Snapple 2009 Annual Report Download - page 89

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than those related to other parts of our business. Accruals are established for the expected payout based on
contractual terms, volume-based metrics and/or historical trends and require management judgment with respect to
estimating customer participation and performance levels.
Transportation and Warehousing Costs
The Company incurred $706 million, $775 million and $736 million of transportation and warehousing costs
in 2009, 2008 and 2007, respectively. These amounts, which primarily relate to shipping and handling costs, are
recorded in selling, general and administrative expenses in the Consolidated Statements of Operations.
Advertising and Marketing Expense
Advertising and marketing costs are expensed as incurred and amounted to approximately $409 million,
$356 million and $387 million for 2009, 2008 and 2007, respectively. These expenses are recorded in selling,
general and administrative expenses in the Consolidated Statements of Operations.
Research and Development
Research and development costs are expensed when incurred and amounted to $15 million and $17 million for
2009 and 2008, respectively. Research and development costs totaled $14 million for 2007, net of allocations to
Cadbury. Additionally, the Company incurred packaging engineering costs of $7 million, $4 million and $5 million
for 2009, 2008 and 2007, respectively. These expenses are recorded in selling, general and administrative expenses
in the Consolidated Statements of Operations.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans in accordance with U.S. GAAP, which requires
the recognition of compensation expense in the Consolidated Statements of Operations related to the fair value of
employee share-based awards.
The Company recognizes the cost of all unvested employee stock options on a straight-line attribution basis
over their respective vesting periods, net of estimated forfeitures. Prior to the separation from Cadbury, the
Company participated in certain employee share plans that contained inflation indexed earnings growth perfor-
mance conditions. These plans were accounted for under the liability method set forth under U.S. GAAP. As such, a
liability was recorded on the balance sheet and, in calculating the income statement charge for share awards, the fair
value of each award was remeasured at each reporting date until awards vested.
The stock-based compensation plans in which the Company’s employees participate are described further in
Note 16.
Restructuring Costs
The Company periodically records facility closing and reorganization charges when a facility for closure or
other reorganization opportunity has been identified, a closure plan has been developed and the affected employees
notified, all in accordance with U.S. GAAP. Refer to Note 13 for additional information.
Foreign Currency Translation
The functional currency of the Company’s operations outside the United States is generally the local currency
of the country where the operations are located. The balance sheets of operations outside the United States are
translated into U.S. Dollars at the end of year rates. The results of operations for the fiscal year are translated into
U.S. Dollars at an annual average rate, calculated using month end exchange rates.
69
DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)