DuPont 2006 Annual Report Download - page 76

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other comprehensive income (loss) until it is cleared to earnings during the same period in which the hedged
item affects earnings. The ineffective portion of all hedges is recognized in current period earnings. Changes
in the fair values of derivative instruments that are not designated as hedges are recorded in current period
earnings.
In the event that a derivative designated as a hedge of a firm commitment or an anticipated transaction is
terminated prior to the maturation of the hedged transaction, gains or losses realized at termination are
deferred and included in the measurement of the hedged transaction. If a hedged transaction matures, or is
sold, extinguished, or terminated prior to the maturity of a derivative designated as a hedge of such
transaction, gains or losses associated with the derivative through the date the transaction matured are included
in the measurement of the hedged transaction and the derivative is reclassified as for trading purposes.
Derivatives designated as a hedge of an anticipated transaction are reclassified as for trading purposes if the
anticipated transaction is no longer likely to occur.
Cash flows from derivative instruments accounted for as either fair value hedges or cash flow hedges are
reported in the same category as the cash flows from the items being hedged. Cash flows from all other
derivative instruments are generally reported as investing activities in the Consolidated Statements of Cash
Flows. See Note 25 for additional discussion regarding the company’s objectives and strategies for derivative
instruments.
Reclassifications
Certain reclassifications of prior years’ data have been made to conform to 2006 classifications.
Accounting Standards Issued Not Yet Adopted
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48
“Accounting for Uncertainty in Income Taxes” an interpretation of FASB Statement No. 109 “Accounting for
Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
financial statements and prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48
will be adopted by the company on January 1, 2007. While the company is still evaluating the impact of
adoption of FIN 48 on its consolidated financial statements, it believes that adoption of FIN 48 will decrease
the liabilities accrued for uncertainty in income taxes at December 31, 2006 by $100 to $125 with a
corresponding increase in Reinvested earnings at January 1, 2007.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, (SFAS 157) “Fair
Value Measurements,” which addresses how companies should measure fair value when required for
recognition or disclosure purposes under generally accepted accounting principles in the U.S. (GAAP). The
standard’s provisions will be applied to existing accounting measurements and related disclosures that are
based on fair value. SFAS 157 does not require any new fair value measurements. The standard applies a
common definition of fair value to be used throughout GAAP, with emphasis on fair value as a “market-
based” measurement versus an entity-specific measurement and establishes a hierarchy of fair value
measurement methods. The disclosure requirements are expanded to include the extent to which companies
use fair value measurements, the methods and assumptions used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 is effective for fiscal years beginning after November 15, 2007.
The new standard’s provisions applicable to the company will be applied prospectively and the company is
currently evaluating the impact of adoption on its consolidated financial statements.
F-13
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)