DuPont 2015 Annual Report Download - page 71

Download and view the complete annual report

Please find page 71 of the 2015 DuPont annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
F-12
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 group is considered impaired when
the total projected undiscounted cash flows from the assets 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 expense includes 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.
Royalty Expense
The company’s Agriculture segment currently has certain third party biotechnology trait license agreements, which require up-
front and variable payments subject to the licensor meeting certain conditions. These payments are reflected as prepaid expenses
and other assets and are amortized to cost of goods sold as seeds containing the respective trait technology are utilized over the
life of the license. The company evaluates the carrying value of the prepaid royalties when events or changes in circumstances
indicate the carrying value may not be recoverable.
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.