DuPont 2009 Annual Report Download - page 66

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E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The company follows generally accepted accounting principles in the United States of America (GAAP). The significant
accounting policies described below, together with the other notes that follow, are an integral part of the Consolidated
Financial Statements.
Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the company, subsidiaries in which a controlling
interest is maintained and variable interest entities (VIEs) for which DuPont is the primary beneficiary. For those
consolidated subsidiaries in which the company’s ownership is less than 100 percent, the outside stockholders’
interests are shown as noncontrolling interests. Investments in affiliates over which the company has significant
influence but not a controlling interest are carried on the equity basis. This includes majority-owned entities for which
the company does not consolidate because a minority investor holds substantive participating rights. Investments in
affiliates over which the company does not have significant influence are accounted for by the cost method or as
available-for-sale securities.
Revenue Recognition
The company recognizes revenue when the earnings process is complete. The company’s revenues are from the sale
of a wide range of products to a diversified base of customers around the world. Revenue for product sales is
recognized upon delivery, when title and risk of loss have been transferred, collectibility is reasonably assured and
pricing is fixed or determinable. Substantially all product sales are sold FOB (free on board) shipping point or, with
respect to non-U.S. customers, an equivalent basis. Accruals are made for sales returns and other allowances based
on the company’s experience. The company accounts for cash sales incentives as a reduction in sales and noncash
sales incentives as a charge to cost of goods sold or selling expense, depending on the nature of the incentive.
Amounts billed to customers for shipping and handling fees are included in net sales and costs incurred by the
company for the delivery of goods are classified as cost of goods sold and other operating charges in the Consolidated
Income Statements. Taxes on revenue-producing transactions are excluded from net sales.
The company periodically enters into prepayment contracts with customers in the Agriculture & Nutrition segment and
receives advance payments for product to be delivered in future periods. These advance payments are recorded as
deferred revenue and are included in other accrued liabilities on the Consolidated Balance Sheets. Revenue
associated with advance payments is recognized as shipments are made and title, ownership and risk of loss pass to
the customer.
Licensing and royalty income is recognized in accordance with agreed upon terms, when performance obligations are
satisfied, the amount is fixed or determinable and collectibility is reasonably assured.
Cash and Cash Equivalents
Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried
at cost plus accrued interest, which approximates fair value because of the short-term maturity of these instruments.
Investments in Securities
Marketable securities represent investments in fixed and floating rate financial instruments with maturities greater than
three months and up to twelve months at time of purchase. They are classified as held-to-maturity and recorded at
amortized cost.
Other assets include long-term investments in securities, which comprise investments for which market values are not
readily available (cost investments) and available-for-sale securities that are reported at fair value (see Note 14).
F-8