fair Value Measurements

Market Risks—We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative contracts pursuant to our risk management policies.

Commodity Prices—We are exposed to commodity price volatility related to purchases of various feedstocks and sales of our products. We selectively use over-the-counter commodity swaps, options and exchange traded futures contracts with various terms to manage the volatility related to these risks. In addition, we are exposed to volatility on the prices of precious metals to the extent that we have obligations, classified as embedded derivatives, tied to the price of precious metals associated with secured borrowings.

Foreign Currency Rates—We have significant worldwide operations. The functional currencies of our consolidated subsidiaries through which we operate are primarily the U.S. dollar and the euro. We enter into transactions denominated in currencies other than our designated functional currencies. As a result, we are exposed to foreign currency risk on receivables and payables. We maintain risk management control policies intended to monitor foreign currency risk attributable to our outstanding foreign currency balances. These control policies involve the centralization of foreign currency exposure management, the offsetting of exposures and the estimating of expected impacts of changes in foreign currency rates on our Comprehensive income. We enter into foreign currency forward and swap contracts to reduce the effects of our net currency exchange exposures.

For foreign currency forward and swap contracts that economically hedge recognized foreign currency monetary assets and liabilities, hedge accounting is not applied. Changes in the fair value of such forward and swap contracts, which are reported in the Consolidated Statements of Income, are offset in part by the currency remeasurement results recognized within earnings on the assets and liabilities.

Foreign Currency Gain (Loss)—Other income, net, in the Consolidated Statements of Income reflected foreign currency gains of $24 million in 2018, and foreign currency losses of $1 million in 2017, and $4 million in 2016.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial Instruments Measured at Fair Value on a Recurring Basis—The following table summarizes financial instruments outstanding as of December 31, 2018 and 2017 that are measured at fair value on a recurring basis:

	December 31, 2018								December 31, 2017
	Notional Amount				Fair Value				Notional Amount				Fair Value				Balance Sheet Classification
Millions of dollars
Assets—
Derivatives designated as hedges:
Commodities	$	472			$	12			$	—			$	—			Prepaid expenses and other current assets
Foreign currency	—				27				—				26				Prepaid expenses and other current assets
Foreign currency	2,000				117				2,000				25				Other assets
Interest rates	600				33				—				20				Prepaid expenses and other current assets
Interest rates	143				1				650				1				Other assets
Derivatives not designated as hedges:
Commodities	35				5				77				20				Prepaid expenses and other current assets
Foreign currency	599				3				19				—				Prepaid expenses and other current assets
Non-derivatives:
Available-for-sale debt securities	567				567				960				960				Short-term investments
Equity securities	322				325				350				347				Short-term investments
Total	$	4,738			$	1,090			$	4,056			$	1,399
Liabilities—
Derivatives designated as hedges:
Commodities	$	4			$	—			$	97			$	8			Accrued liabilities
Commodities	—				—				5				—				Other liabilities
Foreign currency	—				17				139				29				Accrued liabilities
Foreign currency	950				75				950				140				Other liabilities
Interest rates	1,400				16				—				5				Accrued liabilities
Interest rates	2,500				45				3,350				58				Other liabilities
Derivatives not designated as hedges:
Commodities	63				14				108				29				Accrued liabilities
Foreign currency	1,165				7				995				11				Accrued liabilities
Non-derivatives:
Performance share awards	29				29				23				23				Accrued liabilities
Performance share awards	—				—				27				27				Other liabilities
Total	$	6,111			$	203			$	5,694			$	330

Commodity derivatives designated as hedges are classified as Level 1. As of December 31, 2018, these commodity derivatives had notional and fair value of $472 million and $12 million, respectively. Fair value includes the net of a $60 million derivative asset and a $48 million derivative liability. Our limited partnership investments equity securities discussed below are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy. All other derivatives and available-for-sale securities in the tables above are classified as Level 2.

At December 31, 2018, our outstanding foreign currency and commodity contracts not designated as hedges mature from January 2019 to August 2019 and from January 2019 to February 2019, respectively.

Financial Instruments Not Measured at Fair Value on a Recurring Basis—The following table presents the carrying value and estimated fair value of our financial instruments that are not measured at fair value on a recurring basis as of December 31, 2018 and 2017. Short-term loans receivable, which represent our repurchase agreements, and short-term and long-term debt are

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recorded at amortized cost in the Consolidated Balance Sheets. The carrying and fair values of short-term and long-term debt exclude capital leases and commercial paper.

	December 31, 2018								December 31, 2017
	Carrying Value				Fair Value				Carrying Value				Fair Value
Millions of dollars
Non-derivatives:
Assets:
Short-term loans receivable	$	544			$	544			$	570			$	570
Liabilities:
Short-term debt	$	70			$	77			$	64			$	75
Long-term debt	8,492				8,476				8,526				9,442
Total	$	8,562			$	8,553			$	8,590			$	9,517

All financial instruments in the table above are classified as Level 2. There were no transfers between Level 1 and Level 2 for any of our financial instruments during the years ended December 31, 2018 and 2017.

Net Investment Hedges—In 2018 we entered into €800 million of foreign currency contracts that were designated as net investment hedges.

In 2018 foreign currency contracts with an aggregate notional value of €925 million expired. Upon settlement of these foreign currency contracts in 2018, we paid €925 million ($1,078 million at the expiry spot rate) to our counterparties and received $1,108 million from our counterparties.

In 2017, we entered into €617 million of foreign currency contracts that were designated as net investment hedges. In 2017, foreign currency contracts with an aggregate notional value of €550 million expired. Upon settlement of these foreign currency contracts in 2017, we paid €550 million ($658 million at the expiry spot rate) to our counterparties and received $609 million from our counterparties.

In 2016, we also issued euro denominated notes payable due 2022 with notional amounts totaling €750 million that were designated as a net investment hedge. In May 2018, we dedesignated and redesignated a €125 million tranche of these notes as a net investment hedge.

At December 31, 2018 and December 31, 2017, we had outstanding foreign currency contracts with an aggregate notional value of €617 million ($650 million) and €742 million ($789 million), respectively, designated as net investment hedges. In addition, at December 31, 2018 and December 31, 2017, we had outstanding foreign-currency denominated debt, with notional amounts totaling €750 million ($858 million) and €750 million ($899 million), respectively, designated as a net investment hedge.

There was no ineffectiveness recorded for any of these net investment hedging relationships during the years ended December 31, 2017 and 2016.

Cash Flow Hedges—The following table summarizes our cash flow hedges outstanding at December 31, 2018 and December 31, 2017:

	December 31, 2018				December 31, 2017
Millions of dollars	Notional Value				Notional Value				Expiration Date
Foreign currency	$	2,300			$	2,300			2021 to 2027
Interest rates	1,500				1,000				2019 to 2021
Commodities	476				102				2019

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In February 2019 we entered into forward-starting interest rate swaps with a total notional amount of $1,000 million to mitigate the risk of variability in interest rates for an expected debt issuance by February 2020. These swaps were designated as cash flow hedges and will be terminated upon debt issuance. Additionally, concurrent with the redemption of $1,000 million of our outstanding 5% senior notes due 2019, we received $4 million in settlement of $1,000 million of forward-starting interest rate swaps designated as cash flow hedges of forecast interest payments to begin on or before April 15, 2019.

In 2018 we entered into commodity futures contracts with a total notional amount of $198 million to mitigate the risk of variability in feedstock prices for the year 2019. Additionally in 2018, we entered into commodity futures contracts with a total notional amount of $274 million to mitigate the risk of variability in product sales prices for the year 2019.

In 2018 we entered into forward-starting interest rate swaps with a total notional amount of $500 million to mitigate the risk of variability in interest rates for an expected debt issuance by November 2021. These swaps were designated as cash flow hedges and will be terminated upon debt issuance.

In 2018, 2017 and 2016, there were no settlements of our forward-starting swap agreements.

The ineffectiveness recorded for these hedging relationships was less than $1 million for the years ended December 31, 2017 and 2016.

As of December 31, 2018, on a pre-tax basis, less than $1 million, $60 million, and $48 million is scheduled to be reclassified as a decrease to interest expense, increase to sales, and increase to cost of sales, respectively, over the next twelve months.

Fair Value Hedges—In February 2019, concurrent with the redemption of $1,000 million of our outstanding 5% senior notes due 2019, we paid $5 million in settlement of $1,000 million of fixed-for-floating interest rate swaps.

In 2018 we entered into a euro fixed-for-floating interest rate swap to mitigate the change in the fair value of €125 million ($147 million) of our €750 million notes payable due 2022 associated with the risk of variability in the 6-month EURIBOR rate (the benchmark interest rate). The fixed-rate and variable-rate are settled annually and semi-annually, respectively.

In 2017, we entered into U.S. dollar fixed-for-floating interest rate swaps to mitigate changes in fair value of our $1,000 million 3.5% guaranteed notes due 2027 associated with the risk of variability in the 3 Month USD LIBOR rate. The fixed-rate and variable-rate are settled semi-annually and quarterly, respectively.

In 2014, we entered into U.S. dollar fixed-for-floating interest rate swaps to mitigate changes in the fair value of our $2,000 million 5% senior notes due 2019. In March 2017, concurrent with the redemption of $1,000 million of our outstanding 5% senior notes due 2019, we dedesignated the related $2,000 million fair value hedge and terminated swaps in the notional amount of $1,000 million. At the same time, we redesignated the remaining $1,000 million notional amount of swaps as a fair value hedge of the remaining $1,000 million of 5% senior notes outstanding.

In 2017, we entered into U.S. dollar fixed-for-floating interest rate swaps with aggregate notional value of $400 million to mitigate changes in the fair value of our $1,000 million 6% senior notes due 2021 associated with the risk of variability in the 1 Month USD LIBOR rate. The fixed and variable payments for the interest rate swaps related to our 6% senior notes due 2021 are settled semi-annually and monthly, respectively.

At December 31, 2018 and December 31, 2017, we had outstanding fixed-for-floating interest rate swaps with aggregate notional amounts of $3,143 million and $3,000 million, respectively, designated as fair value hedges. The fixed-for-floating interest rate swaps outstanding at December 31, 2018 mature from 2019 to 2027.

