Archer Daniels Midland 2009 Annual Report Download - page 47

Download and view the complete annual report

Please find page 47 of the 2009 Archer Daniels Midland annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

41
Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 1.
Summary of Significant Accounting Policies (Continued)
Receivables
The Company records trade accounts receivable at net realizable value. This value includes an appropriate
allowance for estimated uncollectible accounts, $103 million and $89 million at June 30, 2009 and 2008,
respectively, to reflect any loss anticipated on the trade accounts receivable balances. The Company calculates this
allowance based on its history of write-offs, level of past-due accounts, and its relationships with, and the economic
status of, its customers.
Credit risk on trade receivables is minimized as a result of the large and diversified nature of the Company’s
worldwide customer base. The Company controls its exposure to counter party credit risk through credit analysis
and approvals, credit limits, and monitoring procedures. Collateral is generally not required for the Company’s
trade receivables. Trade accounts receivable due from unconsolidated affiliates as of June 30, 2009 and 2008 was
$301 million and $199 million, respectively.
Inventories
Inventories of certain merchandisable agricultural commodities, which include inventories acquired under deferred
pricing contracts, are stated at market value. In addition, the Company values certain inventories using the lower of
cost, determined by either the first-in, first-out (FIFO) or last-in, first-out (LIFO) methods, or market.
Marketable Securities
The Company classifies its marketable securities as available-for-sale, except for certain designated securities
which are classified as trading securities. Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of income taxes, reported as a component of other comprehensive income. Unrealized gains
and losses related to trading securities are included in income on a current basis. The Company uses the specific
identification method when securities are sold or reclassified out of accumulated other comprehensive income into
earnings. The Company considers marketable securities maturing in less than one year as short-term. All other
marketable securities are classified as long-term.
Property, Plant, and Equipment
Property, plant, and equipment is recorded at cost. Repair and maintenance costs are expensed as incurred. The
Company generally uses the straight-line method in computing depreciation for financial reporting purposes and
generally uses accelerated methods for income tax purposes. The annual provisions for depreciation have been
computed principally in accordance with the following ranges of asset lives: buildings - 10 to 40 years; machinery
and equipment - 3 to 30 years.
Asset Abandonments and Write-Downs
The Company recorded a $13 million, a $32 million, and a $21 million charge in cost of products sold during 2009,
2008, and 2007, respectively, principally related to the abandonment and write-down of certain long-lived assets.
The majority of these assets were idle or related to underperforming product lines, and the decision to abandon or
write-down was finalized after consideration of the ability to utilize the assets for their intended purpose, employ
the assets in alternative uses, or sell the assets to recover the carrying value. After the write-downs, the carrying
value of these assets is immaterial.