Additional Disclosure: Additional LIFO Reserve Disclosure
GENERAL MILLS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(C) INVENTORIES – Inventories are valued at the lower of cost or market. We generally use the LIFO
method of valuing inventory because we believe that it is a better match with current revenues. However,
FIFO is used for most foreign operations, where LIFO is not recognized for statutory purposes.
6. INVENTORIES
The components of inventories are as follows:
In Millions
May 30,
2004
May 25,
2003
Raw materials, work in process and supplies
Finished goods
Grain
Reserve for LIFO valuation method
$ 234
793
77
(41)
$ 221
818
70
(27)
Total Inventories
$1,063
$1,082
At May 30, 2004, and May 25, 2003, respectively, inventories of $765 million and $767 million were
valued at LIFO. LIFO accounting decreased fiscal 2004 earnings by $.02 per share and had a negligible
impact on fiscal 2003 and 2002 earnings. Results of operations were not materially affected by a liquidation
of LIFO inventory. The difference between replacement cost and the stated LIFO inventory value is not
materially different from the reserve for LIFO valuation method.
CATERPILLAR INC.
Consolidated Financial Position at December 31
(Dollars in millions)
2004
2003
2002
Assets
Current assets:
Cash and short-term investments
$
445
$
342
$
309
Receivables—trade and other
7,616
4,025
3,192
Receivables—finance
6,510
5,508
5,066
—
1,550
1,145
398
707
781
Prepaid expenses
1,369
1,424
1,224
Inventories
4,675
3,047
2,763
21,013
16,603
14,480
Retained interests in securitized trade receivables
Deferred and refundable income taxes
Total current assets
1.
Operations and summary of significant accounting policies
D. Inventories
Inventories are stated at the lower of cost or market. Cost is principally determined using the last-in, first-out (LIFO) method. The value of
inventories on the LIFO basis represented about 80% of total inventories at December 31, 2004, 2003 and 2002.
If the FIFO (first-in, first-out) method had been in use, inventories would have been $2,124 million, $1,863 million and $1,977 million higher
than reported at December 31, 2004, 2003 and 2002, respectively.
BOEING CO.
Consolidated Statements of Financial Position
(Dollars in millions except per share data)
December 31,
Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Current portion of customer financing
Income taxes receivable
Deferred income taxes
Inventories, net of advances and progress billings
Assets of discontinued operations
Total current assets
Customer financing
Property, plant and equipment, net
Goodwill
Other acquired intangibles, net
Prepaid pension expense
Deferred income taxes
Investments
Other assets
$
$
2004
2003
3,204
319
4,653
616
$ 4,633
1,991
4,247
70
15,100
10,385
8,443
1,948
955
12,588
154
3,050
1,340
53,963
4,466
857
199
1,716
5,338
2,082
19,291
10,057
8,597
1,913
1,035
8,542
1,242
646
1,663
$52,986
_
Note 1 – Summary of Significant Accounting Policies
Inventories
Inventoried costs on commercial aircraft programs and long-term contracts include direct
engineering, production and tooling costs, and applicable overhead, which includes fringe
benefits, production related indirect and plant management salaries and plant services, not in
excess of estimated net realizable value. In accordance with industry practice, inventoried costs
include amounts relating to programs and contracts with long production cycles, a portion of
which is not expected to be realized within one year.
Because of the higher unit production costs experienced at the beginning of a new airplane
program (known as the “learning curve effect”), the actual costs incurred for production of the
early units in the program will exceed the amount reported as cost of sales for those units. The
excess or actual costs over the amount reported as cost of sales is presented as “deferred
production costs,” which are included in inventory along with unamortized tooling costs.
Used aircraft purchased by the Commercial Airplanes segment, commercial spare parts, and
general stock materials are stated at cost not in excess of net realizable value.
Note 8 – Inventories
Inventories at December 31 consisted of the following:
2004
Long-term contracts in
progress
Commercial aircraft
programs
Commercial spare parts,
used aircraft, general
stock materials and
other, net of reserves
$
Less advances and
progress billings
$
2003
11,258
$
10,228
6,049
6,448
1,884
19,191
2,596
19,272
(14,944)
4,247
(13,934)
5,338
$
As a normal course of our Commercial Airplanes segment production process, our inventory may
include a small quantity of airplanes that are completed but unsold. As of December 31, 2004 and
2003, the value of completed but unsold aircraft in inventory was insignificant. Inventory balances
included $233 subject to claims or other uncertainties primarily relating to the A-12 program as of
December 31, 2004 and 2003.
