FORM 10-K

48 cost-to-cost method. The new standard will have no impact on cash flows and does not affect the economics of our underlying customer contracts. The standard does not have a significant impact on revenue recognition for our Textron Aviation and Industrial segments, which will continue to primarily recognize revenue at the point in time when the customer accepts delivery of the goods provided. At the end of 2017, our backlog excluded amounts where funding from the U.S. Government had not been formally appropriated. Under the new standard, backlog will generally include these unfunded amounts as backlog will be the equivalent of the transaction price allocated to our remaining performance obligations, which represents the revenue we expect to recognize under our contracts in future periods for which work has not yet been performed. At adoption, the increase in our backlog for the unfunded amounts will be fully offset by the decrease due to the acceleration of revenues in the transition adjustment. We expect backlog at the Bell segment to decrease by approximately 15% at the adoption date, which will partially be offset by an increase of approximately 7% at the Textron Systems segment. We have updated the accounting policies affected by this standard, redesigned our related internal controls over financial reporting and are expanding the disclosures to be included in our first quarter Form 10-Q to meet the new requirements. Other Standards In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . This standard requires companies to present only the service cost component of net periodic benefit costs in operating income in the same line as other employee compensation costs, while the other components of net periodic benefit costs must be excluded from operating income. In addition, only the service cost component will be eligible for capitalization into inventory. This standard is effective for our company at the beginning of 2018. The reclassification of the other components of net periodic benefit cost out of operating income must be applied retrospectively, while the change in the amount companies may capitalize into inventory can be applied prospectively. This standard will not have a material impact on our consolidated financial statements and will not change our segment reporting. In February 2016, the FASB issued ASU No. 2016-02, Leases , that requires lessees to recognize all leases with a term greater than 12 months on the balance sheet as right-to-use assets and lease liabilities, while lease expenses would continue to be recognized in the statement of operations in a manner similar to current accounting guidance. Under the current accounting guidance, we are not required to recognize assets and liabilities arising from operating leases on the balance sheet. The new standard is effective for our company at the beginning of 2019 and early adoption is permitted. Entities must adopt the standard on a modified retrospective basis whereby it would be applied at the beginning of the earliest comparative year. While we continue to evaluate the impact of the standard on our consolidated financial statements, we expect that it will materially increase the assets and liabilities on our consolidated balance sheet as we recognize the rights and corresponding obligations related to operating leases. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of 2020 with early adoption permitted beginning in 2019. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of the standard on our consolidated financial statements. Note 2. Business Acquisitions, Goodwill and Intangible Assets 2017 Acquisitions On March 6, 2017, we completed the acquisition of Arctic Cat Inc. (Arctic Cat), a publicly-held company (NASDAQ: ACAT), pursuant to a cash tender offer for $18.50 per share, followed by a short-form merger. Arctic Cat manufactures and markets all- terrain vehicles, side-by-sides and snowmobiles, in addition to related parts, garments and accessories. The cash paid for this business, including repayment of debt and net of cash acquired, totaled $316 million. Arctic Cat provides a platform to expand our product portfolio and increase our distribution channel to support growth within our Textron Specialized Vehicles business in the Industrial segment. The operating results of Arctic Cat are included in the Consolidated Statements of Operations since the closing date. We allocated the consideration paid for this business on a preliminary basis to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. We expect to finalize the purchase accounting in the first quarter of 2018. Based on the preliminary allocation, $230 million has been allocated to goodwill, related to expected synergies and the value of the assembled workforce, and $75 million to intangible assets, which included $18 million of indefinite-lived assets related to tradenames. The definite-lived intangible assets are primarily related to customer/dealer relationships and technology, which will be amortized over 8 to 20 years. We determined the value of the intangible assets using the relief-from-royalty and multi-period excess