We recognized net losses of $16 million and net gains of $32 million during the years ended December 31, 2017 and 2016, respectively, related to the ineffectiveness of our fair value hedges.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Impact on Earnings and Other Comprehensive Income—The following tables summarize the pre-tax effect of derivative instruments and non-derivative instruments on Other comprehensive income and earnings for the years ended December 31, 2018, 2017 and 2016:

	Effect of Financial Instruments
	Year Ended December 31, 2018
Millions of dollars	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI to Income				Additional Gain (Loss) Recognized in Income				Income Statement Classification
Derivatives designated as hedges:
Commodities	$	60			$	—			$	—			Sales and other operating revenues
Commodities	(30		)		(11		)		—				Cost of sales
Foreign currency	190				(100		)		68				Other income, net; Interest expense
Interest rates	43				(1		)		(30		)		Interest expense
Derivatives not designated as hedges:
Commodities	—				—				3				Sales and other operating revenues
Commodities	—				—				1				Cost of sales
Foreign currency	—				—				43				Other income, net
Non-derivatives designated as hedges:
Long-term debt	41				—				—				Other income, net
Total	$	304			$	(112	)		$	85

	Effect of Financial Instruments
	Year Ended December 31, 2017
Millions of dollars	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI to Income				Additional Gain (Loss) Recognized in Income				Income Statement Classification
Derivatives designated as hedges:
Commodities	$	(11	)		$	—			$	—			Cost of sales
Foreign currency	(466		)		265				42				Other income, net; Interest expense
Interest rates	(25		)		(1		)		2				Interest expense
Derivatives not designated as hedges:
Commodities	—				—				(18		)		Sales and other operating revenues
Commodities	—				—				(23		)		Cost of sales
Foreign currency	—				—				(23		)		Other income, net
Non-derivatives designated as hedges:
Long-term debt	(109		)		—				—				Other income, net
Total	$	(611	)		$	264			$	(20	)

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Effect of Financial Instruments
	Year Ended December 31, 2016
Millions of dollars	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI to Income				Additional Gain (Loss) Recognized in Income				Income Statement Classification
Derivatives designated as hedges:
Commodities	$	3			$	—			$	—			Cost of sales
Foreign currency	(30		)		(63		)		46				Other income, net; Interest expense
Interest rates	(17		)		—				8				Interest expense
Derivatives not designated as hedges:
Commodities	—				—				12				Sales and other operating revenues
Commodities	—				—				6				Cost of sales
Foreign currency	—				—				16				Other income, net
Non-derivatives designated as hedges:
Long-term debt	58				—				—				Other income, net
Total	$	14			$	(63	)		$	88

The derivative amounts excluded from the assessment of effectiveness for foreign currency contracts designated as net investment hedges recognized in other comprehensive income for the year ended December 31, 2018 were gains of $19 million. The derivative amounts excluded from the assessment of effectiveness for foreign currency contracts designated as net investment hedges recognized in interest expense for year ended December 31, 2018 were gains of $27 million.

The pre-tax effect of the periodic receipt of fixed interest and payment of variable interest associated with our fixed-for-floating interest rate swaps resulted in an interest expense of $5 million for the year ended December 31, 2018, and reduced interest expense by$23 million and $21 million for the years ended December 31, 2017 and 2016, respectively.

Investments in Available-for-Sale Debt Securities—The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our available-for-sale debt securities that are outstanding as of December 31, 2018 and 2017:

	December 31, 2018
Millions of dollars	Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Available-for-sale debt securities:
Bonds	$	567			$	—			$	—			$	567
Total available-for-sale debt securities	$	567			$	—			$	—			$	567

	December 31, 2017
Millions of dollars	Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Available-for-sale securities:
Commercial paper	$	180			$	—			$	—			$	180
Bonds	630				—				—				630
Certificates of deposit	150				—				—				150
Limited partnership investments	350				2				(5		)		347
Total available-for-sale securities	$	1,310			$	2			$	(5	)		$	1,307

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In 2017 our equity securities classified as available-for-sale primarily consist of our limited partnership investments, which include investments in, among other things, equities and equity related securities, debt securities, credit instruments, global interest rate products, currencies, commodities, futures, options, warrants and swaps. These investments may be redeemed at least monthly with advance notice ranging up to ninety days. The fair value of these funds uses net asset value (“NAV”) per share of the respective pooled fund investment.

At December 31, 2018 and 2017, we had marketable securities classified as Cash and cash equivalents of $19 million and $1,035 million, respectively.

No losses related to other-than-temporary impairments of our debt security investments have been recorded in Accumulated other comprehensive loss during the years ended December 31, 2018, 2017 and 2016.

As of December 31, 2018, bonds classified as available-for-sale debt securities had maturities between two and twenty-five months.

The proceeds from maturities and sales of our available-for-sale debt securities during the years ended December 31, 2018, 2017 and 2016 are summarized in the following table:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Proceeds from maturities of securities	$	423			$	499			$	674

No gain or loss was realized in connection with the sales of our available-for-sale debt securities during the years ended December 31, 2018, 2017, and 2016, respectively.

We use the specific identification method to identify the cost of the securities we sell and the amounts we reclassify out of Accumulated other comprehensive loss into earnings.

The following table summarizes the fair value and unrealized losses related to available-for-sale debt securities that were in a continuous unrealized loss position for less than and greater than twelve months as of December 31, 2018, 2017 and 2016:

	December 31, 2018
	Less than 12 months								Greater than 12 months
Millions of dollars	Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Available-for-sale debt securities:
Bonds	$	118			$	(1	)		$	45			$	—

	December 31, 2017
	Less than 12 months								Greater than 12 months
Millions of dollars	Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Available-for-sale securities:
Limited partnership investments	$	117			$	(5	)		$	—			$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31, 2016
	Less than 12 months								Greater than 12 months
Millions of dollars	Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Available-for-sale securities:
Limited partnership investments	$	—			$	—			$	105			$	(3	)

Investments in Equity Securities—Our equity securities primarily consist of our limited partnership investments, which include investments in, among other things, equities and equity related securities, debt securities, credit instruments, global interest rate products, currencies, commodities, futures, options, warrants and swaps. These investments may be redeemed at least monthly with advance notice ranging up to ninety days. The fair value of these funds uses net asset value (“NAV”) per share of the respective pooled fund investment. These investments had a notional amount of $322 million and a fair value of $325 million at December 31, 2018.

The following table summarizes the portion of unrealized gains and losses for the equity securities that are outstanding as of December 31, 2018:

Millions of dollars
Net gains recognized during the period							$	11
Less: Net gains recognized during the period on securities sold							5
Unrealized gains recognized during the period							$	6

16. Pension and Other Postretirement Benefits

We have defined benefit pension plans which cover employees in the U.S. and various non-U.S. countries. We also sponsor postretirement benefit plans other than pensions that provide medical benefits to certain of our U.S., Canadian, and French employees. In addition, we provide other postemployment benefits such as early retirement and deferred compensation severance benefits to employees of certain non-U.S. countries. We use a measurement date of December 31 for all of our benefit plans.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides a reconciliation of projected benefit obligations, plan assets and the funded status of our U.S. and non-U.S. defined benefit pension plans:

	Year Ended December 31,
	2018								2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Change in benefit obligation:
Benefit obligation, beginning of period	$	1,924			$	1,511			$	1,846			$	1,491
Service cost	51				35				47				39
Interest cost	60				32				60				23
Actuarial loss (gain)	(147		)		23				104				(174		)
Plan amendments	—				4				—				12
Benefits paid	(129		)		(38		)		(133		)		(31		)
Participant contributions	—				1				—				1
Settlement	(10		)		(20		)		—				(30		)
Business combination	3				192				—				—
Foreign exchange effects	—				(81		)		—				180
Benefit obligation, end of period	1,752				1,659				1,924				1,511
Change in plan assets:
Fair value of plan assets, beginning of period	1,680				852				1,571				824
Actual return on plan assets	(37		)		18				195				(60		)
Company contributions	44				56				47				56
Benefits paid	(129		)		(38		)		(133		)		(31		)
Participant contributions	—				1				—				1
Settlement	(10		)		(20		)		—				(30		)
Business combination	—				48				—				—
Foreign exchange effects	—				(46		)		—				92
Fair value of plan assets, end of period	1,548				871				1,680				852
Funded status of continuing operations, end of period	$	(204	)		$	(788	)		$	(244	)		$	(659	)

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Amounts recognized in the Consolidated Balance Sheets consist of:
Prepaid benefit cost, long-term	$	10			$	29			$	8			$	25
Accrued benefit liability, current	—				(27		)		—				(24		)
Accrued benefit liability, long-term	(214		)		(790		)		(252		)		(660		)
Funded status of continuing operations, end of period	$	(204	)		$	(788	)		$	(244	)		$	(659	)

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Amounts recognized in Accumulated other comprehensive loss:
Actuarial and investment loss	$	374			$	251			$	385			$	234
Prior service cost	2				11				2				8
Balance, end of period	$	376			$	262			$	387			$	242

The following additional information is presented for our U.S. and non-U.S. pension plans as of December 31:

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Accumulated benefit obligation for defined benefit plans	$	1,708			$	1,528			$	1,887			$	1,406

Pension plans with projected benefit obligations in excess of the fair value of assets are summarized as follows at December 31:

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Projected benefit obligations	$	1,618			$	1,456			$	1,776			$	1,285
Fair value of assets	1,404				639				1,524				601

Pension plans with accumulated benefit obligations in excess of the fair value of assets are summarized as follows at December 31:

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Accumulated benefit obligations	$	1,578			$	904			$	1,742			$	1,190
Fair value of assets	1,404				198				1,524				601

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides the components of net periodic pension costs:

	U.S. Plans
	Year Ended December 31,
Millions of dollars	2018				2017				2016
Net Periodic Pension Cost:
Service cost	$	51			$	47			$	44
Interest cost	60				60				88
Actual return on plan assets	37				(195		)		(100		)
Less—return in excess of (less than) expected return	(159		)		74				(39		)
Expected return on plan assets	(122		)		(121		)		(139		)
Settlement loss	2				—				58
Prior service cost amortization	—				1				1
Actuarial and investment loss amortization	21				20				20
Net periodic benefit cost	$	12			$	7			$	72
	Non-U.S. Plans
	Year Ended December 31,
Millions of dollars	2018				2017				2016
Net Periodic Pension Cost:
Service cost	$	35			$	39			$	32
Interest cost	32				23				32
Actual return on plan assets	(18		)		60				(146		)
Less—return in excess of (less than) expected return	(6		)		(79		)		122
Expected return on plan assets	(24		)		(19		)		(24		)
Settlement loss	1				2				3
Prior service cost amortization	1				2				—
Actuarial and investment loss amortization	10				16				8
Net periodic benefit cost	$	55			$	63			$	51

Lump sum benefit payments of $288 million were made from existing plan assets in 2016. These payments in total exceeded annual service and interest cost, resulting in pension settlement expense of $58 million. A significant portion of the lump sum payments were due to a voluntary lump sum program to certain former employees in select U.S. pension plans.

