DuPont 2012 Annual Report Download - page 59

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(Dollars in millions, except per share)
Definite-lived intangible assets, such as purchased and licensed technology, patents and customer lists are amortized over their estimated useful lives,
generally for periods ranging from 1 to 20 years. The company continually evaluates the reasonableness of the useful lives of these assets. Once these assets
are fully amortized, they are removed from the Consolidated Balance Sheets.
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The company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may
not be recoverable. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the asset are
separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived asset. The company's fair value methodology is an estimate of fair market value which is made based on prices of similar assets or
other valuation methodologies including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their
disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or fair market value less
cost to sell. Depreciation is discontinued for long-lived assets classified as held for sale.
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Research and development costs are expensed as incurred.
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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 and restoration 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.
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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 25 years.
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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.
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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. A receivable for an
insurance recovery is generally recognized when the loss has occurred and collection is considered probable.
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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 basis 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 indefinitely 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.
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