Nucor 2013 Annual Report Download - page 53

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Goodwill and Other Intangibles Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not
amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than
not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each
year. The evaluation of impairment involves comparing the current estimated fair value of each reporting unit, which is a level below
the reportable segment, to the recorded value, including goodwill. When appropriate, Nucor performs a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. For certain reporting
units it is necessary to perform a quantitative analysis. In these instances, a discounted cash flow model is used to determine the
current estimated fair value of these reporting units. A number of significant assumptions and estimates are involved in the application
of the discounted cash flow model to forecast operating cash flows, including market growth and market share, sales volumes and
prices, costs to produce, discount rate and estimated capital needs. Management considers historical experience and all available
information at the time the fair values of its reporting units are estimated. Assumptions in estimating future cash flows are subject to
a high degree of judgment and complexity. Changes in assumptions and estimates may affect the fair value of goodwill and could
result in impairment charges in future periods.
Finite-lived intangible assets are amortized over their estimated useful lives.
Long-Lived Asset Impairments We evaluate our property, plant and equipment and finite-lived intangible assets for potential impairment
on an individual asset basis or at the lowest level asset grouping for which cash flows can be separately identified. Asset impairments are
assessed whenever circumstances indicate that the carrying amounts of those productive assets could exceed their projected undiscounted
cash flows. When it is determined that impairment exists, the related assets are written down to estimated fair market value.
Equity Method Investments Investments in joint ventures in which Nucor shares control over the financial and operating decisions
but in which Nucor is not the primary beneficiary are accounted for under the equity method. Each of the Company’s equity method
investments is subject to a review for impairment if, and when, circumstances indicate that a decline in value below its carrying
amount may have occurred. Examples of such circumstances include, but are not limited to, a significant deterioration in the earnings
performance or business prospects of the investee; a significant adverse change in the regulatory, economic or technological
environment of the investee; a significant adverse change in the general market condition of either the geographic area or the industry
in which the investee operates; and recurring negative cash flows from operations. If management considers the decline to be other
than temporary, the Company would write down the investment to its estimated fair market value.
Derivative Financial Instruments Nucor uses derivative financial instruments from time to time primarily to partially manage its exposure
to price risk related to natural gas purchases used in the production process and to changes in interest rates on outstanding debt
instruments. Nucor also uses derivatives to hedge a portion of our scrap, copper and aluminum purchases and sales. In addition,
Nucor uses forward foreign exchange contracts to hedge cash flows associated with certain assets and liabilities, firm commitments
and anticipated transactions.
Nucor recognizes all material derivative instruments in the consolidated balance sheets at fair value. Amounts included in
accumulated other comprehensive income (loss) related to cash flow hedges are reclassified into earnings when the underlying
transaction is recognized in net earnings. Changes in fair value hedges are reported currently in earnings along with changes in the
fair value of the hedged items. When cash flow and fair value hedges affect net earnings, they are included on the same financial
statement line as the underlying transaction (cost of products sold or interest expense). If these instruments do not meet hedge
accounting criteria or contain ineffectiveness, the change in fair value (or a portion thereof) is recognized immediately in earnings
in the same financial statement line as the underlying transaction.
Revenue Recognition Nucor recognizes revenue when persuasive evidence of a contractual arrangement exists, delivery has occurred,
the sales price is fixed or determinable and collection is reasonably assured. Product is considered delivered to the customer once it
has been shipped and title and risk of loss has been transferred.
Income Taxes Nucor utilizes the liability method of accounting for income taxes. Under the liability method, deferred taxes are
determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates
expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more
likely than not that some of the deferred tax assets will not be realized.
Nucor recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Potential
accrued interest and penalties related to unrecognized tax benefits are recognized as a component of interest expense.
Nucor’s intention is to permanently reinvest the earnings of certain foreign investments. Accordingly, no provisions have been made
for taxes that may be payable upon remittance of such earnings.