Included in commercial aircraft program inventory and directly related to the sales contracts for
the production of aircraft are amounts paid or credited in cash or other consideration, to airline
customers totaling $665 and $543 as of December 31, 2004 and 2003 respectively. These
amounts are referred to as early issue sales consideration. Early issue sales consideration is
recognized as a reduction to revenue when the delivery of the aircraft under contract occurs. In
the unlikely situation that an airline customer was not able to perform and take delivery of the
contracted aircraft we believe that we would have the ability to recover amounts paid through
retaining amounts secured by advances received on aircraft to be delivered. However to the
extent early issue sales consideration exceeds advances these amounts may not be recoverable
and would be recognized as a current period expense. As of December 31, 2004 and 2003, the
amount of early issue sales consideration net of advance of deposits included in commercial
aircraft program inventory amounted to $123 and $154 respectively.
Commercial aircraft inventory production costs incurred on in-process and delivered units in
excess of the estimated average cost of such units determined as described in Note 1 represent
deferred production costs. As of December 31, 2004 and 2003, there were no significant excess
deferred production costs or unamortized tooling costs not recoverable from existing firm orders
for the 777 program. The deferred production costs and unamortized tooling included in the 777
program’s inventory at December 31 are summarized in the following table:
Deferred production costs
$
2004
703 $
2003
794
485
Unamortized tooling
582
During the years ended December 31, 2004 and 2003, we purchased $298 and $746 of used
aircraft respectively. Used aircraft in inventory totaled $162 and $819 as of December 31, 2004
and 2003 respectively.
When we are unable to immediately sell used aircraft held by Commercial Airplanes, we may
place the aircraft on operating leases, or finance the sale of new aircraft with a short-term note
receivable. The carrying amount of aircraft on operating lease, or sales financed under a note
receivable, totaled $958 and $447 as of December 31, 2004 and 2003 respectively and resulted
in a decrease to Inventory and an offsetting increase to Customer financing. These transactions
were previously identified as non-cash transactions and excluded from the Consolidated
Statements of Cash Flows. However we changed the classification of the cash flow effects of
customer financing transactions which are currently presented as operating activities. As such
these transactions are now recorded in the Consolidated Statements of Cash Flows. (See Note
26.)
During 2002 we were selected by the US Air Force (USAF) to supply 100 767 Tankers and
entered into a preliminary agreement with the USAF for the procurement of the 100 Tankers. On
January 14, 2005 we announced our plan to recognize pre-tax charges totaling $275 related to
the USAF 767 Tanker program. The charge, which is a result of our quarter and year-end
reviews, reflects our updated assessment of securing the specific USAF 767 Tanker contract that
was being negotiated, given the continued delay and now likely re-competition of the contract. As
of December 31, 2004, we expensed $179 (Commercial Airplanes) and $47 (IDS) related to the
USAF 767 Tanker contract for Commercial aircraft programs and Long-term contracts in progress
within the categories above. As of December 31, 2003, the Commercial aircraft programs and
Long-term contracts in progress categories above contained $113 (Commercial Airplanes) and
$28 (IDS) related to the USAF 767 Tanker inventoriable pre-contract costs. These charges were
included in the Consolidated Statement of Cash Flows in the ‘Other charges and credits, net’
which is consistent with the treatment of our inventory write-offs.
INTERNATIONAL PAPER CO.
CONSOLIDATED BALANCE SHEET
2003
2004
In millions at December 31
Assets
Current Assets
Cash and temporary investments
Accounts and notes receivable, less allowances of
$128 in 2004 and $135 in 2003
Inventories
Assets of businesses held for sale
Deferred income tax assets
Other current assets
Total Current Assets
$
2,596
$
2,363
2,994
2,718
229
470
312
2,765
2,767
2,104
581
516
9,319
11,096
NOTE 11
SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Inventories by major category were:
In millions at December 31
Raw materials
2004
$
Finished pulp, paper and packaging products
371
$
2003
406
1,662
1,796
Finished lumber and panel products
184
127
Operating supplies
351
506
16
66
Other
Inventories
$
2,718
$
2,767
The last-in, first-out inventory method is used to value most of International Paper’s U.S. inventories.
Approximately 70% of total raw materials and finished products inventories were valued using this method.
If the first-in, first-out method had been used, it would have increased total inventory balances by
approximately $170 million and $133 million at December 31, 2004 and 2003, respectively.