Archer Daniels Midland 2009 Annual Report Download - page 51

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Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 2.
Acquisitions (Continued)
2009 Acquisitions
During 2009, the Company acquired ten businesses for a total cost of $198 million and recorded a preliminary
allocation of the purchase price related to these acquisitions. The purchase price allocations resulted in goodwill of
$31 million. The purchase price of $198 million was allocated to current assets, property, plant and equipment,
other long-term assets, and liabilities for $176 million, $82 million, $111 million, and $171 million, respectively.
2008 Acquisitions
During 2008, the Company acquired six businesses for a total cost of $15 million, paid for with $2 million in
Company stock and $13 million in cash. The final purchase price allocations resulted in goodwill of $5 million.
The purchase price of $15 million was allocated to current assets, property, plant and equipment, other long-term
assets, and liabilities for $14 million, $10 million, $5 million, and $14 million, respectively.
2007 Acquisitions
During 2007, the Company acquired seven businesses for a total cost of $103 million. One of the acquisitions
resulted in obtaining the remaining outstanding shares of an unconsolidated affiliate where the Company held a
50% interest.
The Company recorded goodwill of $5 million related to these acquisitions. The cash purchase price of $103
million plus the $100 million carrying value of the previously unconsolidated affiliate was allocated to current
assets, property, plant, and equipment, current liabilities, and debt for $82 million, $206 million, $33 million, and
$52 million, respectively.
Note 3.
Fair Value Measurements
Effective July 1, 2008, the Company adopted SFAS 157, which establishes a framework for measuring fair value
and clarifies the definition of fair value within that framework. SFAS 157 defines fair value as an exit price, which
is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most
advantageous market for the asset or liability, in an orderly transaction between market participants on the
measurement date. The fair value hierarchy established in SFAS 157 generally requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable
inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed
based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the
entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market
participants would use in pricing the asset or liability, and are to be developed based on the best information
available in the circumstances. In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of
a Financial Asset in a Market That Is Not Active, which clarifies that when an active market does not exist it may
be appropriate to use unobservable inputs to determine fair value. The Company determines the fair market value
of certain of its inventories of agricultural commodities, derivative contracts, and marketable securities based on the
fair value definition and hierarchy levels established in SFAS 157. SFAS 157 establishes three levels within its
hierarchy that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and
liabilities include exchange-traded derivative contracts, U.S. treasury securities and certain publicly traded equity
securities.