Mondelez 2012 Annual Report Download - page 42

Table of Contents
Revenue Recognition:
We recognize revenues when title and risk of loss pass to customers, which generally occurs upon shipment or delivery of goods.
Revenues are recorded net of consumer incentives and trade promotions and include all shipping and handling charges billed to
customers. Our shipping and handling costs are classified as part of cost of sales. Provisions for product returns and customer
allowances are also recorded as reductions to revenues within the same period that the revenue is recognized.
Marketing and Research and Development:
We promote our products with advertising, consumer incentives and trade promotions. These programs include, but are not limited
to, discounts, coupons, rebates, in-store display incentives and volume-based incentives. We expense advertising costs either in
the period the advertising first takes place or as incurred. Consumer incentive and trade promotion activities are recorded as a
reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these
estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising and consumer
incentive expenses are charged to operations as a percentage of volume, based on estimated volume and related expense for the
full year. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in
the year incurred. Advertising expense was $1,815 million in 2012, $1,860 million in 2011, and $1,729 million in 2010. We expense
product research and development costs as incurred. Research and development expense was $462 million in 2012, $511 million
in 2011, and $404 million in 2010. We record marketing and research and development expenses within selling, general and
administrative expenses.
Environmental Costs:
Throughout the countries in which we do business, we are subject to local, national and multi-national environmental laws and
regulations relating to the protection of the environment. We have programs across our business units designed to meet applicable
environmental compliance requirements.
In the United States, the laws and regulations include the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). CERCLA imposes
joint and severable liability on each potentially responsible party. As of December 31, 2012, our subsidiaries were involved in one
active proceeding in the U.S. under a state equivalent of CERCLA related to our current operations. As of December 31, 2011, our
subsidiaries were involved in 68 active actions. Except for the one active proceeding we retained, all the remaining active actions
relate to and were retained by the divested Kraft Foods Group business.
As of December 31, 2012, we accrued an immaterial amount for environmental remediation. Based on information currently
available, we believe that the ultimate resolution of existing environmental remediation actions and our compliance in general with
environmental laws and regulations will not have a material effect on our financial results.
Employee Benefit Plans:
We provide a range of benefits to our current and retired employees. Depending on jurisdictions, tenure, presence of a union, job
level and other factors, these include pension benefits, postretirement health care benefits and postemployment benefits, consisting
primarily of severance. We record amounts relating to these plans based on calculations specified by U.S. GAAP. These
calculations require the use of various actuarial assumptions, such as discount rates, assumed rates of return on plan assets,
compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis
and make modifications to the assumptions based on current rates and trends when appropriate. As permitted by U.S. GAAP, we
generally amortize any effect of the modifications over future periods. We believe that the assumptions used in recording our plan
obligations are reasonable based on our experience and advice from our actuaries. Refer to Note 10, Benefit Plans , to the
consolidated financial statements for a discussion of the assumptions used.
In connection with the Spin-Off, we transferred to Kraft Foods Group, the plan liabilities and assets associated with the Kraft Foods
Group active and retired employees and certain of our retired employees that previously participated in our North American benefit
plans. At October 1, 2012, we transferred benefit plan liabilities of $12,218 million, pension plan assets of $6,550 million,
accumulated other comprehensive losses, net of tax, of $3,810 million and $2,146 million of related deferred tax assets. We also
expect annual pension expenses to decrease by $91 million in connection with certain of our North American benefit plan
obligations which were transferred to Kraft Foods Group in the Spin-Off.
39