Snapple 2011 Annual Report Download - page 77

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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
57
2. Significant Accounting Policies
Use of Estimates
The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates and judgments
that affect the reported amount of assets, liabilities, revenue and expenses. These estimates and judgments are based on historical
experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances.
These estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Actual amounts may differ from
these estimates. Changes in estimates are recorded in the period of change.
Cash and Cash Equivalents
Cash and cash equivalents include cash and investments in short-term, highly liquid securities, with original maturities of
three months or less.
The Company is exposed to potential risks associated with its cash and cash equivalents. DPS places its cash and cash
equivalents with high credit quality financial institutions. Deposits with these financial institutions may exceed the amount of
insurance provided; however, these deposits typically are redeemable upon demand and, therefore, the Company believes the
financial risks associated with these financial instruments are minimal.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the required
allowance for doubtful collections using information such as its customer credit history and financial condition, industry and
market segment information, economic trends and conditions and credit reports. Allowances can be affected by changes in the
industry, customer credit issues or customer bankruptcies. Account balances are charged against the allowance when it is determined
that the receivable will not be recovered.
Activity in the allowance for doubtful accounts was as follows (in millions):
Balance, beginning of the year
Net charge to costs and expenses
Write-offs and adjustments
Balance, end of the year
2011
$ 5
4
(6)
$ 3
2010
$ 7
1
(3)
$ 5
2009
$ 13
3
(9)
$ 7
The Company is exposed to potential credit risks associated with its accounts receivable. DPS performs ongoing credit
evaluations of its customers, and generally does not require collateral on its accounts receivable. The Company has not experienced
significant credit related losses to date.
As of December 31, 2011 and 2010, Wal-Mart Stores, Inc. ("Wal-Mart") accounted for approximately $71 million and $72
million of the Company's trade accounts receivable.
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined for inventories of the Company's subsidiaries
in the U.S. substantially by the last-in, first-out ("LIFO") valuation method and for inventories of the Company's international
subsidiaries by the first-in, first-out ("FIFO") valuation method. The costs of finished goods inventories include raw materials,
direct labor and indirect production and overhead costs. Reserves for excess and obsolete inventories are based on an assessment
of slow-moving and obsolete inventories, determined by historical usage and demand. Excess and obsolete inventory reserves
were $3 million and $4 million as of December 31, 2011 and 2010, respectively. Refer to Note 3 for further information.