Nucor 2011 Annual Report Download - page 47

46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations Nucor is principally a manufacturer of steel and steel products, as well as a scrap broker and processor, with
operating facilities and customers primarily located in North America.
Principles of Consolidation The consolidated financial statements include Nucor and its controlled subsidiaries, including Nucor-Yamato
Steel Company, a limited partnership of which Nucor owns 51%. All significant intercompany transactions are eliminated.
Distributions are made to noncontrolling interest partners in Nucor-Yamato Steel Company in accordance with the limited partnership
agreement by mutual agreement of the general partners. At a minimum, sufficient cash is distributed so that each partner may pay
their U.S. federal and state income taxes.
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these estimates.
Reclassifications Certain amounts for prior years have been reclassified to conform to the 2011 presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents Cash equivalents are recorded at cost plus accrued interest, which approximates market, and have original
maturities of three months or less at the date of purchase. Cash and cash equivalents are maintained primarily with a few high-credit
quality financial institutions.
Short-term Investments Short-term investments are recorded at cost plus accrued interest, which approximates market. Unrealized
gains and losses on investments classified as available-for-sale are recorded as a component of accumulated other comprehensive
income (loss). Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such
determination at each balance sheet date.
Inventories Valuation Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method of
accounting represent approximately 47% of total inventories as of December 31, 2011 (45% as of December 31, 2010). All inventories
held by the parent company and Nucor-Yamato Steel Company are valued using the LIFO method of accounting except for supplies
that are consumed indirectly in the production process, which are valued using the first-in, first-out (FIFO) method of accounting. All
inventories held by other subsidiaries of the parent company are valued using the FIFO method of accounting. The Company records
any amount required to reduce the carrying value of inventory to net realizable value as a charge to cost of products sold.
Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided on a straight-line basis over
the estimated useful lives of the assets. The costs of planned major maintenance activities are capitalized and amortized over the period
until the next scheduled major maintenance activity. All other repairs and maintenance activities are expensed when incurred.
Goodwill and Other Intangibles Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not
amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than
not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each
year. The evaluation of impairment involves comparing the current estimated fair value of each reporting unit, which is a level below the
reportable segment, to the recorded value, including goodwill. When appropriate, Nucor performs a qualitative assessment to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. For certain reporting units it
is necessary to perform a quantitative analysis. In these instances, a discounted cash flow model is used to determine the current
estimated fair value of these reporting units. A number of significant assumptions and estimates are involved in the application of the
discounted cash flow model to forecast operating cash flows, including market growth and market share, sales volumes and prices,
costs to produce, discount rate and estimated capital needs. Management considers historical experience and all available information
at the time the fair values of its reporting units are estimated. Assumptions in estimating future cash flows are subject to a high degree
of judgment and complexity. Changes in assumptions and estimates may affect the carrying value of goodwill and could result in
additional impairment charges in future periods.
Finite-lived intangible assets are amortized over their estimated useful lives.