CHS 2014 Annual Report Download - page 36

equities. Patronage dividends are recorded as a reduc-
tion to cost of goods sold at the time qualified written
Our derivative instruments primarily consist of com- notices of allocation are received. Investments in other
modity and freight futures and forward contracts and, debt and equity securities are considered available for
to a lesser degree, may include foreign currency and sale financial instruments and are stated at fair value,
interest rate swap contracts. These contracts are eco- with unrealized amounts included as a component of
nomic hedges of price risk, but are not designated or accumulated other comprehensive loss. Investments in
accounted for as hedging instruments for accounting debt and equity instruments are carried at amounts that
purposes, with the exception of certain interest rate approximate fair values. Investments in joint ventures
swap contracts which are accounted for as cash flow and cooperatives have no quoted market prices.
hedges or fair value hedges. Derivative instruments are
recorded on our Consolidated Balance Sheets at fair
value. See Note 12, Derivative Financial Instruments and Property, plant and equipment are stated at cost less
Hedging Activities and Note 13, Fair Value Measure- accumulated depreciation and amortization. Deprecia-
ments for additional information. tion and amortization are provided on the straight-line
method by charges to operations at rates based upon
Even though we have netting arrangements for our the expected useful lives of individual or groups of
exchange-traded futures and options contracts and cer- assets (15 to 20 years for land and land improvements;
tain over-the-counter (OTC) contracts, we report our 20 to 40 years for buildings; 5 to 20 years for machinery
derivatives on a gross basis on our Consolidated Bal- and equipment; and 3 to 10 years for office and other).
ance Sheets. Our associated margin deposits are also The cost and related accumulated depreciation and
reported on a gross basis. amortization of assets sold or otherwise disposed of are
removed from the related accounts and resulting gains
or losses are reflected in operations. Expenditures for
Many of our derivative contracts with futures and maintenance and minor repairs and renewals are
options brokers require us to make both initial margin expensed, while costs of major repairs and betterments
deposits of cash or other assets and subsequent are capitalized and amortized on a straight-line basis
deposits, depending on changes in commodity prices, in over the period of time estimated to lapse until the next
order to comply with applicable regulations. Our margin major repair occurs. We also capitalize and amortize
deposit assets are held by external brokers in segre- eligible costs to acquire or develop internal-use
gated accounts and will be used to settle the associated software that are incurred during the application devel-
derivative contracts on their specified settlement dates. opment stage.
Property, plant and equipment and other long-lived
Beginning in fiscal 2014, supplier advance payments are assets are reviewed in order to assess recoverability
reported as a separate line item on our Consolidated based on projected income and related cash flows on an
Balance Sheets. Prior period amounts have been reclas- undiscounted basis when triggering events occur.
sified accordingly. Supplier advance payments primarily Should the sum of the expected future net cash flows be
include amounts paid for in-transit grain purchases from less than the carrying value, an impairment loss would
suppliers and amounts paid to crop nutrient suppliers to be recognized. An impairment loss would be measured
lock in future supply and pricing. by the amount by which the carrying value of the asset
exceeds the fair value of the asset.
Joint ventures and other investments, in which we have We have asset retirement obligations with respect to
significant ownership and influence, but not control, are certain of our refineries and other assets due to various
accounted for in our consolidated financial statements legal obligations to clean and/or dispose of the compo-
using the equity method of accounting. Investments in nent parts at the time they are retired. In most cases,
other cooperatives are stated at cost, plus patronage these assets can be used for extended and indetermi-
dividends received in the form of capital stock and other nate periods of time, as long as they are properly main-
tained and/or upgraded. It is our practice and current
34 CHS 2014
ONE: Summary of Significant Accounting Policies, continued
Derivative Financial Instruments and
Hedging Activities
Property, Plant and Equipment
Margin Deposits
Supplier Advance Payments
Investments