Kimberly-Clark 2010 Annual Report Download - page 30

PART II
(Continued)
negatively affected K-C Venezuela because it has had to meet its foreign currency needs at rates which
are substantially unfavorable to the official exchange rate. During the second quarter of 2010, the
Venezuelan government enacted reforms to its currency exchange regulations that include a volume
limitation that is insufficient to convert K-C Venezuela’s bolivar-denominated cash into U.S. dollars to
pay for the historical levels of U.S. dollar-denominated imports to support its operations.
K-C Venezuela represented 1 percent and 3 percent of Consolidated Net Sales in 2010 and 2009,
respectively. In 2009, K-C Venezuela represented 1 percent of Consolidated Operating Profit and Net
Income Attributable to Kimberly-Clark. In 2010, Operating Profit and Net Income Attributable to K-C
at our Venezuelan subsidiary were both negative as a result of the $98 million in pretax ($96 million
after tax) adjustment recorded as a result of adopting highly inflationary accounting in the first quarter
of 2010. While K-C Venezuela’s results of operations for the remainder of the year did not have a
material impact on our 2010 consolidated results, they did negatively impact sales volume comparisons
and we expect this trend to continue in 2011. At December 31, 2010, our net investment in K-C
Venezuela was $175 million.
Management believes that our ability to generate cash from operations and our capacity to issue short-term
and long-term debt are adequate to fund working capital, capital spending, payment of dividends, pension plan
contributions and other needs in the foreseeable future.
Variable Interest Entities
We have interests in the financing and real estate entities discussed in Item 8, Notes 2, 9 and 14 to the
Consolidated Financial Statements. The entities described in Item 8, Notes 2 and 9 are consolidated, as are
certain of the real estate entities described in Note 14. The nonconsolidated real estate entities do not engage in
any off-balance sheet arrangements.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
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 period. The critical accounting policies we used in the preparation of the Consolidated Financial
Statements are those that are important both to the presentation of our financial condition and results of
operations and require significant judgments by management with regard to estimates used. The critical
judgments by management relate to consumer and trade promotion and rebate accruals, pension and other
postretirement benefits, retained insurable risks, useful lives for depreciation and amortization, future cash flows
associated with impairment testing for goodwill and long-lived assets, the qualitative analyses used to determine
the primary beneficiary of variable interest entities, deferred income taxes and potential income tax assessments,
and loss contingencies. These critical accounting policies have been reviewed with the Audit Committee of the
Board of Directors.
Promotion and Rebate Accruals
Among those factors affecting the accruals for promotions are estimates of the number of consumer coupons
that will be redeemed and the type and number of activities within promotional programs between us and our
trade customers. Rebate accruals are based on estimates of the quantity of products distributors have sold to
specific customers. Generally, the estimates for consumer coupon costs are based on historical patterns of coupon
redemption, influenced by judgments about current market conditions such as competitive activity in specific
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