Mondelez 2013 Annual Report Download - page 51

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. 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.
Accounting Calendar Changes:
In 2013, the majority of our operating subsidiaries report results as of the last calendar day of the period. In connection with moving
to this common consolidation date, in the first quarter of 2013, we changed the consolidation date for our Europe segment from the
last Saturday of each period to the last calendar day of each period. The change in the consolidation date for our Europe segment
had a favorable impact of $37 million on net revenues and $6 million on operating income in 2013. At this time, primarily our North
American operating subsidiaries continue to report results as of the last Saturday of the period.
Prior to these changes, in 2012 and 2011, the majority of our operating subsidiaries reported results as of the last Saturday of the
year. In 2011, the last Saturday of the year also fell on December 31, and so our 2011 results included one more week of operating
results (“53
rd
week”) than 2013 or 2012, which each had 52 weeks. In 2011, we also changed the consolidation dates for certain
operations of our Europe, Latin America and EEMEA segments. Previously, these operations primarily reported results two weeks
prior to the end of the period. Subsequent to the 2011 changes, the majority of our Europe segment reported results as of the last
Saturday of each period and certain operations within our Latin America and EEMEA segments began to report results as of the
last calendar day of the period or the last Saturday of the period. These changes and the 53
rd
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.
We believe these changes will improve business planning and financial reporting by better matching the close dates of the
operating subsidiaries and 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.
Use of Estimates:
We prepare our consolidated financial statements in accordance with U.S. GAAP, which require 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 the actual amounts became
known. 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.
Long-Lived Assets:
We review long-
lived assets, including amortizable intangible assets, for impairment when conditions exist that indicate the carrying
amount of the assets may not be fully recoverable. We perform undiscounted operating cash flow analyses to determine if an
impairment exists. When testing for impairment of assets held for use, we group assets and liabilities at the lowest level for which
cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value.
Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
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