DuPont 2008 Annual Report Download - page 66

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.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.
Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported
amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid
or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from
differences between the financial and tax bases of the company’s assets and liabilities and are adjusted for changes
in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax
assets when it is more likely than not that a tax benefit will not be realized. Provision has been made for income taxes
on unremitted earnings of subsidiaries and affiliates, except for subsidiaries in which earnings are deemed to be
permanently invested. Investment tax credits or grants are accounted for in the period earned (the flow-through
method). Interest accrued related to unrecognized tax benefits is included in miscellaneous income and expenses,
net, under other income, net. Income tax related penalties are included in the provision for income taxes. It is
reasonably possible that changes from future completed tax examinations could be significant when compared to
the company’s global unrecognized tax benefits, however, due to the uncertainty regarding the timing of completion
of these audits and the possible outcomes, a current estimate of the range of increase or decrease that may occur
within the next twelve months cannot be made.
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.
F-10
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)