Snapple 2011 Annual Report Download - page 82

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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
62
Advertising and Marketing Expense
Advertising and marketing production costs related to television, print, and radio are expensed as of the first date the
advertisement takes place and amounted to approximately $460 million, $445 million and $409 million during the years ended
December 31, 2011, 2010 and 2009, respectively. These expenses are recorded in selling, general and administrative expenses in
the Consolidated Statements of Income. As of December 31, 2011 and 2010, advertising and marketing costs of approximately
$44 million and $32 million, respectively, were recorded as prepaid expenses and other current assets in the Consolidated Balance
Sheets.
Research and Development
Research and development costs are expensed when incurred and amounted to $15 million, $16 million and $15 million
during the years ended December 31, 2011, 2010 and 2009, respectively. Additionally, the Company incurred packaging
engineering costs of $6 million, $6 million and $7 million during the years ended December 31, 2011, 2010 and 2009, respectively.
These expenses when incurred are recorded in selling, general and administrative expenses in the Consolidated Statements of
Income.
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 Income related to the fair value of employee share-based awards.
Compensation cost is based on the grant-date fair value, which is estimated using the Black-Scholes option pricing model for
stock options. The fair value of restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") is determined
based on the number of units granted and the grant date price of common stock. Stock-based compensation expense is recognized
ratably, less estimated forfeitures, over the vesting period in the Consolidated Statements of Income.
The stock-based compensation plans in which the Company's employees participate are described further in Note 14.
Nonmonetary Transactions
The Company accounts for nonmonetary transactions in accordance with U.S. GAAP, which requires transactions with
commercial substance to be recorded at the estimated fair value of the products exchanged, unless the products received have a
more readily determinable estimated fair value. During the year ended December 31, 2011, the Company entered into two barter
agreements where $6 million of real estate was exchanged for certain advertising credits. To account for the exchange, the Company
recorded a gain of $2 million in the Company's Consolidated Statements of Income. The advertising credits received are to be
used over the next five years following 2011.
Restructuring Costs
The Company periodically records significant facility closing and reorganization charges as restructuring costs 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.
Foreign Currency Translation
The functional currency of the Company's operations outside the U.S. is generally the local currency of the country where
the operations are located. The balance sheets of operations outside the U.S. are translated into U.S. Dollars at the end of year
rates. The results of operations were translated into U.S. Dollars at a monthly average rate, calculated using daily exchange rates.