3M 2015 Annual Report Download - page 55

TableofContents
NotestoConsolidatedFinancialStatements
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NOTE1.SignificantAccountingPolicies
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Consolidation:3Misadiversifiedglobalmanufacturer,technologyinnovatorandmarketerofawidevarietyofproducts.All
subsidiariesareconsolidated.Allintercompanytransactionsareeliminated.Asusedherein,theterm“3M”or“Company”refersto
3MCompanyandsubsidiariesunlessthecontextindicatesotherwise.
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Basisofpresentation:CertainbalancesrelativetopriorperiodshavebeenreclassifiedtoconformtoDecember31,2015presentation
inconnectionwiththefollowing,eachofwhichisfurtherdiscussedintheindicatedsectionofNote1:
·Changeinmethodofclassificationofcertainmarketablesecuritiespreviouslyclassifiedasnon-currenttocurrentasfurther
discussedintheMarketablesecuritiessection;and
·AdoptionofAccountingStandardsUpdate(ASU)No.2015-03,SimplifyingthePresentationofDebtIssuanceCosts,and
ASUNo.2015-17,BalanceSheetClassificationofDeferredTaxes,inthefourthquarterof2015onaretrospectivebasisas
furtherdiscussedintheNewAccountingPronouncementssection.
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Foreigncurrencytranslation:LocalcurrenciesgenerallyareconsideredthefunctionalcurrenciesoutsidetheUnitedStates.Assets
andliabilitiesforoperationsinlocal-currencyenvironmentsaretranslatedatmonth-endexchangeratesoftheperiodreported.
Incomeandexpenseitemsaretranslatedatmonth-endexchangeratesofeachapplicablemonth.Cumulativetranslationadjustments
arerecordedasacomponentofaccumulatedothercomprehensiveincome(loss)inshareholders’equity.
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AlthoughlocalcurrenciesaretypicallyconsideredasthefunctionalcurrenciesoutsidetheUnitedStates,underAccountingStandards
Codification(ASC)830,ForeignCurrencyMatters,thereportingcurrencyofaforeignentity’sparentisassumedtobethatentity’s
functionalcurrencywhentheeconomicenvironmentofaforeignentityishighlyinflationary—generallywhenitscumulative
inflationisapproximately100percentormoreforthethreeyearsthatprecedethebeginningofareportingperiod.3Mhasa
subsidiaryinVenezuelawithoperatingincomerepresentinglessthan1.0percentof3M’sconsolidatedoperatingincomefor2015.
SinceJanuary1,2010,thefinancialstatementsoftheVenezuelansubsidiaryhavebeenremeasuredasifitsfunctionalcurrencywere
thatofitsparent.
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TheVenezuelangovernmentsetsofficialratesofexchangeandconditionsprecedenttopurchaseforeigncurrencyattheserateswith
localcurrency.Suchratesandconditionshavebeenandcontinuetobesubjecttochange.InJanuary2014,theVenezuelan
governmentannouncedthattheNationalCenterforForeignCommerce(CENCOEX),hadassumedtherolewithrespecttothe
continuationoftheexistingofficialexchangerate,significantlyexpandedtheuseofasecondcurrencyauctionexchangemechanism
calledtheComplementarySystemforForeignCurrencyAcquirement(orSICAD1),andissuedexchangeregulationsindicatingthe
SICAD1rateofexchangewouldbeusedforpaymentsrelatedtointernationalinvestments.InlateMarch2014,theVenezuelan
governmentlaunchedathirdforeignexchangemechanism,SICAD2,whichitlaterreplacedwithanotherforeigncurrencyexchange
platforminFebruary2015calledtheMarginalSystemofForeignCurrency(SIMADI).TheSIMADIratewasdescribedasbeing
derivedfromdailyprivatebiddersandbuyersexchangingoffersthroughauthorizedagents.Thisrateisapprovedandpublishedby
theVenezuelanCentralBank.
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Thefinancialstatementsof3M’sVenezuelansubsidiarywereremeasuredutilizingtheofficialCENCOEX(oritspredecessor)rate
intoMarch2014,theSICAD1ratebeginninginlateMarch2014,theSICAD2ratebeginninginJune2014,andtheSIMADIrate
beginninginFebruary2015.3M’susesoftheserateswerebaseduponevaluationofanumberoffactorsincluding,butnotlimitedto,
theexchangeratetheCompany’sVenezuelansubsidiarymaylegallyusetoconvertcurrency,settletransactionsorpaydividends;
theprobabilityofaccessingandobtainingcurrencybyuseofaparticularrateormechanism;andtheCompany’sintentandabilityto
useaparticularexchangemechanism.Otherfactorsnotwithstanding,remeasurementimpactsofthechangesinuseoftheseexchange
ratesdidnothavematerialimpactson3M’sconsolidatedresultsofoperationsorfinancialcondition.
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TheCompanycontinuestomonitorcircumstancesrelativetoitsVenezuelansubsidiary.Changesinapplicableexchangeratesor
exchangemechanismsmaycontinueinthefuture.Thesechangescouldimpacttherateofexchangeapplicabletoremeasurethe
Company’snetmonetaryassets(liabilities)denominatedinVenezuelanBolivars(VEF).Asof
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