Kodak 2008 Annual Report Download - page 28

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Environmental Commitments
Environmental liabilities are accrued based on estimates of known environmental remediation responsibilities. The liabilities include
accruals for sites owned or leased by Kodak, sites formerly owned or leased by Kodak, and other third party sites where Kodak was
designated as a potentially responsible party (“PRP”). The amounts accrued for such sites are based on these estimates, which are
determined using the ASTM Standard E 2137-06, “Standard Guide for Estimating Monetary Costs and Liabilities for Environmental
Matters.” The overall method includes the use of a probabilistic model that forecasts a range of cost estimates for the remediation
required at individual sites. The Company’s estimate includes equipment and operating costs for investigations, remediation and
long-term monitoring of the sites. Such estimates may be affected by changing determinations of what constitutes an environmental
liability or an acceptable level of remediation. Kodak's estimate of its environmental liabilities may also change if the proposals to
regulatory agencies for desired methods and outcomes of remediation are viewed as not acceptable, or additional exposures are
identified. The Company has an ongoing monitoring and identification process to assess how activities, with respect to the known
exposures, are progressing against the accrued cost estimates, as well as to identify other potential remediation issues that are
presently unknown.
Additionally, in many of the countries in which the Company operates, environmental regulations exist that require the Company to
handle and dispose of asbestos in a special manner if a building undergoes major renovations or is demolished. The Company
records a liability equal to the estimated fair value of its obligation to perform asset retirement activities related to the asbestos,
computed using an expected present value technique, when sufficient information exists to calculate the fair value.
Recently Issued Accounting Standards
For discussion of the adoption and potential impacts of recently issued accounting standards, refer to the “Recently Issued
Accounting Standards” section of Note 1, “Significant Accounting Policies,” in the Notes to Financial Statements.
Kodak Operating Model and Reporting Structure
For 2008, the Company had three reportable segments: Consumer Digital Imaging Group (“CDG”), Film, Photofinishing and
Entertainment Group (“FPEG”), and Graphic Communications Group (“GCG”). Within each of the Company’s reportable segments
are various components, or Strategic Product Groups (“SPGs”). Throughout the remainder of this document, references to the
segments’ SPGs are indicated in italics. The balance of the Company's continuing operations, which individually and in the
aggregate do not meet the criteria of a reportable segment, are reported in All Other. A description of the segments is as follows:
Consumer Digital Imaging Group Segment (“CDG”): CDG encompasses digital still and video cameras, digital devices such as
picture frames, snapshot printers and related media, kiosks and related media, APEX drylab systems which were introduced in the
first quarter of 2008, consumer inkjet printing, Kodak Gallery, and imaging sensors. The APEX drylab system provides an alternative
to traditional photofinishing processing at retail locations. CDG also includes the licensing activities related to the Company's
intellectual property in digital imaging products.
Film, Photofinishing and Entertainment Group Segment (“FPEG”): FPEG encompasses consumer and professional film, one-
time-use cameras, graphic arts film, aerial and industrial film, and entertainment imaging products and services. In addition, this
segment also includes paper and output systems, and photofinishing services. This segment provides consumers, professionals,
cinematographers, and other entertainment imaging customers with film-related products and services and also provides graphic
arts film to the graphics industry.
Graphic Communications Group Segment (“GCG”): GCG serves a variety of customers in the creative, in-plant, data center,
commercial printing, packaging, newspaper and digital service bureau market segments with a range of software, media and
hardware products that provide customers with a variety of solutions for prepress equipment, workflow software, analog and digital
printing, and document scanning. Products and related services include workflow software and digital controllers; digital printing,
which includes commercial inkjet and electrophotographic products, including equipment, consumables and service; prepress
consumables; output devices; and document scanners.
All Other: All Other is composed of Kodak's display business and other small, miscellaneous businesses.
Prior period segment results have been revised to conform to the current period segment reporting structure.
Change in Cost Allocation Methodology
Effective January 1, 2008, the Company changed its cost allocation methodologies related to employee benefits and corporate
expenses. For the year ended December 31, 2007, this change decreased cost of goods sold by $28 million, increased selling,
general, and administrative costs by $14 million, and increased research and development costs by $14 million. For the year ended
December 31, 2006, this change decreased cost of goods sold by $37 million, increased selling, general, and administrative costs by
$19 million, and increased research and development costs by $18 million.
Prior period segment results have been revised to reflect the changes in cost allocation methodologies outlined above.