Our goal is to manage pension investments over the longer term to achieve optimal returns with an acceptable level of risk and volatility. The assets are externally managed by professional investment firms and performance is evaluated continuously against specific benchmarks.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The actual and target asset allocations for our plans are as follows:

	2018						2017
Millions of dollars	Actual			Target			Actual			Target
Canada
Equity securities	49	%		50	%		50	%		50	%
Fixed income	51	%		50	%		50	%		50	%
United Kingdom—Lyondell Chemical Plans
Equity securities	49	%		50	%		49	%		50	%
Fixed income	51	%		50	%		51	%		50	%
United Kingdom—Basell Plans
Equity securities	49	%		50	%		49	%		50	%
Fixed income	51	%		50	%		51	%		50	%
United Kingdom—A. Schulman Plans
Growth assets	94	%		89	%		—			—
Matching assets	6	%		11	%		—			—
United States
Equity securities	32	%		32	%		36	%		32	%
Fixed income	39	%		38	%		37	%		38	%
Alternatives	29	%		30	%		27	%		30	%

During 2017, Netherlands Defined Benefits pension plans modified their insurance arrangements. As a result, the plan assets were transferred to the insurer for investment in its pooled asset portfolio, and treated as a nonparticipating insurance contract. The associated plan assets underlying the insurance arrangement are measured at the cash surrender value, which is derived primarily from an actuarial determination of the discounted benefits cash flows. The transfer of plan assets resulted in a change in classification in the fair value hierarchy from Level 2 in 2016 for fixed income securities to Level 3 in 2017. These plan assets at December 31, 2017 were valued at $527 million and has reduced to $524 million at December 31, 2018. The change is due to actual return on plan assets of $10 million, contributions net of benefit payments of $12 million offset by $25 million of foreign exchange depreciation.

We estimate the following contributions to our pension plans in 2019:

Millions of dollars		U.S.				Non-U.S.
Defined benefit plans		$	46			$	62
Multi-employer plans		—				8
Total		$	46			$	70

As of December 31, 2018, future expected benefit payments by our pension plans which reflect expected future service, as appropriate, are as follows:

Millions of dollars	U.S.				Non-U.S.
2019	$	140			$	59
2020	140				56
2021	141				57
2022	141				58
2023	141				61
2024 through 2028	677				329

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables set forth the principal assumptions on discount rates, projected rates of compensation increase and expected rates of return on plan assets, where applicable. These assumptions vary for the different plans, as they are determined in consideration of local conditions.

The assumptions used in determining the net benefit liabilities for our pension plans were as follows at December 31:

	2018						2017
	U.S.			Non-U.S.			U.S.			Non-U.S.
Weighted average assumptions:
Discount rate	4.51	%		2.07	%		3.73	%		2.13	%
Rate of compensation increase	4.83	%		2.54	%		4.00	%		2.94	%

The assumptions used in determining net benefit costs for our pension plans were as follows:

	Year Ended December 31,
	2018						2017						2016
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Weighted average assumptions for the year:
Discount rate	3.73	%		2.13	%		4.20	%		1.52	%		4.38	%		2.70	%
Expected return on plan assets	7.50	%		2.92	%		8.00	%		2.15	%		8.00	%		3.37	%
Rate of compensation increase	4.00	%		2.94	%		4.00	%		2.93	%		4.00	%		3.15	%

The discount rate assumptions reflect the rates at which the benefit obligations could be effectively settled, based on the yields of high quality long-term bonds where the term closely matches the term of the benefit obligations. At the beginning of 2017, we changed the approach used to measure service and interest costs for pension and other postretirement benefits under significant U.S. plans. For 2016, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2017, we measured service and interest costs by applying the specific spot rates along that same yield curve to the plans’ projected cash flows. We believe the new approach provides a more precise measurement of service and interest costs. This change did not affect the measurement of our plan obligations. We will account for this change as a change in accounting estimate and, accordingly, will account for it on a prospective basis. The weighted average expected long-term rate of return on assets in our U.S. plans of 7.50% is based on the average level of earnings that our independent pension investment adviser had advised could be expected to be earned over a fifteen to twenty year time period consistent with the plans’ target asset allocation, historical capital market performance, historical plan performance (since the 1997 inception of the U.S. Master Trust) and a forecast of expected future asset returns. The weighted average expected long-term rate of return on assets in our non-U.S. plans of 2.92% is based on expectations and asset allocations that vary by region. We review these long-term assumptions on a periodic basis.

In the U.S. plans, the expected rate of return was derived based on the target asset allocation of 32% equity securities (7.5% expected return), 38% fixed income securities (5.5% expected return), and 30% alternative investments (9.5% expected return). In the non-U.S. plans, the investments consist primarily of fixed income securities whose expected rates of return range from 2.50% to 5.75%.

The following table reflects the actual annualized total returns for the periods ended December 31, 2018:

					Annualized
		December 31, 2018			One Year			Three Years			Five Years			Ten Years
U.S. plan assets		(1.91	)%		(1.91	)%		5.81	%		4.65	%		9.31	%
Non-U.S. plan assets		0.89	%		0.89	%		9.65	%		8.97	%		8.60	%

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Actual rates of return may differ from the expected rate due to the volatility normally experienced in capital markets. The goal is to manage the investments over the long term to achieve optimal returns with an acceptable level of risk and volatility in order to meet the benefit obligations of the plans as they come due.

Our pension plans have not directly invested in securities of LyondellBasell N.V., and there have been no significant transactions between any of the pension plans and the Company or related parties thereof.

The pension investments that are measured at fair value as of December 31, 2018 and 2017 are summarized below:

	December 31, 2018
Millions of dollars	Fair Value				Level 1				Level 2				Level 3
U.S.
Common and preferred stock	$	330			$	330			$	—			$	—
Commingled funds measured at net asset value	411
Fixed income securities	204				—				204				—
Real estate measured at net asset value	107
Hedge funds measured at net asset value	241
Private equity measured at net asset value	108
U.S. government securities	133				133				—				—
Cash and cash equivalents	26				26				—				—
Total U.S. Pension Assets	$	1,560			$	489			$	204			$	—

	December 31, 2018
Millions of dollars	Fair Value				Level 1				Level 2				Level 3
Non-U.S.
Common stock	$	—			$	—			$	—			$	—
Commingled funds measured at net asset value	298
Fixed income securities	—				—				—				—
Insurance arrangements	570				—				—				570
Cash and cash equivalents	2				2				—				—
Total Non-U.S. Pension Assets	$	870			$	2			$	—			$	570
	December 31, 2017
Millions of dollars	Fair Value				Level 1				Level 2				Level 3
U.S.
Common and preferred stock	$	410			$	410			$	—			$	—
Commingled funds measured at net asset value	410
Fixed income securities	225				—				225				—
Real estate measured at net asset value	102
Hedge funds measured at net asset value	253
Private equity measured at net asset value	94
U.S. government securities	148				148				—				—
Cash and cash equivalents	34				34				—				—
Total U.S. Pension Assets	$	1,676			$	592			$	225			$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31, 2017
Millions of dollars	Fair Value				Level 1				Level 2				Level 3
Non-U.S.
Common stock	$	—			$	—			$	—			$	—
Commingled funds measured at net asset value	297
Fixed income securities	—				—				—				—
Insurance arrangements	549				—				—				549
Cash and cash equivalents	5				5				—				—
Total Non-U.S. Pension Assets	$	851			$	5			$	—			$	549

The fair value measurements of the investments in certain entities that calculate net asset value per share as of December 31, 2018 are as follows:

Millions of dollars	Fair Value				Unfunded Commitments				Remaining Life		Redemption Frequency (if currently eligible)		Trade to Settlement Terms		Redemption Notice Period
U.S.
Commingled fund investing in Domestic Equity	$	112			$	—			N/A		daily		1 to 3 days		3 to 4 days
Commingled fund investing in International Equity	58				—				N/A		daily		1 to 3 days		3 days
Commingled fund investing in Fixed Income	241				—				N/A		daily		1 to 3 days		3 to 7 days
Real Estate	107				8				10 years		quarterly		15 to 25 days		45 to 90 days
Hedge Funds	241				—				N/A		quarterly		10 to 30 days		20 to 90 days
Private Equity	108				76				10 years		Not eligible		N/A		N/A
Total U.S.	$	867			$	84

Millions of dollars	Fair Value				Unfunded Commitments				Remaining Life		Redemption Frequency (if currently eligible)		Trade to Settlement Terms		Redemption Notice Period
Non-U.S.
Commingled fund investing in Domestic Equity	$	33			$	—			N/A		1 to 7 days		1 to 3 days		1 to 3 days
Commingled fund investing in International Equity	122				—				N/A		1 to 7 days		1 to 3 days		1 to 3 days
Commingled fund investing in Fixed Income	143				—				N/A		daily		1 to 3 days		3 days
Total Non-U.S.	$	298			$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value measurements of the investments in certain entities that calculate net asset value per share as of December 31, 2017 are as follows:

Millions of dollars	Fair Value				Unfunded Commitments				Remaining Life		Redemption Frequency (if currently eligible)		Trade to Settlement Terms		Redemption Notice Period
U.S.
Commingled fund investing in Domestic Equity	$	106			$	—			N/A		daily		1 to 3 days		3 to 4 days
Commingled fund investing in International Equity	61				—				N/A		daily		1 to 3 days		3 days
Commingled fund investing in Fixed Income	243				—				N/A		daily		1 to 3 days		3 to 7 days
Real Estate	102				12				10 years		quarterly		15 to 25 days		45 to 90 days
Hedge Funds	253				—				N/A		quarterly		10 to 30 days		20 to 90 days
Private Equity	94				92				10 years		Not eligible		N/A		N/A
Total U.S.	$	859			$	104

Millions of dollars	Fair Value				Unfunded Commitments				Remaining Life		Redemption Frequency (if currently eligible)		Trade to Settlement Terms		Redemption Notice Period
Non-U.S.
Commingled fund investing in Domestic Equity	$	29			$	—			N/A		1 to 7 days		1 to 3 days		1 to 3 days
Commingled fund investing in International Equity	119				—				N/A		1 to 7 days		1 to 3 days		1 to 3 days
Commingled fund investing in Fixed Income	149				—				N/A		daily		1 to 3 days		3 days
Total Non-U.S.	$	297			$	—

Multi-employer Plan—The Company participates in a multi-employer arrangement with Pensionskasse der BASF WaG V.VaG (“Pensionskasse”) which provides for benefits to the majority of our employees in Germany. Up to a certain salary level, the benefit obligations are covered by contributions of the Company and the employees to the plan. Contributions made to the multi-employer plan are expensed as incurred.

