Income Taxes
The Plan has received a determination letter from the Internal Revenue Service dated May 22, 2014, stating that the Plan is qualified under
Section 401 (a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan has since been amended, but the plan
administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a
tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the tax authorities. Management has evaluated the Plans tax positions and concluded that as of
December 31, 2020 the Plan had maintained its tax-exempt status and had taken no uncertain tax positions that required an adjustment to the financial statements. Therefore, no provision or liability for
income taxes has been included in the Plans financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Risks and Uncertainties
The Plan invests in various
investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the
value of investment securities will occur in the near term and that such changes could materially affect the participants account balances and the amounts reported in the statements of net assets available for benefits.
On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus, known as
COVID-19, as a global pandemic. The pandemic in the United States and throughout the world has resulted in substantial volatility in financial markets. The COVID-19
pandemic has affected and may continue to affect the market price of Wabtec stock and other Plan assets. Due to the ongoing economic uncertainty and volatility caused by COVID-19, the resulting financial
impact to the Plan cannot be reasonably estimated.
During the year ended December 31, 2020, the Plan was amended to adopt several provisions in the
Coronavirus Aid Relief and Economic Security Act (CARES Act). The relief provisions allowed eligible individuals to receive coronavirus-related distributions for the period starting January 1, 2020 and ending December 31, 2020,
extended the period for loan repayments due from March 27, 2020 through December 31, 2020 and suspended required minimum distributions in 2020.
3. FAIR VALUE MEASUREMENT
The Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This
hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities
in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on
the Companys assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. There have been no changes in the methodologies used at December 31, 2020 and 2019.
The Plans assets are invested in the common stock of Westinghouse Air Brake Technologies Corporation, a common collective trust, a self-directed
brokerage fund, mutual funds through Fidelity Management Trust Company (Fidelity) and mutual funds held by various other issuers, the Plan custodian and trustee. The following is a description of the valuation methodologies used for
assets measured at fair value:
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