DuPont 2006 Annual Report Download - page 74

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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. Once these assets are fully amortized, they are
removed from the Consolidated Balance Sheets.
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.
Research and Development
Research and development costs are expensed as incurred.
Environmental
Accruals for environmental matters are recorded in operating expenses when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated. Accrued liabilities do not include
claims against third parties and are not discounted.
Costs related to environmental remediation are charged to expense. Other environmental costs are also charged
to expense unless they increase the value of the property or reduce or prevent contamination from future
operations, in which case, they are capitalized.
Asset Retirement Obligations
The company records asset retirement obligations at fair value at the time the liability is incurred. Accretion
expense is recognized as an operating expense using the credit-adjusted risk-free interest rate in effect when
the liability was recognized. The associated asset retirement obligations are capitalized as part of the carrying
amount of the long-lived asset and depreciated over the estimated remaining useful life of the asset, generally
for periods ranging from 1 to 20 years.
Litigation
The company accrues for liabilities related to litigation matters when the information available indicates that it
is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Legal
costs such as outside counsel fees and expenses are charged to expense in the period incurred.
Insurance/Self-Insurance
The company self-insures certain risks where permitted by law or regulation, including workers’ compensation,
vehicle liability and employee related benefits. Liabilities associated with these risks are estimated in part by
considering historical claims experience, demographic factors and other actuarial assumptions. For other risks,
the company uses a combination of insurance and self-insurance, reflecting comprehensive reviews of relevant
risks.
F-11
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)