The following table provides disclosure related to the Company’s multi-employer plan:

	Company Contributions
Millions of dollars	2018				2017				2016
Pensionskasse(a)	$	8			$	27			$	7

(a) The Company-specific plan information for the Pensionskasse is not publicly available and the plan is not subject to a collective-bargaining agreement. The plan provides fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the Pensionskasse is underfunded, the future contributions to the plan may increase and may be used to fund retirement benefits for employees related to other employers. The Pensionskasse financial statements for the years ended December 31, 2017 and 2016 indicated total assets of $9,093 million and $7,897 million, respectively; total actuarial present value of accumulated plan benefits of $8,747 million and $7,559 million, respectively; and total contributions

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for all participating employers of $653 million and $246 million, respectively. Our plan contributions did not exceed 5 percent of the total contributions in 2018, 2017 or 2016.

Other Postretirement Benefits—We sponsor unfunded health care and life insurance plans covering certain eligible retired employees and their eligible dependents. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverage. Life insurance benefits are generally provided by insurance contracts. We retain the right, subject to existing agreements, to modify or eliminate these benefits.

The following table provides a reconciliation of benefit obligations of our unfunded other postretirement benefit plans:

	Year Ended December 31,
	2018								2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Change in benefit obligation:
Benefit obligation, beginning of period	$	280			$	62			$	276			$	67
Service cost	2				2				3				2
Interest cost	9				1				9				1
Actuarial (gain) loss	(46		)		(3		)		6				(15		)
Benefits paid	(26		)		(1		)		(21		)		(1		)
Participant contributions	6				—				7				—
Business combination	9				—				—				—
Foreign exchange effects	—				(2		)		—				8
Benefit obligation, end of period	234				59				280				62
Change in plan assets:
Fair value of plan assets, beginning of period	—				—				—				—
Employer contributions	21				1				14				1
Participant contributions	5				—				7				—
Benefits paid	(26		)		(1		)		(21		)		(1		)
Fair value of plan assets, end of period	—				—				—				—
Funded status, end of period	$	(234	)		$	(59	)		$	(280	)		$	(62	)

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Amounts recognized in the Consolidated Balance Sheets consist of:
Accrued benefit liability, current	$	(18	)		$	(1	)		$	(18	)		$	(1	)
Accrued benefit liability, long-term	(216		)		(58		)		(262		)		(61		)
Funded status, end of period	$	(234	)		$	(59	)		$	(280	)		$	(62	)

	December 31, 2018								December 31, 2017
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Amounts recognized in Accumulated other comprehensive loss:
Actuarial and investment income (loss)	$	65			$	(15	)		$	19			$	(19	)
Balance, end of period	$	65			$	(15	)		$	19			$	(19	)

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides the components of net periodic other postretirement benefit costs:

	U.S. Plans
	Year Ended December 31,
Millions of dollars	2018				2017				2016
Net Periodic Other Postretirement Cost:
Service cost	$	2			$	3			$	3
Interest cost	9				9				11
Actuarial loss amortization	—				—				—
Net periodic benefit cost	$	11			$	12			$	14
	Non-U.S. Plans
	Year Ended December 31,
Millions of dollars	2018				2017				2016
Net Periodic Other Postretirement Cost:
Service cost	$	2			$	2			$	2
Interest cost	1				1				2
Actuarial loss amortization	1				3				2
Net periodic benefit cost	$	4			$	6			$	6

The following table sets forth the assumed health care cost trend rates:

	U.S. Plans
	December 31,
	2018						2017
Assumed health care trend rate:
Immediate trend rate	6.4				%		6.7				%
Ultimate trend rate (the rate to which the cost trend rate is assumed to decline)	4.5				%		4.5				%
Year that the rate reaches the ultimate trend rate	2038						2038
	Non-U.S. Plans
	Canada						France
	December 31,						December 31,
	2018			2017			2018			2017
Assumed health care trend rate:
Immediate trend rate	5.5	%		6.0	%		4.5	%		4.7	%
Ultimate trend rate (the rate to which the cost trend rate is assumed to decline)	4.5	%		4.5	%		4.5	%		4.7	%
Year that the rate reaches the ultimate trend rate	2021			2021			—			—

The health care cost trend rate assumption does not typically have a significant effect on the amounts reported due to limits on maximum contribution levels to the medical plans. However, changing the assumed health care cost trend rates by one percentage point in each year would increase or decrease the accumulated other postretirement benefit liability as of December 31, 2018 by $17 million and $12 million, respectively, for non-U.S. plans and by less than $1 million for U.S. plans

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and would not have a material effect on the aggregate service and interest cost components of the net periodic other postretirement benefit cost for the year then ended.

The assumptions used in determining the net benefit liabilities for our other postretirement benefit plans were as follows:

	December 31,
	2018						2017
	U.S.			Non-U.S.			U.S.			Non-U.S.
Weighted average assumptions:
Discount rate	4.47	%		2.30	%		3.66	%		2.48	%
Rate of compensation increase	4.50	%		—			4.00	%		—

The assumptions used in determining the net benefit costs for our other postretirement benefit plans were as follows:

	Year Ended December 31,
	2018						2017						2016
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Weighted average assumptions for the year:
Discount rate	3.66	%		2.48	%		4.07	%		1.69	%		4.23	%		2.69	%
Rate of compensation increase	4.00	%		—			4.00	%		—			4.00	%		—

As of December 31, 2018, future expected benefit payments by our other postretirement benefit plans, which reflect expected future service, as appropriate, were as follows:

Millions of dollars	U.S.				Non-U.S.
2019	$	18			$	1
2020	18				1
2021	18				1
2022	18				1
2023	18				1
2024 through 2028	84				8

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accumulated Other Comprehensive Loss—The following pre-tax amounts were recognized in Accumulated other comprehensive loss as of and for the years ended December 31, 2018 and 2017:

	Pension Benefits								Other Benefits
Millions of dollars	Actuarial (Gain) Loss				Prior Service Cost (Credit)				Actuarial (Gain) Loss				Prior Service Cost (Credit)
December 31, 2016	$	722			$	1			$	12			$	—
Arising during the period	(65		)		12				(9		)		—
Amortization	(36		)		(3		)		(3		)		—
Settlement loss	(2		)		—				—				—
December 31, 2017	619				10				—				—
Arising during the period	40				4				(49		)		—
Amortization	(31		)		(1		)		(1		)		—
Settlement loss	(3		)		—				—				—
December 31, 2018	$	625			$	13			$	(50	)		$	—

In 2018, $40 million of pension benefits actuarial loss primarily reflects $126 million of gains due to changes in discount rate assumption offset by $166 million of losses due to asset experience. There were $49 million of other postretirement benefits actuarial gains primarily due to $19 million of discount rate assumption changes and $30 million of changes due to favorable liability experience, and other immaterial items. In 2017, $65 million of pension benefits actuarial gain primarily reflects $72 million of gains due to changes in discount rate assumption offset by $7 million of losses due to asset experience (actual asset return compared to expected return). There were $9 million of other postretirement benefits actuarial gains due to $2 million of discount rate assumption changes, offset by a gain of $6 million of changes due to favorable liability experience, and other immaterial items.

Deferred income taxes related to amounts in Accumulated other comprehensive income (loss) include provisions of $144 million and $208 million as of December 31, 2018 and 2017, respectively.

At December 31, 2018, Accumulated other comprehensive income (loss) of $12 million represents net actuarial and investment losses and $1 million of prior service cost related to non-U.S. pension plans that are expected to be recognized as a component of net periodic benefit cost in 2019. There are $18 million of net actuarial and investment losses in AOCI at December 31, 2018 for U.S. pension plans expected to be recognized in net periodic benefit cost in 2019. At December 31, 2018, AOCI included $1 million of net actuarial loss related to non-U.S. other postretirement benefits and $5 million net actuarial gain related to U.S. other post-retirement benefits that is expected to be recognized in net periodic benefit cost in 2019.

Defined Contribution Plans—Most employees in the U.S. and certain non-U.S. countries are eligible to participate in defined contribution plans (“Employee Savings Plan”) by contributing a portion of their compensation. We make employer contributions, such as matching contributions, to certain of these plans. The Company also has a nonqualified deferred compensation plan that covers senior management in the U.S. This plan was amended in April 2013 to provide for company contributions on behalf of certain eligible employees who earn base pay above the IRS annual compensation limit.

The following table provides the company contributions to the Employee Savings Plans:

	Company Contributions
	2018								2017								2016
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.				U.S.				Non-U.S.
Employee Savings Plans	$	40			$	5			$	36			$	5			$	35			$	7

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17. Incentive and Share-Based Compensation

We are authorized to grant restricted stock units, stock options, performance share units, and other cash and stock awards under our Long-Term Incentive Plan (“LTIP”). The Compensation Committee oversees our equity award grants, the type of awards, the required performance measures, and the timing and duration of each grant. The maximum number of shares of our common stock reserved for issuance under the LTIP is 22,000,000. As of December 31, 2018, there were 4,992,577 shares remaining available for issuance assuming maximum payout for performance share units awards. When options are exercised and awards are paid out, shares are issued from our treasury shares.

Total share-based compensation expense and the associated tax benefits are as follows for the years ended December 31:

Millions of dollars	2018				2017				2016
Compensation Expense:
Restricted stock units	$	15			$	13			$	10
Stock options	7				7				7
Qualified performance awards	—				—				(3		)
Performance share units	17				35				24
Total	$	39			$	55			$	38
Tax Benefit:
Restricted stock units	$	4			$	5			$	4
Stock options	2				2				2
Qualified performance awards	—				—				(1		)
Performance share units	4				12				8
Total	$	10			$	19			$	13

Beginning in 2017, we elected to recognize forfeitures as they occur for stock-based compensation.

Restricted Stock Unit Awards (“RSUs”)—RSUs generally entitle the recipient to be paid out an equal number of ordinary shares on the third anniversary of the grant date. RSUs, which are subject to customary partial or accelerated vesting or forfeiture in the event of certain termination events, are accounted for as an equity award with compensation cost recognized in the income statement ratably over the vesting period.

