Table of Contents Fresh Start Adjustments Hexion Inc. |  85  | 2020 Form 10-K iii. Discount rates ranging from 11.0% to 16.5%, which were based on the after-tax weighted average cost of capital (“WACC”); and ii. Royalty rates ranging from 0.2% to 2.0% of expected net sales determined with regard to comparable market transactions and profitability analysis; i. Forecasted net sales attributable to the trademarks through the applicable economic useful life; • Trademarks of $141 were valued using the relief from royalty income approach based on the following significant assumptions: iv. Economic lives of 20 to 25 years. iii. Discount rates ranging from 13.0% to 17.5%, which were based on the after-tax WACC; and ii. Attrition rates ranging from 0.5% to 5.0%; i. Forecasted net sales and profit margins attributable to the current customer base through the applicable economic useful life; • Customer related intangible assets of $904, exclusive of $64 related to the Held for Sale Business, were valued using the multi-period excess earnings income approach based on the following significant assumptions; (z) Reflects the adjustments made to eliminate the Predecessor Company’s other intangible assets of $17, exclusive of $7 related to the Held for Sale Business, and to record $1,155, exclusive of $64 related to the Held for Sale Business, in estimated fair value of Successor other intangible assets. Fair value was comprised of the following: (y) Reflects the adjustments made to record the elimination of the Predecessor goodwill balance of $83, exclusive of $25 related to the Held for Sale Business, and to record the Successor goodwill of $164, exclusive of $14 related to the Held for Sale Business, which represents the reorganization value of assets in excess of amounts allocated to identified tangible and intangible assets. (x) Reflects $24 of adjustments made to bring the right-of-use operating leased assets, exclusive of $1 related to the Held of Sale Business, and their associated liabilities to fair value utilizing an average discount rate of approximately 6% and to record favorable leasehold interests of $9, exclusive of $5 related to the Held for Sale Business, which were valued using a rental analysis approach based on (i) fair market rent was determined based on rates for facilities comparable to the Company’s properties, (ii) discount rates ranging from 8.0% to 12.0%, which were based on the after-tax WACC; and (iii) market rental growth rates ranging from 0.0% to 5.0%. • The cost approach was utilized to estimate fair value for machinery and equipment. This approach considers the amount required to construct or purchase a new asset of equal utility at current market prices, with adjustments in value for physical deterioration and functional and economic obsolescence. Physical deterioration is an adjustment made in the cost approach to reflect the real operating age of an asset with regard to wear and tear, decay and deterioration that is not prevented by maintenance. Functional obsolescence is an adjustment made to reflect the loss in value or usefulness of an asset caused by inefficiencies or inadequacies of the asset, as compared to a more efficient or less costly replacement asset with newer technology. Economic obsolescence is an adjustment made to reflect the loss in value or usefulness of an asset due to factors external to the asset, such as the economics of the industry, reduced demand, increased competition or similar factors. • The market, sales comparison or trended cost approach was utilized to estimate fair value for land and buildings. This approach relies upon recent sales, offerings of similar assets or a specific inflationary adjustment to original purchase price to arrive at a probable selling price. (w) Reflects the adjustments made to record property, plant and equipment at its estimated fair value and eliminate Predecessor accumulated depreciation. Depreciable lives were also revised to reflect the remaining estimated useful lives of the related property, plant and equipment, which range from 1 to 39 years. Fair value was determined as follows: (v) Reflects the adjustments required to record the Predecessor Company’s long-term assets at fair value. (u) Reflects the deferred tax asset impact of the fresh start adjustments, resulting primarily from the book adjustment made to foreign property, plant, and equipment and intangibles that increased the future taxable temporary differences recorded. (t) Reflects the adjustments made to record the Predecessor Company’s investments in unconsolidated subsidiaries at fair value utilizing a cost approach method. (s) Reflects the adjustment made to record finished goods inventory at its estimated fair value, which was determined based on the current acquisition cost, including disposal and holding period costs and a reasonable profit margin less costs to sell. (r) Reflects the adjustments made to Predecessor deferred revenue in situations where it has been determined the Successor Company has no remaining legal performance obligation related to the arrangement that give rise to the deferred revenue for the Predecessor Company. (q) The Fresh Start Adjustments column reflects adjustments required to record the assets and liabilities of the Company at fair value, including the elimination of the accumulated deficit and accumulated other comprehensive (loss) of the Predecessor Company. Depreciable lives were revised to reflect the remaining estimated useful lives as follows (in years): Buildings 9 to 39 years Machinery and equipment 1 to 20 years