Mondelez 2014 Annual Report Download - page 46

Table of Contents
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the
financial statement and tax bases of our assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those differences
are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not
that a tax benefit will not be realized.
We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax
position will be sustained on examination by tax authorities based on the technical merits of the position. The amount we recognize
is measured as the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We evaluate
uncertain tax positions on an ongoing basis and adjust the related tax liabilities or assets in light of changing facts and
circumstances, such as the progress of a tax audit or expiration of a statute of limitations. We believe the estimates and
assumptions used to support our evaluation of uncertain tax positions are reasonable. However, final determination of historical tax
liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different from estimates
reflected on our consolidated balance sheet and historical income tax provisions. The outcome of these final determinations could
have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is
made. We believe our tax positions comply with applicable tax laws and that we have adequately accounted for uncertain tax
positions.
No taxes have been provided on undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, such
as material changes in long-term investment requirements, necessitate that these earnings be distributed, an additional provision
for taxes may apply, which could materially affect our future effective tax rate.
See Note 15, Income Taxes , for additional information on our effective tax rate, current and deferred taxes, valuation allowances
and unrecognized tax benefits.
Contingencies:
See Note 11, Commitments and Contingencies , to the consolidated financial statements.
New Accounting Guidance:
See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements for a discussion of new
accounting standards.
Commodity Trends
We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients,
packaging and fuel required for production. During 2014, the primary drivers of the increase in our aggregate commodity costs were
increased cocoa, dairy, packaging, energy and coffee bean costs and higher currency-related costs on our commodity purchases,
partially offset by lower costs for sugar and grains and oils due primarily to hedging.
A number of external factors such as weather conditions, commodity market conditions, currency fluctuations and the effects of
governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our
products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing
and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials;
however, we may not be able to fully hedge against commodity cost changes, and our hedging strategies may not protect us from
increases in specific raw material costs. We generally also price to protect gross profit dollars. Due to competitive or market
conditions, planned trade or promotional incentives, or other factors, our pricing actions may lag commodity cost changes
temporarily.
We expect price volatility and a slightly higher aggregate cost environment to continue in 2015. While the costs of our principal raw
materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally
remain available from numerous sources.
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