Snapple 2012 Annual Report Download - page 77

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
59
Research and Development
Research and development costs are expensed when incurred and amounted to $15 million for the years ended December 31,
2012 and 2011 and $16 million during the year ended December 31, 2010. Additionally, the Company incurred packaging
engineering costs of $6 million for each of the years ended December 31, 2012, 2011 and 2010. These expenses are recorded when
incurred in SG&A 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. Refer to Note 14 for additional
information .
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, 2012 there were no nonmonetary transactions
of this type. 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 four years.
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 are translated into U.S. Dollars at a monthly average rate, calculated using daily exchange rates.
The following table sets forth exchange rate information for the periods and currencies indicated:
Mexican Peso to U.S. Dollar Exchange Rate End of Year
Rates Annual Average Rates
2012 12.97 13.15
2011 13.95 12.43
2010 12.35 12.63
Canadian Dollar to U.S. Dollar Exchange Rate End of Year
Rates Annual Average Rates
2012 0.99 1.00
2011 1.02 0.99
2010 1.00 1.03
Differences arising from the translation of opening balance sheets of these entities to the rate ruling at the end of the financial
year are recognized in AOCL. The differences arising from the translation of foreign results at the average rate are also recognized
in AOCL. Such translation differences are recognized as income or expense in the period in which the Company disposes of the
operations.