CHS 2011 Annual Report Download - page 32

2011 CHS 31
NOTE 1
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION
CHS Inc. (CHS or the Company) is one of the nation’s
leading integrated agricultural companies. As a coop-
erative, CHS is owned by farmers and ranchers and
their member cooperatives (referred to herein as “mem-
bers”) across the United States. The Company also has
preferred stockholders that own shares of the Compa-
ny’s 8% Cumulative Redeemable Preferred Stock, which
is listed on the NASDAQ Global Select Market under the
symbol CHSCP. On August 31, 2011, the Company had
12,272,003 shares of preferred stock outstanding. The
Company buys commodities from and provides prod-
ucts and services to patrons (including member and
other non-member customers), both domestic and
international. The Company provides a wide variety
of products and services, from initial agricultural inputs
such as fuels, farm supplies, crop nutrients and crop
protection products, to agricultural outputs that include
grains and oilseeds, grain and oilseed processing and
food products. A portion of the Company’s operations
are conducted through equity investments and joint
ventures whose operating results are not fully consol-
idated with our results; rather, a proportionate share of
the income or loss from those entities is included as a
component in the Company’s net income under the
equity method of accounting.
BASIS OF PRESENTATION
AND RECLASSIFICATIONS
The consolidated financial statements include the accounts
of CHS and all of its wholly-owned and majority-owned
subsidiaries and limited liability companies, which is pri-
marily National Cooperative Refinery Association (NCRA),
included in the Energy segment. The effects of all signif-
icant intercompany transactions have been eliminated.
CHS has aligned its segments based on an assessment
of how its businesses operate and the products and
services it sells. During the Company’s second quarter
of fiscal 2011, there were several changes in the Com-
pany’s senior leadership team which resulted in the
realignment of the Company’s segments. One of these
changes is that the Company no longer has a chief
operating officer of Processing, resulting in a change
in the way the Company manages its business and the
elimination of that segment. The revenues previously
reported in the Company’s Processing segment were
entirely from its oilseed processing operations and,
since those operations have grain-based commodity
inputs and similar commodity risk management
requirements as other operations in its Ag Business
segment, the Company has included oilseed processing
in that segment. The Company’s wheat milling and
packaged food operations previously included in the
Company’s Processing segment are now included in
Corporate and Other, as those businesses are conducted
through non-consolidated joint ventures. In addition,
the Company’s non-consolidated agronomy joint ven-
ture is winding down its business activity and is
included in Corporate and Other, rather than in the
Company’s Ag Business segment, where it was previ-
ously reported. There was no change to the Company’s
Energy segment. For comparative purposes, segment
information for the years ended August 31, 2010 and
2009, have been retrospectively revised to reflect these
changes. This revision had no impact on consolidated
net income or net income attributable to CHS Inc.
Certain reclassifications to the Company’s previously
reported financial information have been made to con-
form to the current period presentation.
CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid
investments with original maturities of three months
or less at the date of acquisition.
INVENTORIES
Grain, processed grain, oilseed and processed oilseed
are stated at net realizable values which approximate
market values. All other inventories are stated at the
lower of cost or market. Costs for inventories produced
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS