Investor Presentaiton
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Following is a summary of the most significant accounting policies, which have been consistently
applied in the reporting years, unless otherwise indicated.
NIF require the use of certain critical accounting estimates in the preparation of the financial statements.
Also, Management judgment is required in the process of determining the Company's accounting
policies.
a. Derivative financial instruments
All derivative financial instruments classified as for trading or market risk hedging are recognized in the
balance sheet as assets and/or liabilities at their fair value.
Fair value is determined based on recognized market prices and, when not traded in a public marked, are
determined on the basis of valuation techniques accepted in the financial environment.
Changes to the fair value of derivative financial instruments are recognized in comprehensive financing
cost, except when they are contracted for hedging risks and comply with all hedging requirements,
designation thereof is documented at the outset of the hedging transaction, describing the purpose,
primary position, risks to be hedged, types of derivatives and measurement of effectiveness of the
relationship, characteristics, accounting recognition and the manner by which the effectiveness is to be
measured, applicable to said operations.
In fair value hedging, both the derivative instrument and the hedged item are valued at fair value and
the valuation fluctuations are recorded in the income statement in the same line item as the position
they hedge; in cash flow hedging the effective portion is temporarily located in comprehensive income
in stockholders' equity and reclassified to income when the position they are hedging has an impact on
income, the ineffective portion is immediately recognized in the income statement.
b. Permanent investments in associated companies
Permanent investments in associated companies are valued by the equity method, which consists
of adjusting the acquisition value of the shares, determined based on the purchase method, with
respect to proportional portion of the comprehensive income or loss and the distribution of the equity
reimbursement profits subsequent to the acquisition date.
Losses in associated companies are recognized in the corresponding proportion, as follows: a) in
permanent investments, until reaches zero; b) if there is any surplus after applying the matters described
in point a) above, it is recognized in asset items until they reach zero; c) any surplus is recognized as a
liability for the legal obligations or assumed on behalf of the associated company; and d) the holding
company recognizes no loss surpluses, if any.
c. Inventories
At December 31, 2009 and 2008, inventories are expressed at their historical cost, determined by the
first-in first-out method. In addition, the cost of sales recognized at the historical cost of purchases and
production of inventories, determined by the valuation method described above. Values so determined
do not exceed market value.
The allowance for obsolete and/or slow moving inventory is determined based on studies conducted
by Company Management and is sufficient to absorb any related loss.
Agricultural production in process corresponds to expenses incurred during the cultivation to harvest
period at their historical costs. Values so determined do not exceed their net realization value.
d. Property, machinery and equipment
Property, machinery and equipment, including financial-leasing acquisitions, are stated as follows: i)
acquisitions subsequent to January 1, 2008 at their historical cost, and ii) acquisitions up to December 31,
2007 of domestic origin at their restated value determined by applying factors derived from the National
Consumer Price Index (NCPI) to their acquisition cost, up to December 31, 2007.
Depreciation is calculated by the straight-line method based on the useful lives of the assets, estimated by
Company Management, and applied to the values of property, machinery and equipment. See Note 7.
Property, machinery and equipment are subject to annual impairment testing, only when signs of
impairment are identified. Consequently, said items are stated at their modified historical cost, less
accumulated depreciation and, if applicable, impairment losses. See Note 7.
Property, machinery and equipment intended for sale are valued at the lesser of their book value or at
their net realization value. Said long-lived assets are not subject to depreciation. See Note 7.
e. Intangible assets
Intangible assets are recognized in the balance sheet when they meet the following conditions: are
identifiable, provide future economic benefits and the Company has control over such benefits.
Intangible assets are classified as follows: i) definite life: those which are amortized systematically, based
on the best estimate of their useful life determined on the basis of expected future economic benefits,
and are subject to impairment testing as signs thereof are identified, and ii) indefinite useful life, which
are not amortized, but subject to annual impairment testing. See Note 8.
These intangible assets, either acquired or developed, are stated as follows: i) as of January 1, 2008, at their
historical cost, and ii) up to December 31, 2007, at indexed values determined through the application
factors derived from the NCPI to their acquisition costs up to that date. Consequently, these assets are
stated at their modified historical cost, less the corresponding accumulated amortization and, if any,
impairment losses.
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