Snapple 2008 Annual Report Download - page 83

Cash and Cash Equivalents
Cash and cash equivalents include cash and investments in short-term, highly liquid securities, with original
maturities of three months or less.
The Company is exposed to potential risks associated with its cash and cash equivalents. DPS places its cash
and cash equivalents with high credit quality financial institutions. Deposits with these financial institutions may
exceed the amount of insurance provided; however, these deposits typically are redeemable upon demand and,
therefore, the Company believes the financial risks associated with these financial instruments are minimal.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company
determines the required allowance for doubtful collections using information such as its customer credit history and
financial condition, industry and market segment information, economic trends and conditions and credit reports.
Allowances can be affected by changes in the industry, customer credit issues or customer bankruptcies. Account
balances are charged against the allowance when it is determined that the receivable will not be recovered.
Activity in the allowance for doubtful accounts was as follows (in millions):
2008 2007 2006
Balance, beginning of the year .................................... $20 $14 $10
Net charge to costs and expenses................................... 5 11 4
Acquisition of subsidiaries ....................................... — — 3
Write-offs.................................................... (12) (5) (3)
Balance, end of the year ......................................... $13 $20 $14
The Company is exposed to potential credit risks associated with its accounts receivable. DPS performs
ongoing credit evaluations of its customers, and generally does not require collateral on its accounts receivable. The
Company has not experienced significant credit related losses to date. No single customer accounted for 10% or
more of the Company’s trade accounts receivable for any period presented.
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined for inventories of the Company’s
subsidiaries in the United States substantially by the last-in, first-out (“LIFO”) valuation method and for inventories
of the Company’s international subsidiaries by the first-in, first-out (“FIFO”) valuation method. The costs of
finished goods inventories include raw materials, direct labor and indirect production and overhead costs. Reserves
for excess and obsolete inventories are based on an assessment of slow-moving and obsolete inventories,
determined by historical usage and demand. Excess and obsolete inventory reserves were $7 million and $17 million
as of December 31, 2008 and 2007, respectively. Refer to Note 6 for further information.
Property, Plant and Equipment
Property, plant and equipment is stated at cost plus capitalized interest on borrowings during the actual
construction period of major capital projects, net of accumulated depreciation. Significant improvements which
substantially extend the useful lives of assets are capitalized. The costs of major rebuilds and replacements of plant
and equipment are capitalized and expenditures for repairs and maintenance which do not improve or extend the life
of the assets are expensed as incurred. When property, plant and equipment is sold or retired, the costs and the
related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in other
operating expense (income) in the Consolidated Statement of Operations. Refer to Note 7 for further information.
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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)