In 2015, 190,399 RSUs were granted to the Chief Executive Officer (“CEO”) and three other executive officers. These RSUs vest in annual tranches with 10% vested after one year and an additional 15% vested after two years and the remaining vesting in equal tranches after each of the third, fourth and fifth years. Compensation cost for these awards is recognized using the graded vesting method.

The holders of all RSUs are entitled to dividend equivalents settled in the form of cash payments to the holder no later than March 15, following the year in which dividends are paid, as long as the participant remains employed at the time of the dividend payment. See the “Dividend Distribution” section of Note 20 for the per share amount of dividend equivalent payments made to the holders of RSUs during 2018, 2017 and 2016. Total dividend equivalent payments were $2 million in 2018 and $1 million in 2017 and 2016.

RSUs are valued at the market price of the underlying stock on the date of grant. The weighted average grant date fair value for RSUs granted during the years ended December 31, 2018, 2017 and 2016 was $108.52, $91.14 and $79.77, respectively. The total fair value of RSUs vested during 2018, 2017 and 2016 was $13 million, $8 million and $16 million, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes RSU activity for the year ended December 31, 2018:

	Number of Units			Weighted Average Grant Date Fair Value (per share)
Thousands of units, except per share amounts
Outstanding at January 1, 2018	377			$	85.17
Granted	213			108.52
Vested	(115	)		84.27
Forfeited	(13	)		101.67
Outstanding at December 31, 2018	462			$	95.69

As of December 31, 2018, the unrecognized compensation cost related to RSUs was $21 million, which is expected to be recognized over a weighted average period of 2 years.

Stock Option Awards (“Stock Options”)—Stock Options are granted with an exercise price equal to the market price of our ordinary shares at the date of grant. The awards generally have a three-year vesting period that vests in equal increments on the first, second and third anniversary of the grant date. The awards have a contractual term of ten years, subject to customary partial or accelerated vesting or forfeiture in the event of certain termination events. Stock Options are accounted for as equity awards with compensation cost recognized using the graded vesting method. None of the Stock Options are designed to qualify as incentive Stock Options as defined in Section 422 of the Internal Revenue Code.

In 2015, 457,555 Stock Options were granted to the CEO and three other executive officers. These Stock Options vest in annual tranches with 10% vested after one year and an additional 15% vested after two years and the remaining vesting in equal tranches after each of the third, fourth, and fifth years.

The fair value of each Stock Option is estimated, based on several assumptions, on the date of grant using the Black-Scholes option valuation model. The principal assumptions utilized in valuing Stock Options include the expected stock price volatility (based on our historical stock price volatility over the expected term); the expected dividend yield; and the risk-free interest rate (an estimate based on the yield of a United States Treasury zero coupon bond with a maturity equal to the expected life of the option).

The expected term of all Stock Options granted is estimated based on a simplified approach. In 2010, when the majority of our Stock Options were granted, we determined that the simplified method was appropriate because of the life of LyondellBasell N.V. and its relative stage of development. Similarly, we did not possess exercise patterns similar to our situation. The Stock Options that have been granted since 2010 have been limited in number and have occurred during periods of substantial share price volatility.

Weighted average fair values of Stock Options granted in each respective year and the assumptions used in estimating those fair values are as follows:

	2018				2017				2016
Weighted average fair value	$	21.58			$	21.55			$	20.39
Fair value assumptions:
Dividend yield	4.0		%		4.0		%		3.0-4.0%
Expected volatility	27.8-29.0%				34.9-35.1%				35.3-36.0%
Risk-free interest rate	2.6-2.9%				2.10-2.29%				1.14-1.93%
Weighted average expected term, in years	6.0				6.0				6.0

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes Stock Option activity for the year ended December 31, 2018:

	Number of Shares (in thousands)			Weighted Average Exercise Price				Weighted Average Remaining Term		Aggregate Intrinsic Value (millions of dollars)
Outstanding at January 1, 2018	1,019			$	82.93
Granted	336			109.03
Exercised	(64	)		69.36
Forfeited	(9	)		100.91
Expired	(1	)		109.09
Outstanding at December 31, 2018	1,281			$	90.30			7.4 years		$	4
Exercisable at December 31, 2018	557			$	83.00			6.5 years		$	3

The range of exercise prices for Stock Options outstanding as of December 31, 2018, 2017 and 2016 was $13.11 to $113.39, $13.11 to $113.03 and $12.61 to $113.03, respectively.

The aggregate intrinsic value of Stock Options exercised during the years ended December 31, 2018, 2017 and 2016 was $3 million, $6 million and $1 million, respectively.

As of December 31, 2018, the unrecognized compensation cost related to Stock Options was $5 million, which is expected to be recognized over a one-year period. During 2018, cash received from the exercise of Stock Options was $4 million. There was $1 million tax benefit associated with these exercises.

Performance Share Units Awards (“PSUs”) and Qualified Performance Awards (“QPAs”)—PSUs and QPAs are granted under the LTIP and have three-calendar year performance periods. They are granted in the beginning of each performance period, provide a target number of share units, and ultimately payout between 0% and 200% of target. Each unit is equivalent to one share of our common stock. These share awards are subject to customary partial or accelerated vesting or forfeiture in the event of certain termination events.

For PSUs granted beginning in 2017, the final number of shares payable is determined after the performance period based on the relative Total Shareholder Return (“TSR”). TSR is an objective calculation that takes into account LYB’s TSR rank within its peer group and whether LYB’s specific TSR is positive or negative. Since the final payout is based on objective criteria established at the grant date, the awards are treated as equity awards. Compensation expense during the three-calendar year performance period is accrued on a straight-line basis. PSUs are valued using a Monte-Carlo simulation payout value on grant date.

For PSUs granted prior to 2017 and QPAs, the final number of shares payable is determined at the end of the performance period by the Compensation Committee based generally on subjective criteria established at the beginning of the performance period. Since the service-inception date precedes the grant date, these share awards are treated as a liability award until the grant date and compensation expense during the performance period is accrued on a straight-line basis subject to fair value adjustments. PSUs granted prior to 2017 and QPAs are valued at market price of the underlying stock on the date of payment.

PSUs granted beginning in 2016 accrue dividend equivalent units. These dividend equivalent units will be converted to shares upon payment at the end of the performance period and are classified in Accrued and Other liabilities on the Consolidated Balance Sheets. Dividend equivalents for PSUs granted in 2016 are recorded in compensation expense while PSUs granted beginning in 2017 are recorded in Retained earnings.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes PSU activity classified as equity awards for the year ended December 31, 2018:

	Number of Units			Weighted Average Grant Date Fair Value (per share)
Thousands of units, except per share amounts
Outstanding at January 1, 2018	224			$	93.28
Granted	219			89.32
Forfeited	(13	)		91.36
Outstanding at December 31, 2018	430			$	91.33

The assumptions used in the Monte Carlo simulation to estimate the fair value of PSUs granted in 2017 and 2018 are as follows:

	2018			2017
Expected volatility of LyondellBasell N.V. common stock	27.15	%		30.98	%
Expected volatility of peer companies	17.45-42.99%			16.98-39.89%
Average correlation coefficient of peer companies	0.50			0.51
Risk-free interest rate	2.40	%		1.46	%

As of December 31, 2018, the unrecognized compensation cost related to PSUs assuming target payout was $21 million, which is expected to be recognized over a weighted average period of 2 years.

The weighted average grant date fair value for PSUs classified as liability awards granted during the years ended December 31, 2018 and 2017 was 109.09 and 92.69 respectively. The total fair value of PSUs vested during 2018 and 2017 was $25 million and $21 million, respectively.

For grants made in 2013, executive officers were only eligible for QPAs while eligible employees could elect to receive QPAs. The weighted average grant date fair value for QPAs granted during the year ended December 31, 2016 was $77.93. The total fair value of QPAs vested during 2016 was $20 million.

Employee Stock Purchase Plan

We have an Employee Share Purchase Plan (“ESPP”) which includes a 10% discount and a look-back provision. These provisions allow participants to purchase our stock at a discount on the lower of the fair market value at the beginning or end of the purchase period. As a result of the 10% discount and the look-back provision, the ESPP is considered a compensatory plan under generally accepted accounting principles.

18. Income Taxes

LyondellBasell Industries N.V. is tax resident in the United Kingdom pursuant to a mutual agreement procedure determination ruling between the Dutch and United Kingdom competent authorities and therefore subject solely to the United Kingdom corporate income tax system.

Through our subsidiaries, we have substantial operations world-wide and earn significant income in the U.S. Taxes are primarily paid on the earnings generated in various jurisdictions, including the U.S., The Netherlands, Germany, France, Italy and other countries. LyondellBasell Industries N.V. has little or no taxable income of its own because, as a holding company, it does not conduct any operations. Instead, the subsidiaries through which we operate incur tax obligations in the jurisdictions in which they operate.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We monitor income tax developments in countries where we conduct business. In 2017, the U.S. enacted “H.R.1”, also known as the “Tax Cuts and Jobs Act” (the “Tax Act”) materially impacting our Consolidated Financial Statements by, among other things, decreasing the tax rate, and significantly affecting future periods. The Tax Act reduced the federal corporate tax rate from 35% to 21% for years beginning after 2017, which resulted in the remeasurement of our U.S. net deferred income tax liabilities. As a result, we recognized a tax benefit of $819 million in 2017. Following adjustments made in 2018, the cumulative impact of the remeasurement of our U.S. net deferred income tax liabilities and tax accruals was an $814 million income tax benefit. Adjustments to the 2017 provisional amount were reported as a component of income tax expense in the reporting period in which the adjustments were identified.

To determine the full effects of the tax law for 2018, we are awaiting the finalization of several proposed U.S. Treasury regulations under the Tax Act that were issued during 2018, as well as additional regulations to be proposed and finalized pursuant to the U.S. Treasury’s expanded regulatory authority under the Tax Act. It is also possible that technical correction legislation concerning the Tax Act could retroactively affect tax liabilities for 2018. We will continue to analyze the Tax Act to determine the full effects of the new law as additional regulations are proposed and finalized.

