Kraft 2005 Annual Report Download - page 59

MERRILL CORPORATION EYOUNG// 8-MAR-06 09:45 DISK126:[06CHI5.06CHI1135]DU1135A.;17
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KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DU1135A.;17
Merrill Corporation/Chicago [phone] Page Dim: 8.250 X 10.750Copy Dim: 38. X 54.3
Intangible assets at December 31, 2005 and 2004, were as follows (in millions):
2005 2004
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
Non-amortizable intangible assets ............. $10,482 $10,589
Amortizable intangible assets ................. 95 $61 96 $51
Total intangible assets .................... $10,577 $61 $10,685 $51
Non-amortizable intangible assets consist substantially of brand names purchased through the
Nabisco acquisition. Amortizable intangible assets consist primarily of certain trademark licenses and
non-compete agreements. Amortization expense for intangible assets was $10 million, $11 million and
$9 million for the years ended December 31, 2005, 2004 and 2003, respectively. Amortization expense
for each of the next five years is currently estimated to be approximately $7 million or less.
The movement in goodwill and gross carrying amount of intangible assets is as follows:
2005 2004
Intangible Intangible
Goodwill Assets Goodwill Assets
(in millions)
Balance at January 1 .......................... $25,177 $10,685 $25,402 $11,516
Changes due to:
Acquisitions .............................. 57 71
Reclassification to assets held for sale ........... (814) (485)
Currency ................................ (508) 10 495 (7)
Intangible asset impairment .................. (13) (118) (29)
Other .................................. (8) 37 (381)
Balance at December 31 ........................ $24,648 $10,577 $25,177 $10,685
Other in 2004, above, includes the reclassification to goodwill of certain amounts previously
classified as indefinite life intangible assets, as well as tax adjustments related to the Nabisco
acquisition.
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’
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