CHS 2013 Annual Report Download - page 33

through fiscal 2018, with $0.3 million of the notional with unrealized amounts included as a component of
amount expiring during fiscal 2014. None of CHS Capital’s accumulated other comprehensive loss. Investments in
interest rate swaps qualify for hedge accounting and as a debt and equity instruments are carried at amounts that
result, changes in fair value are recorded in earnings within approximate fair values. Investments in joint ventures
interest, net in our Consolidated Statements of Operations. and cooperatives have no quoted market prices.
Long-term debt used to finance non-current assets carries
various fixed interest rates and is payable at various dates
to minimize the effects of market interest rate changes. Property, plant and equipment are stated at cost less
The weighted-average interest rate on fixed rate debt out- accumulated depreciation and amortization. Deprecia-
standing on August 31, 2013 was approximately 5.0%. tion and amortization are provided on the straight-line
method by charges to operations at rates based upon the
Foreign Exchange Contracts: expected useful lives of individual or groups of assets (15
We conduct essentially all of our business in U.S. dollars, to 20 years for land and land improvements; 20 to
except for grain marketing operations primarily in South 40 years for buildings; 5 to 20 years for machinery and
America and Europe, and purchases of products from equipment; and 3 to 10 years for office and other). The
Canada. We had minimal risk regarding foreign currency cost and related accumulated depreciation and amortiza-
fluctuations during fiscal 2013 and in prior years, as substan- tion of assets sold or otherwise disposed of are removed
tially all international sales were denominated in U.S. dollars. from the related accounts and resulting gains or losses
From time to time, we enter into foreign currency futures are reflected in operations. Expenditures for maintenance
contracts to mitigate currency fluctuations. Foreign cur- and minor repairs and renewals are expensed, while costs
rency fluctuations do, however, impact the ability of foreign of major repairs and betterments are capitalized and
buyers to purchase U.S. agricultural products and the com- amortized on a straight-line basis over the period of time
petitiveness of U.S. agricultural products compared to the estimated to lapse until the next major repair occurs.
same products offered by alternative sources of world
supply. As of August 31, 2013, we had $7.1 million included in Property, plant and equipment and other long-lived
derivative assets and $5.9 million included in derivative liabil- assets are reviewed in order to assess recoverability
ities associated with foreign currency contracts. 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
Many of our derivative contracts with futures and less than the carrying value, an impairment loss would
options brokers require us to make both initial margin be recognized. An impairment loss would be measured
deposits of cash or other assets and subsequent by the amount by which the carrying value of the asset
deposits, depending on changes in commodity prices, in exceeds the fair value of the asset.
order to comply with applicable regulations. Our margin
deposit assets are held by external brokers in segre- We have asset retirement obligations with respect to
gated accounts and will be used to settle the associated certain of our refineries and related assets due to various
derivative contracts on their specified settlement dates. 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 indetermi-
Joint ventures and other investments, in which we have nate periods of time, as long as they are properly main-
significant ownership and influence, but not control, are tained and/or upgraded. It is our practice and current
accounted for in our consolidated financial statements intent to maintain refineries and related assets and to
using the equity method of accounting. Investments in continue making improvements to those assets based
other cooperatives are stated at cost, plus patronage on technological advances. As a result, we believe our
dividends received in the form of capital stock and other refineries and related assets have indeterminate lives for
equities. Patronage dividends are recorded as a reduc- purposes of estimating asset retirement obligations
tion to cost of goods sold at the time qualified written because dates or ranges of dates upon which we would
notices of allocation are received. Investments in other retire a refinery and related assets cannot reasonably be
debt and equity securities are considered available for estimated at this time. When a date or range of dates
sale financial instruments and are stated at fair value, can reasonably be estimated for the retirement of any
38 CHS 2013
ONE: Summary of Significant Accounting Policies, continued
Property, Plant and Equipment
Margin Deposits
Investments