DuPont 2005 Annual Report Download - page 68

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E. I. du Pont de Nemours and Company
Notes to Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Other assets include long-term investments in securities, which comprise marketable equity securities and other securities and
investments for which market values are not readily available. Marketable equity securities are classified as available-for-sale
and reported at fair value. Fair value is based on quoted market prices as of the end of the reporting period. Unrealized gains
and losses are reported, net of their related tax effects, as a component of Accumulated other comprehensive income (loss) in
stockholders’ equity until sold. At the time of sale, any gains or losses calculated by the specific identification method are
recognized in Other income. Losses are also recognized in income when a decline in market value is deemed to be other than
temporary. Other securities and investments for which market values are not readily available are carried at cost (see
Note 17).
Inventories
The majority of the company’s inventories are valued at cost, as determined by the last-in, first-out (LIFO) method; in the
aggregate, such valuations are not in excess of market. Pioneer inventories are valued at the lower of cost, as determined by
the first-in, first-out (FIFO) method, or market.
Elements of cost in inventories include raw materials, direct labor, and manufacturing overhead. Stores and supplies are valued
at cost or market, whichever is lower; cost is generally determined by the average cost method.
Property, Plant and Equipment
Property, plant and equipment (PP&E) is carried at cost and is depreciated using the straight-line method. PP&E placed in
service prior to 1995 is depreciated under the sum-of-the-years’ digits method or other substantially similar methods. Substan-
tially all equipment and buildings are depreciated over useful lives ranging from 15 to 25 years. Capitalizable costs associated
with computer software for internal use are amortized on a straight-line basis over 5 to 7 years. When assets are surrendered,
retired, sold or otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the
accounts and included in determining gain or loss on such disposals.
Maintenance and repairs are charged to operations; replacements and improvements are capitalized.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed
more frequently when events or changes in circumstances indicate the carrying value may not be recoverable. The company’s
fair value methodology is based on quoted market prices, if available. If quoted market prices are not available, an estimate of
fair market value is made based on prices of similar assets or other valuation methodologies including present value tech-
niques. Impairment losses are included in income from operations.
Definite-lived intangible assets, such as purchased technology, patents, and customer lists are amortized over their estimated
useful lives, generally for periods ranging from 5 to 20 years. The company continually evaluates the reasonableness of the
useful lives of these assets.
Impairment of Long-Lived Assets
The company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances
indicate the carrying value may not be recoverable. The carrying value of a long-lived asset is considered impaired when the
total projected undiscounted cash flows from such asset are separately identifiable and are less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived
asset. The company’s fair value methodology is based on quoted market prices, if available. If quoted market prices are not
available, an estimate of fair market value is made based on prices of similar assets or other valuation methodologies including
present value techniques. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair
market values are reduced for disposal costs.
F-9