DuPont 2005 Annual Report Download - page 67

Download and view the complete annual report

Please find page 67 of the 2005 DuPont 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 117

  • 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
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

E. I. du Pont de Nemours and Company
Notes to Consolidated Financial Statements
(Dollars in millions, except per share)
1. Summary of Significant Accounting Policies
DuPont follows generally accepted accounting principles in the United States of America (GAAP). The significant accounting
policies described below, together with the other notes that follow, are an integral part of the Consolidated Financial
Statements.
Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the company, subsidiaries in which a controlling interest is
maintained, and variable interest entities (VIE) for which DuPont is the primary beneficiary. For those consolidated subsidiaries
in which the company’s ownership is less than 100 percent, the outside stockholders’ interests are shown as Minority interests.
Investments in affiliates over which the company has significant influence but not a controlling interest are carried on the
equity basis. This includes majority-owned entities for which the company does not consolidate because a minority investor
holds substantive participating rights. Investments in affiliates over which the company does not have significant influence are
accounted for by the cost method.
Revenue Recognition
The company recognizes revenue when the earnings process is complete. The majority of the company’s revenues are from
the sale of a wide range of products to a diversified base of customers around the world. Revenue for product sales is
recognized upon delivery, when title and risk of loss have been transferred, collectibility is reasonably assured, and pricing is
fixed or determinable. Substantially all product sales are sold FOB (free on board) shipping point or, with respect to non-U.S.
customers, an equivalent basis. Accruals are made for sales returns and other allowances based on the company’s experi-
ence. The company accounts for cash sales incentives as a reduction in sales and noncash sales incentives as a charge to
cost of goods sold or selling expense, depending on the nature of the incentive. Amounts billed to customers for shipping and
handling fees are included in Net sales and costs incurred by the company for the delivery of goods are classified as Cost of
goods sold and other operating charges in the Consolidated Income Statements.
The company periodically enters into prepayment contracts with customers in the Agriculture & Nutrition segment and
receives advance payments for product to be delivered in future periods. These advance payments are recorded as deferred
revenue and are included in Other accrued liabilities on the Consolidated Balance Sheet. Revenue associated with advance
payments is recognized as shipments are made and title, ownership, and risk of loss pass to the customer.
Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount
is fixed or determinable, and collectibility is reasonably assured.
Affiliate and Subsidiary Stock Transactions
Gains or losses arising from issuances by an affiliate or a subsidiary of its own stock are recorded as nonoperating items.
Cash and Cash Equivalents
Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost
plus accrued interest, which approximates fair value because of the short-term maturity of these instruments.
Investments in Securities
Marketable debt securities represent investments in fixed and floating rate financial instruments with maturities of twelve
months or less from time of purchase. They are classified as held-to-maturity and recorded at amortized cost.
F-8