Nucor 2015 Annual Report Download - page 55

5353
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations Nucor is principally a manufacturer of steel and steel products, as well as a scrap broker and processor, with
operating facilities and customers primarily located in North America.
Principles of Consolidation The consolidated financial statements include Nucor and its controlled subsidiaries, including
Nucor-Yamato Steel Company, a limited partnership of which Nucor owns 51%. All intercompany transactions are eliminated.
Distributions are made to noncontrolling interest partners in Nucor-Yamato Steel Company in accordance with the limited partnership
agreement by mutual agreement of the general partners. At a minimum, sufficient cash is distributed so that each partner may pay
their U.S. federal and state income taxes.
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these estimates.
Reclassifications During the first six months of 2015, the Company performed certain internal reorganization activities. In connection
with this process, the financial information utilized by the Chief Operating Decision Maker when assessing segment performance
and making resource allocations was adjusted in a way that affected how certain assets are grouped. This resulted in certain assets
being reclassified between the steel mills segment, steel products segment, raw materials segment and corporate/eliminations in
the segment footnote in order to align with the approach management uses to assess the performance of those segments. The
segment data for the comparable periods has also been reclassified in order to conform to the current period presentation. These
reclassifications did not have any impact on the consolidated asset balances nor did they impact any segment income statement
amounts. The steel mills, steel products and raw materials segments are consistent with the way Nucor manages its business,
which is based primarily upon the similarity of the types of products produced and sold by each segment (see Note 23).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents Cash equivalents are recorded at cost plus accrued interest, which approximates fair value, and have
original maturities of three months or less at the date of purchase. Cash and cash equivalents are maintained primarily with a few
high-credit quality financial institutions.
Short-term Investments Short-term investments are recorded at cost plus accrued interest, which approximates fair value. Unrealized
gains and losses on investments classified as available-for-sale are recorded as a component of accumulated other comprehensive
income (loss). Management determines the appropriate classification of its investments at the time of purchase and re-evaluates
such determination at each balance sheet date.
Inventories Valuation Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method
of accounting represent approximately 48% of total inventories as of December 31, 2015 (43% as of December 31, 2014). All inventories
held by the parent company and Nucor-Yamato Steel Company are valued using the LIFO method of accounting except for supplies
that are consumed indirectly in the production process, which are valued using the first-in, first-out (FIFO) method of accounting. All
inventories held by other subsidiaries of the parent company are valued using the FIFO method of accounting. The Company records
any amount required to reduce the carrying value of inventory to net realizable value as a charge to cost of products sold.
Property, Plant and Equipment Property, plant and equipment are stated at cost, except for property, plant and equipment acquired
through acquisitions which are recorded at acquisition date fair value. With the exception of our natural gas wells, depreciation is
provided on a straight-line basis over the estimated useful lives of the assets. Depletion of all capitalized costs associated with our natural
gas producing properties is expensed on a unit-of-production basis by individual field as the gas from the proved developed reserves
is produced. The costs of planned major maintenance activities are capitalized as part of other current assets and amortized over the
period until the next scheduled major maintenance activity. All other repairs and maintenance activities are expensed when incurred.
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