Kraft 2003 Annual Report Download - page 47

45
At December 31, 2003 and 2002, goodwill by reportable segment
was as follows:
(in millions)
2003 2002
Cheese, Meals and Enhancers $8,834 $8,803
Biscuits, Snacks and Confectionery 8,963 9,015
Beverages, Desserts and Cereals 2,143 2,143
Oscar Mayer and Pizza 613 616
To tal Kraft Foods North America 20,553 20,577
Europe, Middle East and Africa 4,562 4,082
Latin America and Asia Pacific 287 252
To tal Kraft Foods International 4,849 4,334
Total goodwill $25,402 $24,911
Intangible assets at December 31, 2003 and 2002, were as follows:
(in millions)
2003 2002
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
Non-amortizable
intangible assets $11,432 $11,485
Amortizable
intangible assets 84 $39 54 $30
Total intangible assets $11,516 $39 $11,539 $30
Non-amortizable intangible assets are substantially comprised of
brand names purchased through the Nabisco acquisition.
Amortizable intangible assets consist primarily of certain trademark
licenses and non-compete agreements. Pre-tax amortization
expense for intangible assets was $9 million and $7 million for the
years ended December 31, 2003 and 2002, respectively.
Amortization expense for each of the next five years is currently
estimated to be $10 million or less.
The movement in goodwill and intangible assets from December 31,
2002, is as follows:
(in millions)
Intangible
Goodwill Assets
Balance at December 31, 2002 $24,911 $11,539
Changes due to:
Acquisitions 49 30
Currency 520 (40)
Other (78) (13)
Balance at December 31, 2003 $25,402 $11,516
Environmental costs: The Company is subject to laws and
regulations relating to the protection of the environment. The
Company provides for expenses associated with environmental
remediation obligations on an undiscounted basis when such
amounts are probable and can be reasonably estimated.
Such accruals are adjusted as new information develops or
circumstances change.
While it is not possible to quantify with certainty the potential impact
of actions regarding environmental remediation and compliance
efforts that the Company may undertake in the future, in the opinion
of management, environmental remediation and compliance costs,
before taking into account any recoveries from third parties, will not
have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows.
Foreign currency translation:The Company translates the results
of operations of its foreign subsidiaries using average exchange
rates during each period, whereas balance sheet accounts are
translated using exchange rates at the end of each period. Currency
translation adjustments are recorded as a component of
shareholders’ equity. Transaction gains and losses are recorded in
marketing, administration and research costs on the consolidated
statements of earnings and were not significant for any of the
periods presented.
Guarantees: Effective January 1, 2003, the Company adopted
Financial Accounting Standards Board (“FASB”) Interpretation
No. 45, “Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness
of Others.” Interpretation No. 45 required the disclosure of certain
guarantees existing at December 31, 2002. In addition, Interpretation
No. 45 required the recognition of a liability for the fair value of the
obligation of qualifying guarantee activities that are initiated or
modified after December 31, 2002. Accordingly, the Company has
applied the recognition provisions of Interpretation No. 45 to
guarantees initiated after December 31, 2002. Adoption of
Interpretation No. 45 as of January 1, 2003 did not have a material
impact on the Company’s consolidated financial statements. See
Note 17. Contingencies for a further discussion of guarantees.
Hedging instruments: Effective January 1, 2001, the Company
adopted SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” and its related amendment, SFAS No. 138,
“A ccounting for Certain Derivative Instruments and Certain Hedging
Activities.” These standards require that all derivative financial
instruments be recorded at fair value on the consolidated balance
sheets as either assets or liabilities. Changes in the fair value of
derivatives are recorded each period either in accumulated other
comprehensive earnings (losses) or in earnings, depending on
whether a derivative is designated and effective as part of a hedge
transaction and, if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in accumulated other
comprehensive earnings (losses) are reclassified to the consolidated
statement of earnings in the periods in which operating results are