Snapple 2012 Annual Report Download - page 72

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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
54
2. Significant Accounting Policies
Use of Estimates
The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that
affect the reported amount of assets, liabilities, revenue and expenses. These estimates and judgments are based on historical
experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances.
These estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded
in the period of change. Actual amounts may differ from these estimates.
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 is exposed to potential credit risks associated with its accounts receivable, as it generally does not require
collateral on its accounts receivable. 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. The Company has not
experienced significant credit related losses to date.
Activity in the allowance for doubtful accounts was as follows (in millions):
2012 2011 2010
Balance, beginning of the year $ 3 $ 5 $ 7
Net charge to costs and expenses 24 1
Write-offs and adjustments (2)(6)(3)
Balance, end of the year $ 3 $ 3 $ 5
As of December 31, 2012 and 2011, Wal-Mart Stores, Inc. ("WalMart") accounted for approximately $63 million and $71
million, respectively, of the Company's trade accounts receivable.
Inventories
Inventories are stated at the lower of cost or market value. Cost is primarily determined for inventories of the Company's
subsidiaries by the last-in, first-out ("LIFO") 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 $3 million as of December 31, 2012 and 2011. Refer to Note 3 for further information.