DuPont 2012 Annual Report Download - page 58

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(Dollars in millions, except per share)
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Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost plus accrued interest. The
estimated fair value of the company's cash equivalents was determined using level 2 inputs within the fair value hierarchy, as described below. Based on
current interest rates for similar investments with comparable credit risk and time to maturity, the fair value of the company's cash equivalents approximates
its stated value of $2,026 and $1,932 as of December 31, 2012 and 2011, respectively.
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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.
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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.
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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, certain food-ingredient and enzyme 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.
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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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Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and
separately recognized. Goodwill and indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed more
frequently when events or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value. The
company's fair value methodology is based on prices of similar assets or other valuation methodologies including discounted cash flow techniques.
Impairment losses are included in cost of goods sold and other operating charges.
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