Interest income earned by certain of our European subsidiaries through intercompany financings is either untaxed or taxed at rates substantially lower than the U.S. statutory rate. Tax regulations proposed in 2018 may affect tax deductible interest in the U.S. in future periods; however, we do not believe they will have a material impact as proposed. In addition, in 2016 the U.S. Treasury issued final Section 385 debt-equity regulations that impact our internal financings beginning in 2017. Pursuant to a 2017 Executive Order, the Treasury Department reviewed these regulations and determined that they should be retained, subject to further review following the enactment of U.S. tax reform. We are awaiting the U.S. Treasury’s review of the existing Section 385 debt-equity regulations which could impact our internal financings in future years as well as any final regulations impacting interest deductions under the Tax Act. In addition, there has been an increased attention, both in the U.S. and globally, to the tax practices of multinational companies, including the European Union’s state aid investigations, proposals by the Organization for Economic Cooperation and Development with respect to base erosion and profit shifting, and European Union tax directives. Such attention may result in further legislative changes that could adversely affect our tax rate. Other than the Tax Act, management does not believe that recent changes in income tax laws will have a material impact on our Consolidated Financial Statements, although new or proposed changes to tax laws could affect our tax liabilities in the future.

The significant components of the provision for income taxes are as follows:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Current:
U.S. federal	$	(89	)		$	543			$	421
Non-U.S.	404				595				557
State	38				47				51
Total current	353				1,185				1,029
Deferred:
U.S. federal	197				(637		)		339
Non-U.S.	48				22				20
State	15				28				(2		)
Total deferred	260				(587		)		357
Provision for income taxes before tax effects of other comprehensive income	613				598				1,386
Tax effects of elements of other comprehensive income:
Pension and postretirement liabilities	63				29				(21		)
Financial derivatives	16				(14		)		(96		)
Foreign currency translation	18				(33		)		(7		)
Unrealized gains (losses) from available-for-sale debt securities	—				(3		)		1
Total income tax expense in comprehensive income	$	710			$	577			$	1,263

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Since the proportion of U.S. revenues, assets, operating income and associated tax provisions is significantly greater than any other single taxing jurisdiction within the worldwide group, the reconciliation of the differences between the provision for income taxes and the statutory rate is presented on the basis of the U.S. statutory federal income tax rate of 21% as opposed to the United Kingdom statutory rate of 19% to provide a more meaningful insight into those differences. Our effective tax rate for the year ended December 31, 2018 is 11.5%. This summary is shown below:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Income before income taxes:
U.S.	$	2,795			$	2,438			$	2,511
Non-U.S.	2,516				3,055				2,722
Total	$	5,311			$	5,493			$	5,233
Income tax at U.S. statutory rate	$	1,115			$	1,923			$	1,832
Increase (reduction) resulting from:
Non-U.S. income taxed at different statutory rates	89				(164		)		(159		)
Remeasurement of U.S. net deferred tax liability	—				(819		)		—
State income taxes, net of federal benefit	53				40				24
Exempt income	(296		)		(385		)		(349		)
Uncertain tax positions	(320		)		28				39
U.S. manufacturing deduction	—				(57		)		(42		)
Other, net	(28		)		32				41
Income tax provision	$	613			$	598			$	1,386

Our 2016 income tax provision included a charge of $135 million for non-cash out of period adjustments from prior years which is reflected in Other, net in the table above. $74 million of the charge relates to a correction for the tax effects on our cross-currency swaps with the remainder relating primarily to adjustments for deferred tax liabilities associated with some of our consolidated subsidiaries. Management concluded that these adjustments were immaterial to all periods presented.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The deferred tax effects of tax loss and credit carryforwards (“tax attributes”) and the tax effects of temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements, reduced by a valuation allowance where appropriate, are presented below. The 2017 impact of re-measurement of the U.S. net deferred tax liability resulting from the U.S. enactment of the Tax Act is included in the various components of deferred income taxes.

	December 31,
Millions of dollars	2018				2017
Deferred tax liabilities:
Accelerated tax depreciation	$	1,809			$	1,523
Investment in joint venture partnerships	147				214
Intangible assets	151				48
Inventory	285				266
Other liabilities	22				26
Total deferred tax liabilities	2,414				2,077
Deferred tax assets:
Tax attributes	180				196
Employee benefit plans	334				315
Other assets	76				97
Total deferred tax assets	590				608
Deferred tax asset valuation allowances	(120		)		(96		)
Net deferred tax assets	470				512
Net deferred tax liabilities	$	1,944			$	1,565

	December 31,
Millions of dollars	2018				2017
Balance sheet classifications:
Deferred tax assets—long-term	$	31			$	90
Deferred tax liabilities—long-term	1,975				1,655
Net deferred tax liabilities	$	1,944			$	1,565

Deferred taxes on the unremitted earnings of certain equity joint ventures and subsidiaries of $96 million and $51 million at December 31, 2018 and 2017, respectively, have been provided. The increase is primarily related to the acquisition of A. Schulman subsidiaries for outside basis differences in jurisdictions without 100% participation exemptions and local withholding taxes.

At December 31, 2018 and 2017, we had total tax attributes available in the amount of $938 million and $784 million, respectively, for which a deferred tax asset was recognized at December 31, 2018 and 2017 of $180 million and $196 million, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The scheduled expiration of the tax attributes and the related deferred tax assets, before valuation allowance, as of December 31, 2018 are as follows:

Millions of dollars	Tax Attributes				Deferred Tax on Tax Attributes
2019	$	47			$	9
2020	13				1
2021	32				2
2022	21				2
2023	34				2
Thereafter	289				39
Indefinite	502				125
Total	$	938			$	180

The tax attributes are primarily related to operations in France, Canada, the United Kingdom, Spain, The Netherlands and the United States. The related deferred tax assets by primary jurisdictions are shown below:

	December 31,
Millions of dollars	2018				2017				2016
France	$	64			$	92			$	140
Canada	28				31				29
United Kingdom	36				17				16
Spain	11				32				33
The Netherlands	12				13				19
United States	14				10				16
Other	15				1				2
Total	$	180			$	196			$	255

To fully realize these net deferred tax assets, we will need to generate sufficient future taxable income in the countries where these tax attributes exist during the periods in which the attributes can be utilized. Based upon projections of future taxable income over the periods in which the attributes can be utilized and/or temporary differences can be reversed, management believes it is more likely than not that only $61 million of these deferred tax assets at December 31, 2018 will be realized.

Prior to the close of each reporting period, management considers the weight of all evidence, both positive and negative, to determine if a valuation allowance is necessary for each jurisdictions’ net deferred tax assets. We place greater weight on historical evidence over future predictions of our ability to utilize net deferred tax assets. We consider future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income in prior carryback year(s) if carryback is permitted under applicable law, as well as available prudent and feasible tax planning strategies that would, if necessary, be implemented to ensure realization of the net deferred tax asset.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the valuation allowances by primary jurisdiction is shown below, reflecting the valuation allowances for all the net deferred tax assets, including deferred tax assets for tax attributes and other temporary differences.

	December 31,
Millions of dollars	2018				2017				2016
France	$	23			$	25			$	22
Canada	28				32				30
United Kingdom	33				17				16
The Netherlands	12				12				12
United States	13				10				16
Other	11				—				—
	$	120			$	96			$	96

During 2018, the valuation allowance increased in the United Kingdom due to disallowed interest deductions where we do not expect to realize a future benefit. This increase also includes the addition of valuation allowances associated with A. Schulman entities where management assessed that deferred tax attributes are not likely to be realized.

During 2017, the valuation allowance decreased in the U.S. due to the remeasurement of our U.S. net deferred income tax liability. This reduction was offset by increases in the valuation allowances of other jurisdictions due primarily to currency translation adjustments.

During 2016, we released $19 million of our valuation allowance related to Spanish net deferred tax assets associated with operating losses, as Spanish operations were no longer in a three-year cumulative loss position and our projections indicated and management expected the operating losses to be fully utilized within the next nine years.

We continue to maintain a full valuation allowance against the net deferred tax asset in Canada. Given our operational structure in Canada and the relevant Canadian loss utilization rules, we do not expect to realize a future benefit related to the net deferred tax asset. We continue to maintain a valuation allowance against the net deferred tax asset in various immaterial jurisdictions based on recent cumulative book losses.

Tax benefits totaling $269 million, $544 million and $546 million relating to uncertain tax positions, which are reflected in Other liabilities, were unrecognized as of December 31, 2018, 2017 and 2016, respectively. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Balance, beginning of period	$	544			$	546			$	521
Additions for tax positions of current year	16				15				16
Additions for tax positions of prior years	23				3				11
Reductions for tax positions of prior years	(299		)		(20		)		(2		)
Settlements (payments/refunds)	(15		)		—				—
Balance, end of period	$	269			$	544			$	546

The majority of the 2018, 2017 and 2016 balances, if recognized, will affect the effective tax rate. We operate in multiple jurisdictions throughout the world, and our tax returns are periodically audited or subjected to review by tax authorities. We are currently under examination in a number of tax jurisdictions. As a result, there is an uncertainty in income taxes recognized in our financial statements. We may settle or appeal positions challenged by the tax authorities. In 2018, we entered into various audit settlements impacting specific uncertain tax positions. These audit settlements resulted in a $358 million non-cash benefit

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

to our effective tax rate consisting of the recognition of $299 million of previously unrecognized tax benefits as a reduction for tax positions of prior years and the release of $59 million of previously accrued interest. This non-cash reduction in unrecognized tax benefits is reflected on our Consolidated Balance Sheets in Other liabilities and on our Consolidated Statements of Cash Flows in Other operating activities.

The majority of the additions for tax positions of prior years are with respect to the A. Schulman acquisition on August 21, 2018.

We are no longer subject to any significant income tax examinations by tax authorities for the years prior to 2017 in the Netherlands, prior to 2010 in Italy, prior to 2005 in Germany, prior to 2010 in France, prior to 2016 in the United Kingdom, and prior to 2015 in the U.S., our principal tax jurisdictions. It is reasonably possible that, within the next twelve months, due to the settlement of uncertain tax positions with various tax authorities and the expiration of statutes of limitations, unrecognized tax benefits could decrease by up to approximately $190 million.

We recognize interest associated with unrecognized tax benefits in income tax expense. Income tax expense includes a benefit of interest and penalties totaling $47 million in the year ended December 31, 2018 and interest expense totaling $16 million in each of the years ended December 31, 2017 and December 31, 2016. We had accrued approximately $16 million, $63 million and $47 million for interest and penalties as of December 31, 2018, 2017 and 2016, respectively.

19. Commitments and Contingencies

Commitments—We have various purchase commitments for materials, supplies and services incident to the ordinary conduct of business, generally for quantities required for our businesses and at prevailing market prices. These commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements. At December 31, 2018, capital expenditure commitments were in incurred in our normal course of business, including commitments of approximately $685 million primarily related to building our new Hyperzone high-density polyethylene plant in La Porte, Texas and a world-scale PO/TBA plant on the Texas Gulf Coast.

Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on our Consolidated Financial Statements. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations.

Environmental Remediation—Our accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $90 million and $102 million as of December 31, 2018 and 2017, respectively. At December 31, 2018, the accrued liabilities for individual sites range from less than $1 million to $17 million. The remediation expenditures are expected to occur over a number of years, and not to be concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the activity in our accrued environmental liability included in “Accrued liabilities” and “Other liabilities:”

	Year Ended December 31,
Millions of dollars	2018				2017
Beginning balance	$	102			$	95
Additional provisions	—				—
Changes in estimates	4				11
Amounts paid	(13		)		(13		)
Foreign exchange effects	(3		)		9
Ending balance	$	90			$	102

Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation and dissolution of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third party claims relating to environmental and tax matters and various types of litigation. As of December 31, 2018, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.

As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to certain proprietary licensed technologies. Such indemnifications have a stated maximum amount and generally cover a period of 5 to 10 years.

20. Stockholders’ Equity

Dividend Distributions—The following table summarizes the dividends paid to common shareholders in the periods presented:

Millions of dollars, except per share amounts	Dividend Per Ordinary Share				Aggregate Dividends Paid				Date of Record
For the year 2018:
March	$	1.00			$	395			March 5, 2018
June	1.00				392				June 11, 2018
September	1.00				389				September 5, 2018
December	1.00				378				December 10, 2018
	$	4.00			$	1,554
For the year 2017:
March	$	0.85			$	343			March 6, 2017
June	0.90				361				June 5, 2017
September	0.90				356				September 6, 2017
December	0.90				355				December 5, 2017
	$	3.55			$	1,415

A. Schulman Special Stock— In November 2018, we paid a total of $2 million related to dividends on A. Schulman Special Stock.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Share Repurchase Program—In 2018, our shareholders approved a proposal to authorize us to repurchase up to 57,844,016 of our outstanding ordinary shares through December 1, 2019 (“2018 Share Repurchase Program”), which superseded the remaining authorization under our 2017 Share Repurchase Program.

The timing and amount of these repurchases, which are determined based on our evaluation of market conditions and other factors, may be executed from time to time through open market or privately negotiated transactions. The repurchased shares, which are recorded at cost, are classified as Treasury stock and may be retired or used for general corporate purposes, including for various employee benefit and compensation plans.

The following table summarizes our share repurchase activity for the periods presented:

Millions of dollars, except shares and per share amounts	Shares Repurchased			Average Purchase Price				Total Purchase Price, Including Commissions
For the year 2018:
2017 Share Repurchase Program	4,004,753			$	106.05			$	425
2018 Share Repurchase Program	15,215,966			95.49				1,453
	19,220,719			$	97.69			$	1,878
For the year 2017:
2016 Share Repurchase Program	3,501,084			$	85.71			$	300
2017 Share Repurchase Program	6,516,917			83.54				545
	10,018,001			$	84.30			$	845
For the year 2016:
2015 Share Repurchase Program	15,302,707			$	80.15			$	1,226
2016 Share Repurchase Program	21,316,627			79.18				1,688
	36,619,334			$	79.58			$	2,914

Due to the timing of settlements, total cash paid for share repurchases for the years ended December 31, 2018, 2017 and 2016 was $1,854 million, $866 million and $2,938 million, respectively.

Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:

	Year Ended December 31,
	2018			2017			2016
Ordinary shares outstanding:
Beginning balance	394,512,054			404,046,331			440,150,069
Share-based compensation	307,335			371,980			418,892
Warrants exercised	—			4,184			200
Employee stock purchase plan	121,398			107,560			96,504
Purchase of ordinary shares	(19,244,126	)		(10,018,001	)		(36,619,334	)
Ending balance	375,696,661			394,512,054			404,046,331

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows:

	Year Ended December 31,
	2018			2017			2016
Ordinary shares held as treasury shares:
Beginning balance	183,928,109			174,389,139			138,285,201
Share-based compensation	(307,335	)		(371,980	)		(418,892	)
Warrants exercised	—			509			—
Employee stock purchase plan	(121,398	)		(107,560	)		(96,504	)
Purchase of ordinary shares	19,244,126			10,018,001			36,619,334
Treasury shares canceled	(178,229,883	)		—			—
Ending balance	24,513,619			183,928,109			174,389,139

During 2018, following approval by our management and shareholders, we canceled 178,229,883 ordinary shares held in our treasury account in accordance with cancellation requirements under Dutch law.

Purchase of ordinary shares during 2018 includes 23,407 shares that were returned to us at no cost resulting from unclaimed distributions to creditors.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accumulated Other Comprehensive Income (Loss)—The components of, and after-tax changes in, Accumulated other comprehensive loss as of and for the years ended December 31, 2018, 2017 and 2016 are presented in the following table:

Millions of dollars	Financial Derivatives				Unrealized Gains (Losses) on Available-for-Sale Debt Securities				Unrealized Gains on Equity Securities and Equity Securities Held by Equity Investees				Defined Benefit Pension and Other Postretirement Benefit Plans				Foreign Currency Translation Adjustments				Total
Balance—January 1, 2018	$	(120	)		$	—			$	17			$	(421	)		$	(761	)		$	(1,285	)
Adoption of accounting standards	(2		)		—				(17		)		(51		)		—				(70		)
Other comprehensive income (loss) before reclassifications	180				—				—				5				(74		)		111
Tax (expense) benefit before reclassifications	(43		)		—				—				2				(18		)		(59		)
Amounts reclassified from accumulated other comprehensive income (loss)	(110		)		—				—				36				—				(74		)
Tax (expense) benefit	27				—				—				(13		)		—				14
Net other comprehensive income (loss)	54				—				—				30				(92		)		(8		)
Balance—December 31, 2018	$	(68	)		$	—			$	—			$	(442	)		$	(853	)		$	(1,363	)
Balance—January 1, 2017	$	(75	)		$	1			$	—			$	(498	)		$	(939	)		$	(1,511	)
Other comprehensive income (loss) before reclassifications	(323		)		(2		)		15				62				145				(103		)
Tax (expense) benefit before reclassifications	86				1				2				(15		)		33				107
Amounts reclassified from accumulated other comprehensive income	264				—				—				44				—				308
Tax expense	(72		)		—				—				(14		)		—				(86		)
Net other comprehensive income (loss)	(45		)		(1		)		17				77				178				226
Balance—December 31, 2017	$	(120	)		$	—			$	17			$	(421	)		$	(761	)		$	(1,285	)
Balance—January 1, 2016	$	(79	)		$	(5	)		$	—			$	(428	)		$	(926	)		$	(1,438	)
Other comprehensive income (loss) before reclassifications	(29		)		7				—				(184		)		(27		)		(233		)
Tax (expense) benefit before reclassifications	7				(1		)		—				37				7				50
Amounts reclassified from accumulated other comprehensive income (loss)	(63		)		—				—				93				7				37
Tax (expense) benefit	89				—				—				(16		)		—				73
Net other comprehensive income (loss)	4				6				—				(70		)		(13		)		(73		)
Balance—December 31, 2016	$	(75	)		$	1			$	—			$	(498	)		$	(939	)		$	(1,511	)

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:

Millions of dollars	Year Ended December 31,												Affected Line Items on the Consolidated Statements of Income
2018				2017				2016
Reclassification adjustments for:
Financial derivatives	$	(110	)		$	264			$	(63	)		Other income, net
Income tax expense (benefit)	(27		)		72				(89		)		Provision for income taxes
Financial derivatives, net of tax	(83		)		192				26
Amortization of defined pension items:
Prior service cost	1				3				1
Actuarial loss	32				39				31
Settlement loss	3				2				61
Income tax expense	13				14				16
Defined pension items, net of tax	23				30				77
Foreign currency translations adjustments	—				—				7				Other income, net
Income tax expense (benefit)	—				—				—				Provision for income taxes
Foreign currency translations adjustments, net of tax	—				—				7
Total reclassifications, before tax	(74		)		308				37
Income tax expense (benefit)	(14		)		86				(73		)		Provision for income taxes
Total reclassifications, after tax	$	(60	)		$	222			$	110			Amount included in net income

Amortization of prior service cost and actuarial loss are included in the computation of net periodic pension and other postretirement benefit costs (see Note 16 to the Consolidated Financial Statements).

Non-Controlling Interests—In April 2017, we increased our interest in the entity that holds our equity interest in Al Waha Petrochemicals Ltd. from 83.79% to 100% by paying $21 million to exercise a call option to purchase the remaining 16.21% interest held by a third party.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

21. Per Share Data

Basic earnings per share are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock options awards and other equity-based compensation awards. We have unvested restricted stock units that are considered participating securities for earnings per share.

Earnings per share data and dividends declared per share of common stock are as follows:

	Year Ended December 31,
	2018								2017								2016
	Continuing				Discontinued				Continuing				Discontinued				Continuing				Discontinued
Millions of dollars	Operations				Operations				Operations				Operations				Operations				Operations
Net income (loss)	$	4,698			$	(8	)		$	4,895			$	(18	)		$	3,847			$	(10	)
Less: net (income) loss attributable to non-controlling interests	—				—				2				—				(1		)		—
Net income (loss) attributable to the Company shareholders	4,698				(8		)		4,897				(18		)		3,846				(10		)
Dividends on A.Schulman Special Stock	(2		)		—				—				—				—				—
Net income attributable to participating securities	(6		)		—				(5		)		—				(4		)		—
Net income (loss) attributable to ordinary shareholders—basic	$	4,690			$	(8	)		$	4,892			$	(18	)		$	3,842			$	(10	)
Potential diluted effect of PSUs	(5		)		—				—				—				—				—
Net income (loss) attributable to ordinary shareholders— diluted	$	4,685			$	(8	)		$	4,892			$	(18	)		$	3,842			$	(10	)
Millions of shares, except per share amounts
Basic weighted average common stock outstanding	389				389				398				398				419				419
Effect of dilutive securities:
Stock options	—				—				1				1				—				—
QPA and PSU awards	—				—				—				—				1				1
Potential dilutive shares	389				389				399				399				420				420
Earnings (loss) per share:
Basic	$	12.06			$	(0.02	)		$	12.28			$	(0.05	)		$	9.17			$	(0.02	)
Diluted	$	12.03			$	(0.02	)		$	12.28			$	(0.05	)		$	9.15			$	(0.02	)
Participating securities	0.5				0.5				0.4				0.4				0.3				0.3
Dividends declared per share of common stock	$	4.00			$	—			$	3.55			$	—			$	3.33			$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22. Segment and Related Information

In conjunction with our acquisition of A. Schulman, we formed the Advanced Polymer Solutions business management function for the product lines acquired in the acquisition. In addition, the responsibility for business decisions relating to polypropylene compounds, Catalloy and polybutene-1, previously reflected in our O&P–EAI and O&P–Americas segments, were moved to our new Advanced Polymer Solutions business management function. These products are now reflected in our new Advanced Polymer Solutions segment. All comparable periods presented have been revised to reflect this change.

