Snapple 2010 Annual Report Download - page 81

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Activity in the allowance for doubtful accounts was as follows (in millions):
Balance, beginning of the year
Net charge to costs and expenses
Write-offs and adjustments
Balance, end of the year
2010
$7
1
(3)
$5
2009
$13
3
(9)
$7
2008
$20
5
(12)
$13
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.
As of December 31, 2010, Wal-Mart Stores, Inc. ("Wal-Mart") accounted for approximately $72 million of the Company's
trade accounts receivable. No single customer accounted for 10% or more of the Company’s trade accounts receivable as of
December 31, 2009.
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined for inventories of the Company’s subsidiaries
in the U.S. 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 $4 million and $9 million as of December 31, 2010 and 2009, respectively. Refer to Note 4 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), net in the Consolidated Statements of Operations. Refer to Note 5
for further information.
For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful asset lives
as follows:
Type of Asset
Buildings
Building improvements
Machinery and equipment
Vehicles
Cold drink equipment
Computer software
Useful Life
40 years
10 to 25 years
3 to 20 years
5 to 10 years
4 to 7 years
3 to 5 years
Leasehold improvements are depreciated over the shorter of the estimated useful life of the assets or the lease term. Estimated
useful lives are periodically reviewed and, when warranted, are updated.
The Company periodically reviews long-lived assets for impairment whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable. In order to assess recoverability, DPS compares the estimated undiscounted
future pre-tax cash flows from the use of the asset or group of assets, as defined, to the carrying amount of such assets. Measurement
of an impairment loss is based on the excess of the carrying amount of the asset or group of assets over the long-lived asset’s fair
value. As of December 31, 2010 and 2009, no analysis was warranted.
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