Kodak 2004 Annual Report Download - page 58

Financials
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E A S T M A N฀ K OD A K ฀ C O M PA N Y
Use฀of฀Estimates฀฀The฀preparation฀of฀financial฀statements฀in฀conformity฀
with฀accounting฀principles฀generally฀accepted฀in฀the฀United฀States฀of฀
America฀requires฀management฀to฀make฀estimates฀and฀assumptions฀that฀
affect฀the฀reported฀amounts฀of฀assets฀and฀liabilities฀and฀disclosure฀of฀
contingent฀assets฀and฀liabilities฀at฀year฀end,฀and฀the฀reported฀amounts฀of฀
revenues฀and฀expenses฀during฀the฀reporting฀period.฀Actual฀results฀could฀
differ฀from฀those฀estimates.
Foreign฀Currency฀฀For฀most฀subsidiaries฀and฀branches฀outside฀the฀U.S.,฀
the฀local฀currency฀is฀the฀functional฀currency.฀In฀accordance฀with฀the฀State-
ment฀of฀Financial฀Accounting฀Standards฀(SFAS)฀No.฀52,฀“Foreign฀Currency฀
Translation,”฀the฀financial฀statements฀of฀these฀subsidiaries฀and฀branches฀
are฀translated฀into฀U.S.฀dollars฀as฀follows:฀assets฀and฀liabilities฀at฀year-end฀
exchange฀rates;฀income,฀expenses฀and฀cash฀flows฀at฀average฀exchange฀
rates;฀and฀shareholders’฀equity฀at฀historical฀exchange฀rates.฀For฀those฀
subsidiaries฀for฀which฀the฀local฀currency฀is฀the฀functional฀currency,฀the฀re-
sulting฀translation฀adjustment฀is฀recorded฀as฀a฀component฀of฀accumulated฀
other฀comprehensive฀income฀in฀the฀accompanying฀Consolidated฀Statement฀
of฀Financial฀Position.฀Translation฀adjustments฀are฀not฀tax-effected฀since฀
they฀relate฀to฀investments,฀which฀are฀permanent฀in฀nature.
฀For฀certain฀other฀subsidiaries฀and฀branches,฀operations฀are฀con-
ducted฀primarily฀in฀U.S.฀dollars,฀which฀is฀therefore฀the฀functional฀currency.฀฀
Monetary฀assets฀and฀liabilities,฀and฀the฀related฀revenue,฀expense,฀gain฀and฀
loss฀accounts,฀of฀these฀foreign฀subsidiaries฀and฀branches฀are฀remeasured฀
at฀year-end฀exchange฀rates.฀Non-monetary฀assets฀and฀liabilities,฀and฀the฀
related฀revenue,฀expense,฀gain฀and฀loss฀accounts,฀are฀remeasured฀at฀
historical฀rates.฀Adjustments,฀which฀result฀from฀the฀remeasurement฀of฀the฀
assets฀and฀liabilities฀of฀these฀subsidiaries,฀are฀included฀in฀net฀income.฀
Foreign฀exchange฀gains฀and฀losses฀arising฀from฀transactions฀denomi-
nated฀in฀a฀currency฀other฀than฀the฀functional฀currency฀of฀the฀entity฀involved฀
are฀included฀in฀net฀income.฀The฀effects฀of฀foreign฀currency฀transactions,฀
including฀related฀hedging฀activities,฀were฀losses฀of฀$10฀million,฀$10฀million,฀
and฀$19฀million฀in฀the฀years฀2004,฀2003,฀and฀2002,฀respectively,฀and฀are฀
included฀in฀other฀income฀(charges),฀net,฀in฀the฀accompanying฀Consolidated฀
Statement฀of฀Earnings.฀Refer฀to฀the฀“Derivative฀Financial฀Instruments”฀
section฀of฀Note฀1,฀“Significant฀Accounting฀Policies,”฀for฀a฀description฀of฀how฀
hedging฀activities฀are฀reflected฀in฀the฀Company’s฀Consolidated฀Statement฀
of฀Earnings.฀฀
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,฀foreign฀currency฀
forward฀contracts฀and฀commodity฀forward฀contracts.฀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฀custom-
ers฀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฀manage-
ment’s฀expectations.฀With฀respect฀to฀the฀foreign฀currency฀forward฀contracts฀
and฀commodity฀forward฀contracts,฀the฀counterparties฀to฀these฀contracts฀
are฀major฀financial฀institutions.฀The฀Company฀has฀not฀experienced฀non-
performance฀by฀any฀of฀its฀counterparties.
Additionally,฀the฀Company฀guarantees฀debt฀and฀other฀obligations฀with฀
certain฀unconsolidated฀affiliates฀and฀customers,฀which฀could฀potentially฀
subject฀the฀Company฀to฀significant฀concentrations฀of฀credit฀risk.฀However,฀
with฀the฀exception฀of฀the฀Company’s฀total฀debt฀guarantees฀for฀which฀there฀
is฀a฀concentration฀with฀one฀of฀Kodak’s฀unconsolidated฀affiliate฀companies,฀
these฀guarantees฀relate฀to฀numerous฀customers฀in฀a฀variety฀of฀industries,฀
markets฀and฀geographies฀around฀the฀world.฀The฀Company฀does฀not฀believe฀
The฀following฀table฀reflects฀the฀impact฀of฀the฀aforementioned฀adjustments฀on฀selected฀components฀of฀the฀Company’s฀2003฀consolidated฀income฀
statement:
฀฀ Pensions฀and฀Other฀ ฀
฀ As฀Originally฀ Postretirement฀ ฀ Adjustments฀Relating฀฀ ฀
(in฀millions)฀ Reported฀ Benefits฀ Other฀ to฀Prior฀Periods฀ Tax฀ As฀Adjusted
Income฀from฀continuing฀
฀ operations฀ $฀ 109฀ $฀ (9)฀ $฀ 5฀ $฀ (1)฀ $฀ —฀ $฀ 104
Provision฀(benefit)
฀ for฀income฀taxes฀ ฀ (90)฀ ฀ (3)฀ ฀ 7฀ ฀ —฀ ฀ 1฀ ฀ (85)฀
Income฀(loss)฀from
฀฀฀ continuing฀operations฀ ฀ 199฀ ฀ (6)฀ ฀ (2)฀ ฀ (1)฀ ฀ (1)฀ ฀ 189฀
Income฀(loss)฀from
฀฀฀ discontinued฀operations฀ ฀ 77฀ ฀ —฀ ฀ (3)฀ ฀ —฀ ฀ —฀ ฀ 74฀
Provision฀(benefit)
฀฀฀ for฀income฀taxes฀ ฀ 11฀฀ ฀ —฀ ฀ (1)฀ ฀ —฀ ฀ —฀ ฀ 10฀
Income฀(loss)฀from
฀฀฀ discontinued฀operations฀ ฀ 66฀ ฀ —฀ ฀ (2)฀ ฀ —฀ ฀ —฀ ฀ 64฀
Net฀income฀(loss)฀ $฀ 265฀ $฀ (6)฀ $฀ (4)฀ $฀ (1)฀ $฀ (1)฀ $฀ 253