Our operations are managed through six operating segments, as shown below. We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting. Each of the operating segments is managed by a senior executive reporting directly to our Chief Executive Officer, the chief operating decision maker. Discrete financial information is available for each of the segments, and our Chief Executive Officer uses the operating results of each of the operating segments for performance evaluation and resource allocation. The activities of each of our segments from which they earn revenues and incur expenses are described below:

•	Olefins and Polyolefins–Americas (“O&P–Americas”). Our O&P–Americas segment produces and markets olefins and co-products, polyethylene and polypropylene.

•	Olefins and Polyolefins–Europe, Asia, International (“O&P–EAI”). Our O&P–EAI segment produces and markets olefins and co-products, polyethylene, and polypropylene.

•	Intermediates and Derivatives (“I&D”). Our I&D segment produces and markets propylene oxide and its derivatives; oxyfuels and related products; and intermediate chemicals such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.

•	Advanced Polymer Solutions (“APS”). Our APS segment produces and markets compounding and solutions, such as polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders, and advanced polymers, which includes Catalloy and polybutene-1.

•	Refining. Our Refining segment refines heavy, high-sulfur crude oil and other crude oils of varied types and sources available on the U.S. Gulf Coast into refined products, including gasoline and distillates.

•	Technology. Our Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.

Our chief operating decision maker uses EBITDA as the primary measure for reviewing our segments’ profitability and therefore, in accordance with ASC 280, Segment Reporting, we have presented EBITDA for all segments. We define EBITDA as earnings before interest, taxes and depreciation and amortization.

“Other” includes intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefit costs other than service costs. Sales between segments are made primarily at prices approximating prevailing market prices.

.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized financial information concerning reportable segments is shown in the following table for the periods presented:

	Year Ended December 31, 2018
	O&P – Americas				O&P – EAI				I&D				APS				Refining				Technology				Other				Total
Millions of dollars
Sales and other operating revenues:
Customers	$	6,883			$	9,984			$	9,426			$	4,022			$	8,221			$	468			$	—			$	39,004
Intersegment	3,525				854				162				2				936				115				(5,594		)		—
	10,408				10,838				9,588				4,024				9,157				583				(5,594		)		39,004
Depreciation and amortization expense	442				208				287				69				192				43				—				1,241
Other income (expense), net	11				48				2				2				3				1				39				106
Income from equity investments	58				225				6				—				—				—				—				289
Capital expenditures	1,079				248				409				62				250				48				9				2,105
EBITDA	2,762				1,163				2,011				400				167				328				36				6,867

	Year Ended December 31, 2017
Millions of dollars	O&P – Americas				O&P – EAI				I&D				APS				Refining				Technology				Other				Total
Sales and other operating revenues:
Customers	$	7,265			$	9,445			$	8,346			$	2,922			$	6,165			$	341			$	—			$	34,484
Intersegment	2,739				773				126				—				683				109				(4,430		)		—
	10,004				10,218				8,472				2,922				6,848				450				(4,430		)		34,484
Depreciation and amortization expense	433				210				279				35				177				40				—				1,174
Other income (expense), net	42				138				1				(2		)		2				—				(2		)		179
Income from equity investments	42				271				8				—				—				—				—				321
Capital expenditures	741				163				332				55				213				32				11				1,547
EBITDA	2,899				1,927				1,490				438				157				223				—				7,134

	Year Ended December 31, 2016
Millions of dollars	O&P – Americas				O&P – EAI				I&D				APS				Refining				Technology				Other				Total
Sales and other operating revenues:
Customers	$	6,463			$	8,097			$	7,085			$	2,601			$	4,559			$	378			$	—			$	29,183
Intersegment	2,259				621				141				—				576				101				(3,698		)		—
	8,722				8,718				7,226				2,601				5,135				479				(3,698		)		29,183
Depreciation and amortization expense	359				201				269				31				163				41				—				1,064
Other income (expense), net	62				19				—				24				8				—				(2		)		111
Income from equity investments	59				302				6				—				—				—				—				367
Capital expenditures	1,370				229				333				38				224				36				13				2,243
EBITDA	2,788				1,729				1,333				427				72				262				(9		)		6,602

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In 2018, EBITDA for our O&P–EAI segment includes a $36 million gain from the fourth quarter 2018 sale of our carbon black subsidiary in France. Our APS segment results include charges totaling $69 million for acquisition-related transaction and integration costs associated with our acquisition of A. Schulman.

In 2017, our O&P–Americas results include a $31 million gain on the first quarter sale of property in Lake Charles, Louisiana. EBITDA for our O&P–EAI segment includes a $108 million gain on the sale of our 27% interest in Geosel and also includes a $21 million non-cash gain stemming from the elimination of an obligation associated with a lease.

In 2016, operating results for our O&P–Americas segment includes a non-cash, LCM inventory valuation charge of $26 million due mainly to the drop in polypropylene prices. Our O&P–Americas and APS segments’ results benefited from gains of $57 million and $21 million, respectively, related to the 2016 sale of our wholly owned subsidiary, Petroken Petroquimica Ensenada S.A.

A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following table for each of the periods presented:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
EBITDA:
Total segment EBITDA	$	6,831			$	7,134			$	6,611
Other EBITDA	36				—				(9		)
Less:
Depreciation and amortization expense	(1,241		)		(1,174		)		(1,064		)
Interest expense	(360		)		(491		)		(322		)
Add:
Interest income	45				24				17
Income from continuing operations before income taxes	$	5,311			$	5,493			$	5,233

The following assets are summarized and reconciled to consolidated totals in the following table:

Millions of dollars	O&P – Americas				O&P – EAI				I&D				APS				Refining				Technology				Other				Total
December 31, 2018
Property, plant and equipment, net	$	5,769			$	1,745			$	2,663			$	818			$	1,216			$	266			$	—			$	12,477
Investment in PO joint ventures	—				—				469				—				—				—				—				469
Equity investments	196				1,326				73				16				—				—				—				1,611
Goodwill	162				114				229				1,300				—				9				—				1,814
December 31, 2017
Property, plant and equipment, net	$	5,025			$	1,794			$	2,457			$	350			$	1,130			$	241			$	—			$	10,997
Investment in PO joint ventures	—				—				420				—				—				—				—				420
Equity investments	187				1,366				82				—				—				—				—				1,635
Goodwill	162				121				237				41				—				9				—				570

As a result of the acquisition of A. Schulman, property, plant and equipment and goodwill attributable to the polypropylene compounds, Catalloy and polybutene-1 businesses previously reported in our O&P–Americas and O&P–EAI segments have been recast for all comparable periods presented.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-lived assets include Property, plant and equipment, net, Intangible assets, net, Investments in PO joint ventures, and Equity investments, (see Notes 8, 9 and 10 to the Consolidated Financial Statements). The following long-lived assets data is based upon the location of the assets:

	Year Ended December 31,
Millions of dollars	2018				2017
Long-lived assets:
United States	$	10,346			$	8,761
Germany	1,527				1,417
The Netherlands	757				779
France	565				551
Italy	343				329
Mexico	254				198
Other	1,730				1,585
Total	$	15,522			$	13,620

23. Unaudited Quarterly Results

The following table presents selected financial data for the quarterly periods in 2018 and 2017:

	For the Quarter Ended
Millions of dollars, except per share amounts	March 31				June 30				September 30				December 31
2018
Sales and other operating revenues	$	9,767			$	10,206			$	10,155			$	8,876
Gross profit(a)	1,755				1,916				1,656				1,148
Operating income(b)	1,494				1,626				1,317				794
Income from equity investments	96				68				89				36
Income from continuing operations(b) (c)	1,231				1,655				1,115				697
Loss from discontinued operations, net of tax	—				(1		)		(2		)		(5		)
Net income(b) (c)	1,231				1,654				1,113				692
Earnings per share:
Basic	3.12				4.23				2.86				1.81
Diluted	3.11				4.22				2.85				1.79

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	For the Quarter Ended
Millions of dollars, except per share amounts	March 31				June 30				September 30				December 31
2017
Sales and other operating revenues	$	8,430			$	8,403			$	8,516			$	9,135
Gross profit(a)	1,439				1,802				1,577				1,607
Operating income(b)	1,210				1,577				1,332				1,341
Income from equity investments	81				78				81				81
Income from continuing operations(b) (c)	805				1,134				1,058				1,898
Loss from discontinued operations, net of tax	(8		)		(4		)		(2		)		(4		)
Net income(b) (c)	797				1,130				1,056				1,894
Earnings per share:
Basic	1.98				2.82				2.67				4.80
Diluted	1.98				2.81				2.67				4.79

(a)	Represents Sales and other operating revenues less Cost of sales.

(b)

The three months ended September 30, 2018 and December 31, 2018 include charges for acquisition-related transaction and integration costs associated with our acquisition of A. Schulman of $53 million ($42 million, after tax) and $20 million ($15 million, after tax), respectively. The three months ended December 31, 2018 also includes a gain of $36 million ($34 million, after tax) on the sale of our carbon black subsidiary in France.

The three months ended March 31, 2017 includes a gain of $31 million ($20 million, after tax) on the sale of property in Lake Charles, Louisiana currently used as a logistic terminal. The three months ended June 30, 2017 includes a $21 million non-cash gain ($14 million, after tax) stemming from the elimination of an obligation associated with a lease. The three months ended September 30, 2017 includes a $108 million gain ($103 million, after tax) on the sale of our 27% interest in Geosel.

(c)	The three months ended June 30, 2018 includes a $346 million benefit related to $288 million of previously unrecognized tax benefits and the release of $58 million of associated accrued interest.

The three months ended March 31, 2017 includes total charges to interest expense of $113 million ($106 million, after tax) related to the redemption of $1,000 million aggregate principal amount of our outstanding 5% senior notes due 2019. The three months ended December 31, 2017 includes an $819 million non-cash tax benefit related to the lower federal income tax rate resulting from the newly enacted U.S. Tax Act.