Note  1 -- Summary of Significant Accounting Policies Note  2 -- Accounting Changes Note  3 -- Special Charges Note  4 -- Segment Information Note  5 -- Leases Note  6 -- Supplementary Income Statement Information Note  7 -- Provision for Income Taxes Note  8 -- Earnings Per Share Note  9 -- Supplementary Balance Sheet Information Note 10 -- Property, Plant and Equipment - Net Note 11 -- Deferred Income Taxes Note 12 -- Goodwill Note 13 -- Other Intangible Assets Note 14 -- Debt Note 15 -- Financial Instruments Note 16 -- Shareholder's Equity Note 17 -- Preferred Stock Note 18 -- Incentive Plans and Stock Options Note 19 -- Retirement Programs Note 20 -- Commitments and Contingencies Note 21 -- Quarterly Data (Unaudited)
 

NOTE 2. ACCOUNTING CHANGES
2002 Goodwill Impairment — Praxair adopted SFAS 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002. Under the new rule, companies no longer amortize goodwill or indefinite-lived intangible assets (see Note 12). The rule required the company to perform an initial assessment of whether there is an indication that the carrying value of goodwill is impaired. During the second quarter of 2002, Praxair completed the initial impairment test and concluded that certain of its goodwill was impaired, resulting in a non-cash after-tax charge of $139 million or $0.42 per share on a diluted basis. The charge includes the $144 million goodwill write-down, a $2 million charge for goodwill held on an equity investment, which was recorded as a write-down of the investment, and is also net of a $7 million tax benefit. The charge was recorded as a cumulative effect of an accounting change, retroactive to January 1, 2002.

The following is a summary of the impairment charge by business segment,
net of a $7 million tax benefit:

(Millions of dollars)
SEGMENT	REPORTING UNIT	CHARGE
South America	Southern Cone, Andean Region	$  80
Europe*	Poland, Israel	20
Asia	India	17
Surface Technologies	Aviation Services	22
		$139
* Includes $2 million related to a non-consolidated equity investment.

This assessment must be conducted at least annually at the reporting unit level, and any such impairment must be recorded as a charge to operating earnings. The annual impairment tests for 2002 and 2003 were performed and no additional impairments were indicated.

2001 Derivatives — Effective January 1, 2001, Praxair adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 137 and 138. SFAS 133 requires all derivatives to be recorded on the balance sheet at fair value. At January 1, 2001, Praxair recorded a one-time after-tax charge as a cumulative effect adjustment for the initial adoption of SFAS 133 totaling $2 million in its consolidated statement of operations, and a deferred loss of $4 million in the accumulated other comprehensive income (loss) component of shareholders’ equity in the condensed consolidated balance sheet (see Notes 1, 14 and15).