DuPont 2013 Annual Report Download - page 59

E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
F-12
Goodwill and Other Intangible Assets
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.
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.
Impairment of Long-Lived Assets
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.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include costs (primarily consisting
of employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and
development of new products, enhancement of existing products and regulatory approval of new and existing products.
Environmental
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.
Asset Retirement Obligations
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.
Litigation
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.
Insurance/Self-Insurance
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.