DuPont 2009 Annual Report Download - page 69

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E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
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, 2009, 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, 2009, the assets and liabilities of the other VIEs are not material 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 probable.
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 24 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 2009 classifications.
F-11