Mondelez 2012 Annual Report Download - page 40

Table of Contents
Critical Accounting Policies
Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements includes a summary of the significant
accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and disclosure of
our critical accounting policies and estimates with our Audit Committee. The following is a review of the more significant
assumptions and estimates, as well as the accounting policies we used to prepare our consolidated financial statements.
Principles of Consolidation:
The consolidated financial statements include Mondelēz International, as well as our wholly owned and majority owned
subsidiaries. The majority of our operating subsidiaries report results as of the last Saturday of the year. A portion of our
international operating subsidiaries report results as of the last calendar day. In 2011, the last Saturday of the year fell on
December 31, so our 2011 results included one more week of operating results (“53 week”) than 2012 or 2010, which each had
52 weeks.
In 2011, we changed the consolidation date for certain operations of our Europe segment and in the Latin America, Central and
Eastern Europe (“CEE”) and Middle East and Africa (“MEA”) regions within our Developing Markets segment. Previously, these
operations primarily reported results two weeks prior to the end of the period. Subsequent to the 2011 changes, our Europe
segment reports results as of the last Saturday of each period. Certain operations within our Developing Markets segment now
report results as of the last calendar day of the period or the last Saturday of the period. These changes and the 53 week in 2011
resulted in a favorable impact to net revenues of $679 million and a favorable impact of $93 million to operating income in 2011.
In 2010, we changed the consolidation date for certain European biscuits operations, which are included within our Europe
segment, and certain operations in Asia Pacific and Latin America within our Developing Markets segment. Previously, these
operations primarily reported period-end results one month or two weeks prior to the end of the period. Europe moved the reporting
of these operations to two weeks prior to the end of the period, and Asia Pacific and Latin America moved the reporting of these
operations to the last day of the period. These changes resulted in a favorable impact to net revenues of $193 million and a
favorable impact of $23 million to operating income in 2010.
We believe these changes are preferable and will improve business planning and financial reporting by better matching the close
dates of the operating subsidiaries within our Europe and Developing Markets segments and by bringing the reporting dates closer
to the period-end date. As the effect to prior-period results was not material, we have not revised prior-period results.
We account for investments in which we exercise significant influence (20%-50% ownership interest) under the equity method of
accounting. We use the cost method of accounting for investments in which we have an ownership interest of less than 20% and in
which we do not exercise significant influence. Noncontrolling interest in subsidiaries consists of the equity interest of noncontrolling
investors in consolidated subsidiaries of Mondelēz International. All intercompany transactions are eliminated.
Use of Estimates:
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates and
assumptions that affect a number of amounts in our consolidated financial statements. Significant accounting policy elections,
estimates and assumptions include, among others, pension and benefit plan assumptions, valuation assumptions of goodwill and
intangible assets, useful lives of long-lived assets, marketing program accruals, insurance and self-insurance reserves and income
taxes. We base our estimates on historical experience and other assumptions that we believe are reasonable. If actual amounts
differ from estimates, we include the revisions in our consolidated results of operations in the period in which we know the actual
amounts. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a
material effect on our consolidated financial statements.
Inventories:
Inventories are stated at the lower of cost or market. We value all our inventories using the average cost method. We also record
inventory allowances for overstocked and obsolete inventories due to ingredient and packaging changes.
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