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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
62
Transportation and Warehousing Costs
The Company incurred $776 million, $775 million and $794 million of transportation and warehousing costs during the years
ended December 31, 2013, 2012 and 2011, respectively. These amounts, which primarily relate to shipping and handling costs,
are recorded in SG&A expenses in the Consolidated Statements of Income.
Advertising and Marketing Expense
Advertising and marketing production costs related to television, print, radio and other marketing investments are expensed
as of the first date the advertisement takes place. All other advertising and marketing costs are expensed as incurred. Advertising
and marketing expense was approximately $486 million, $481 million and $460 million during the years ended December 31,
2013, 2012 and 2011, respectively. These expenses are recorded in SG&A expenses in the Consolidated Statements of Income.
As of December 31, 2013 and 2012, advertising and marketing costs of approximately $12 million and $28 million, respectively,
were recorded as other current and non-current assets in the Consolidated Balance Sheets.
Research and Development Costs
Research and development costs are expensed when incurred and amounted to $15 million for each of the years ended
December 31, 2013, 2012 and 2011. Additionally, the Company incurred packaging engineering costs of $6 million for each of
the years ended December 31, 2013, 2012 and 2011. These expenses are recorded when incurred in SG&A expenses in the
Consolidated Statements of Income.
Stock-Based Compensation Expense
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 stock-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. Stock-based compensation
expense for PSUs is adjusted each period based on the current estimate of performance compared to the target metric. Refer to
Note 16 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 years ended December 31, 2013 and 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 unused advertising credits, which are recorded in prepaid
expenses and other current assets and other non-currents assets, was $4 million and $5 million as of December 31, 2013 and 2012,
respectively.
Deferred Compensation Plan
Employee and employer matching contributions under the supplemental savings plan ("SPP") are maintained in a rabbi trust
and are not readily available to us. Participants can direct the investment of their deferred compensation plan accounts in the same
investments funds offered by the DPS' Savings Incentive Plan (the "SIP"). Although participants direct the investment of these
funds, they are classified as trading securities and are included in other non-current assets. The corresponding liability related to
the deferred compensation plan is recorded in other non-current liabilities. Gains and losses in connection with these trading
securities are recorded in other expense (income), net, with an offset for the same amount recorded in SG&A expenses. We had
deferred compensation plan assets of $21 million as of December 31, 2013. Gains associated with these trading securities were
$2 million for the year ended December 31, 2013.