DuPont 2007 Annual Report Download - page 68

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Foreign Currency Translation
The U.S. dollar (USD) is the functional currency of most of the company’s worldwide operations. For subsidiaries
where the USD is the functional currency, all foreign currency asset and liability amounts are remeasured into USD at
end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill
and other intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are
remeasured at average exchange rates in effect during the year, except for expenses related to balance sheet
amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of
foreign currency-denominated monetary assets and liabilities are included in income in the period in which they
occur.
For subsidiaries where the local currency is the functional currency, assets and liabilities denominated in local
currencies are translated into USD, at end-of-period exchange rates and the resultant translation adjustments are
reported, net of their related tax effects, as a component of Accumulated other comprehensive income (loss) in
stockholders’ equity. Assets and liabilities denominated in other than the local currency are remeasured into the local
currency prior to translation into USD and the resultant exchange gains or losses are included in income in the period
in which they occur. Income and expenses are translated into USD at average exchange rates in effect during the
period.
Variable Interest Entities (VIEs)
The company consolidates VIEs where DuPont is considered the primary beneficiary. At December 31, 2007, the
assets, liabilities and operations of these entities are not material to the Consolidated Financial Statements of the
company.
The company is also involved with other entities that are VIEs for which the company is not currently the primary
beneficiary. Future events may require these VIEs to be consolidated if the company becomes the primary
beneficiary. At December 31, 2007, the assets and liabilities of the other VIEs are immaterial to the
Consolidated Financial Statements of the company. The company’s share of the net income (loss) of these
VIEs is included in Other income, net, in the Consolidated Income Statements and is not material.
Hedging and Trading Activities
Derivative instruments are reported on the Consolidated Balance Sheets at their fair values. For derivative
instruments designated as fair value hedges, changes in the fair values of the derivative instruments will
generally be offset on the income statement by changes in the fair value of the hedged items. For derivative
instruments designated as cash flow hedges, the effective portion of any hedge is reported in Accumulated 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 23 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 2007 classifications.
F-11
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)