Kimberly-Clark 2007 Annual Report Download - page 64

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of Kimberly-Clark Corporation and all
subsidiaries in which it has a controlling financial interest (the “Corporation”). All significant intercompany
transactions and accounts are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S.”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net
sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in
these estimates are recorded when known. Estimates are used in accounting for, among other things, consumer
and trade promotion and rebate accruals, pension and other post-employment benefits, retained insurable risks,
useful lives for depreciation and amortization, future cash flows associated with impairment testing for goodwill
and long-lived assets and for determination of the primary beneficiary of variable interest entities, deferred tax
assets and potential income tax assessments, and loss contingencies.
Cash Equivalents
Cash equivalents are short-term investments with an original maturity date of three months or less.
Inventories and Distribution Costs
For financial reporting purposes, most U.S. inventories are valued at the lower of cost, using the Last-In,
First-Out (LIFO) method, or market. The balance of the U.S. inventories and inventories of consolidated
operations outside the U.S. are valued at the lower of cost, using either the First-In, First-Out (FIFO) or
weighted-average cost methods, or market. Distribution costs are classified as cost of products sold.
Available-for-Sale Securities
Available-for-sale securities, consisting of debt securities issued by unaffiliated corporations and exchange-
traded equity funds, are carried at market value. Securities with maturity dates of one year or less are included in
other current assets and were $18.0 million and $6.0 million at December 31, 2007 and 2006, respectively.
Securities with maturity dates greater than one year are included in other assets and were $13.8 million at
December 31, 2006. There were no securities with maturities greater than one year at December 31, 2007. The
securities are held by the Corporation’s consolidated foreign financing subsidiary described in Note 5.
Unrealized holding gains or losses on these securities are recorded in other comprehensive income until realized.
No significant gains or losses were recognized in income for any of the three years ended December 31, 2007.
Property and Depreciation
For financial reporting purposes, property, plant and equipment are stated at cost and are depreciated
principally on the straight-line method. Buildings are depreciated over their estimated useful lives, primarily 40
years. Machinery and equipment are depreciated over their estimated useful lives, primarily ranging from 16 to 20
years. For income tax purposes, accelerated methods of depreciation are used. Purchases of computer software are
capitalized. External costs and certain internal costs (including payroll and payroll-related costs of employees)
directly associated with developing significant computer software applications for internal use are capitalized.
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