Disclosed is a non-yellowing coating composition comprising: a hydroxy component having at least two free hydroxyl groups per molecule, and an anhydride component having at least two carboxylic acid anhydride groups per molecule. The anhydride component is derived from a mixture of monomers comprising greater than or equal to 11 percent by weight of an ethylenically unsaturated carboxylic acid anhydride, the balance of the mixture comprised of at least one vinyl comonomer. The molar ratio of the vinyl comonomer to the carboxylic acid anhydride in the mixture should be at least 1.0:1.0 and the ratio should be sufficient to provide a color standard number of less than 150. Typically, the coating composition is in the form of a two-package composition.Also disclosed is a method of coating comprising: (I) coating a substrate with one or more applications of a pigmented basecoating composition to form a basecoat, and (II) coating the basecoat with one or more applications of a transparent topcoating composition to form a transparent topcoat, in which the basecoating composition and/or the topcoating composition comprises the aforesaid non-yellowing coating composition.