CHS 2011 Annual Report Download - page 36

2011 CHS 35
value, with unrealized amounts included as a component
of accumulated other comprehensive income (loss).
Investments in debt and equity instruments are carried
at amounts that approximate fair values. Investments
in joint ventures and cooperatives have no quoted
market prices.
MARGIN DEPOSITS
The Company’s margin deposits primarily consist of
deposits on the balance sheet of the Company’s wholly-
owned subsidiary, Country Hedging, Inc., which is a reg-
istered futures commission merchant and a full–service
commodity futures and options broker.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less
accumulated depreciation and amortization. Deprecia-
tion and amortization are provided on the straight-line
method by charges to operations at rates based upon the
expected useful lives of individual or groups of assets
(primarily 15 to 40 years for land improvements and
buildings and 3 to 20 years for machinery, equipment,
office and other). The cost and related accumulated
depreciation and amortization of assets sold or other-
wise disposed of are removed from the related accounts
and resulting gains or losses are reflected in operations.
Expenditures for maintenance and minor repairs and
renewals are expensed, while costs of major repairs and
betterments are capitalized and amortized on a
straight-line basis over the period of time estimated
to lapse until the next major repair occurs.
The Company reviews property, plant and equipment
and other long-lived assets in order to assess recover-
ability based on projected income and related cash flows
on an undiscounted basis when triggering events occur.
Should the sum of the expected future net cash flows be
less than the carrying value, an impairment loss would
be recognized. An impairment loss would be measured
by the amount by which the carrying value of the asset
exceeds the fair value of the asset.
The Company has asset retirement obligations with
respect to certain of its refineries and related assets
due to various legal obligations to clean and/or dispose
of various component parts at the time they are retired.
However, these assets can be used for extended and
indeterminate periods of time, as long as they are
properly maintained and/or upgraded. It is the Com-
pany’s practice and current intent to maintain refineries
and related assets and to continue making improve-
ments to those assets based on technological advances.
As a result, the Company believes that its refineries and
related assets have indeterminate lives for purposes of
estimating asset retirement obligations because dates
or ranges of dates upon which the Company would retire
a refinery and related assets cannot reasonably be esti-
mated at this time. When a date or range of dates can
reasonably be estimated for the retirement of any com-
ponent part of a refinery or related asset, the Company
will estimate the cost of performing the retirement
activities and record a liability for the fair value of that
cost using established present value techniques.
GOODWILL AND OTHER
INTANGIBLE ASSETS
Goodwill and other intangible assets are reviewed for
impairment annually or more frequently if impairment
conditions arise, and those that are impaired are written
down to fair value. For goodwill, the Company’s annual
impairment testing occurs in the third quarter. Other
intangible assets consist primarily of customer lists,
trademarks and agreements not to compete. Intangible
assets subject to amortization are expensed over their
respective useful lives (ranging from 3 to 30 years). The
Company has no material intangible assets with indef-
inite useful lives.
The Company had various acquisitions during the three
years ended August 31, 2011, which have been
accounted for using the purchase method of accounting.
Operating results of the acquisitions are included in the
consolidated financial statements since the respective
acquisition dates. The respective purchase prices were
allocated to the assets, liabilities and identifiable intan-
gible assets acquired based upon the estimated fair
values. The excess purchase prices over the estimated
fair values of the net assets acquired have been reported
as goodwill.
In the Company’s Energy segment, major maintenance
activities (turnarounds) at the two refineries are
accounted for under the deferral method. Turnarounds
are the scheduled and required shutdowns of refinery
processing units. The costs related to the significant
overhaul and refurbishment activities include materials