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Archer Daniels Midland Company
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Business
The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural
commodities and products.
Principles of Consolidation
The consolidated financial statements as of June 30, 2008, and for the three years then ended include the accounts
of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Investments in affiliates are carried at cost plus equity in undistributed earnings since acquisition
and are adjusted, where appropriate, for amortizable basis differences between the investment balance and the
underlying net assets of the investee. Certain majority-owned subsidiaries whose fiscal periods differ from the
Company’s are consolidated using the most recent available financial statements which in each case are within 93
days of the Company’s year end and are consistent from period to period
The Company evaluates and consolidates where appropriate its less than majority-owned investments pursuant to
Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities,
an Interpretation of Accounting Research Bulletin No. 51 (FIN 46). A variable interest entity (VIE) is a
corporation, partnership, trust, or any other legal structure used for business purposes that does not have equity
investors with proportionate voting rights or has equity investors that do not provide sufficient financial resources
for the entity to support its activities. FIN 46 requires a VIE to be consolidated by a company if that company is the
primary beneficiary of the VIE. The primary beneficiary of a VIE is an entity that is subject to a majority of the
risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns, or both.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts reported in its consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all non-segregated, highly-liquid investments with a maturity of three months or less at the
time of purchase to be cash equivalents.
Segregated Cash and Investments
The Company segregates certain cash and investment balances in accordance with certain regulatory requirements,
commodity exchange requirements, and insurance arrangements. These segregated balances represent deposits
received from customers trading in exchange-traded commodity instruments, securities pledged to commodity
exchange clearinghouses, and cash and securities pledged as security under certain insurance arrangements.
Segregated cash and investments primarily consist of cash, United States government securities, and money-market
funds.
Receivables
The Company records trade accounts receivable at net realizable value. This value includes an appropriate
allowance for estimated uncollectible accounts, $89 million and $69 million at June 30, 2008 and 2007,
respectively, to reflect any loss anticipated on the trade accounts receivable balances. The Company calculates this
allowance based on its history of write-offs, level of past-due accounts, and its relationships with, and the economic
status of, its customers.
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