DuPont 2010 Annual Report Download - page 68

E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
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. The carrying value approximates fair value due to the short-term nature of the investments.
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 13).
Fair Value Measurements
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that
prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest
priority to unobservable inputs (level 3 measurements). A financial instrument’s level within the fair value hierarchy is
based on the lowest level of any input that is significant to the fair value measurement.
The company uses the following valuation techniques to measure fair value for its assets and liabilities:
Level 1 – Quoted market prices in active markets for identical assets or liabilities;
Level 2 – Significant other observable inputs (e.g. quoted prices for similar items in active markets,
quoted prices for identical or similar items in markets that are not active, inputs other than
quoted prices that are observable such as interest rate and yield curves, and market-
corroborated inputs);
Level 3 – Unobservable inputs for the asset or liability, which are valued based on management’s
estimates of assumptions that market participants would use in pricing the asset or liability.
Inventories
The majority of the company’s inventories are valued at cost, as determined by the last-in, first-out (LIFO) method; in
the aggregate, such valuations are not in excess of market. Seed inventories are valued at the lower of cost, as
determined by the first-in, first-out (FIFO) method, or market.
Elements of cost in inventories include raw materials, direct labor and manufacturing overhead. Stores and supplies
are valued at cost or market, whichever is lower; cost is generally determined by the average cost method.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and is depreciated using the straight-line method. Property, plant and
equipment placed in service prior to 1995 is depreciated under the sum-of-the-years’ digits method or other
substantially similar methods. Substantially all equipment and buildings are depreciated over useful lives ranging from
15 to 25 years. Capitalizable costs associated with computer software for internal use are amortized on a straight-line
basis over 5 to 7 years. When assets are surrendered, retired, sold or otherwise disposed of, their gross carrying values
and related accumulated depreciation are removed from the accounts and included in determining gain or loss on
such disposals.
Maintenance and repairs are charged to operations; replacements and improvements are capitalized.
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