Kodak 2008 Annual Report Download - page 62

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For certain other subsidiaries and branches, operations are conducted primarily in U.S. dollars, which is therefore the functional
currency. Monetary assets and liabilities of these foreign subsidiaries and branches, which are recorded in local currency, are
remeasured at year-end exchange rates, while the related revenue, expense, and gain and loss accounts, which are recorded in
local currency, are remeasured at average exchange rates. Non-monetary assets and liabilities, and the related revenue, expense,
and gain and loss accounts, are remeasured at historical rates. Adjustments that result from the remeasurement of the assets and
liabilities of these subsidiaries are included in net (loss) earnings in the accompanying Consolidated Statement of Operations.
The effects of foreign currency transactions, including related hedging activities, are included in Other income (charges), net, in the
accompanying Consolidated Statement of Operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and
cash equivalents, receivables, and derivative instruments. The Company places its cash and cash equivalents with high-quality
financial institutions and limits the amount of credit exposure to any one institution. With respect to receivables, such receivables
arise from sales to numerous customers in a variety of industries, markets, and geographies around the world. Receivables arising
from these sales are generally not collateralized. The Company performs ongoing credit evaluations of its customers’ financial
conditions and no single customer accounts for greater than 10% of the sales of the Company. The Company maintains reserves for
potential credit losses and such losses, in the aggregate, have not exceeded management’s expectations. With respect to the
derivative instruments, the counterparties to these contracts are major financial institutions. The Company has not experienced non-
performance by any of its derivative instruments counterparties.
Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." All derivative instruments are recognized as either assets or liabilities and are measured at fair value.
Certain derivatives are designated and accounted for as hedges. The Company does not use derivatives for trading or other
speculative purposes. See Note 12, “Financial Instruments.”
Cash Equivalents
All highly liquid investments with a remaining maturity of three months or less at date of purchase are considered to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or market. The cost of all of the Company’s inventories is determined by either the “first in,
first out” (“FIFO”) or average cost method, which approximates current cost. The Company provides inventory reserves for excess,
obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors.
Properties
Properties are recorded at cost, net of accumulated depreciation. The Company capitalizes additions and improvements.
Maintenance and repairs are charged to expense as incurred. The Company principally calculates depreciation expense using the
straight-line method over the assets’ estimated useful lives, which are as follows:
Years
Buildings and building improvements 5-40
Land improvements 20
Leasehold improvements 3-20
Equipment 3-15
Tooling 1-3
Furniture and fixtures 5-10
The Company depreciates leasehold improvements over the shorter of the lease term or the asset’s estimated useful life. Upon sale
or other disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net
amount, less proceeds from disposal, is charged or credited to net (loss) earnings.