EASTMAN CHEMICAL CO

In preparing the consolidated financial statements in conformity with GAAP, management must make decisions which impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales revenue and expenses, fair value of disposal groups, and related disclosure of contingent assets and liabilities. On an ongoing basis, Eastman evaluates its estimates, including those related to impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the critical accounting estimates described in Part II, Item 7 of the Company's 2024 Annual Report on Form 10-K are the most important to the fair presentation of the Company's financial condition and results. These estimates require management's most significant judgments in the preparation of the Company's consolidated financial statements.

Impairment of Long-Lived Assets

Goodwill

Goodwill is an asset determined as the residual of the purchase price over the fair value of identified assets and liabilities acquired in a business combination. As of September 30, 2025, the goodwill balance as reported on the Unaudited Consolidated Statements of Financial Position is $3.7 billion. Eastman conducts testing of goodwill for impairment annually in the fourth quarter or more frequently when events and circumstances indicate an impairment may have occurred. As a result of the impact of forecasted decreases in revenue and earnings, the Company considered whether these conditions indicated that it was more likely than not that goodwill was impaired for each of its reporting units during third quarter 2025. Management does not believe it is more likely than not that goodwill was impaired for each of its reporting units as of September 30, 2025. However, the performance films reporting unit (part of the AM operating segment as described in Part I, Item 1, "Business", of the Company's 2024 Annual Report on Form 10-K), which has a goodwill balance of $811 million at September 30, 2025, has experienced near-term declines in revenue and earnings as a result of the combination of weakness in the macro environment, historically low automotive builds, and the impact of global trade. Additional declines in the market conditions or forecasted revenue and earnings or changes in other assumptions used to estimate fair value of the performance films reporting unit could result in an impairment of goodwill.