Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in the company’s Annual Report on Form 10-K for the year ended December 31, 2021, collectively referred to as the “2021 Annual Report.” The interim Consolidated Financial Statements include the accounts of the company and all of its subsidiaries in which a controlling interest is maintained.

Since 2018, Argentina has been considered a hyper-inflationary economy under U.S. GAAP and therefore the U.S. Dollar (“USD”) is the functional currency for our related subsidiaries. Argentina contributes approximately 5 percent to both the company's annual Sales and EBITDA. We remeasure net monetary assets and translate our financial statements utilizing the official Argentine Peso (“Peso”) to USD exchange rate. The ability to draw down Peso cash balances is limited at this time due to government restrictions and market availability of U.S. Dollars. The devaluation of the Peso relative to the USD over the last several years has resulted in the recognition of exchange losses (refer to Note 5 – Supplementary Information, to the interim Consolidated Financial Statements, and Note 9 – Supplemental Information, to the company's 2021 Annual Report). As of September 30, 2022, a further 10 percent deterioration in the official Peso to USD exchange rate would reduce the USD value of our net monetary assets and negatively impact pre-tax earnings by approximately $20 million. We will continue to assess the implications to our operations and financial reporting.

In April 2022, the company implemented a global business unit organization model (“BU Reorganization”). While the new organization model had no impact on our determination of operating segments, it did result in the company’s digital reporting unit being merged into the seed and crop protection reporting units with the goodwill relating to the former digital reporting unit being reassigned to the seed and crop protection reporting units using a relative fair value allocation approach. The impact of the BU Reorganization did not have a material impact to the company’s historical reportable segments’ financial measures. An interim goodwill impairment assessment immediately prior to the BU Reorganization and for the seed and crop protection reporting units immediately after the BU Reorganization resulted in no goodwill impairment charges.

Qualitative impairment assessments were performed for the seed and crop protection reporting units. The qualitative assessments included an evaluation of relevant factors including GDP growth rates, long-term commodity prices, equity and credit market activity, discount rates, changes in the industry and market structure, competitive environments, cost factors such as raw material prices, and overall financial performance. Based on the qualitative assessments performed, it was more likely than not that the fair value of each reporting unit exceeded the carrying value and therefore a quantitative test was not performed. A quantitative impairment assessment was performed for the former digital reporting unit using a combination of the discounted cash flow model (a form of the income approach) and the market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The company's significant assumptions in this analysis included future cash flow projections, weighted average cost of capital, the terminal growth rate and the tax rate. The company’s estimate of future cash flows is based on current regulatory and economic climates, recent operating results, and assumed business strategy from a market participant perspective and includes an estimate of a long-term future growth rate based on such strategy. Actual results may differ from those assumed in the company’s forecast. The company derives its discount rate using a capital asset pricing model and analyzes published rates for industries relevant to its reporting unit to estimate the cost of equity financing. The company uses a discount rate that is commensurate with the risks and uncertainty inherent in the reporting unit and in its internally developed forecast. Under the market approach, the company uses historically completed transactions for comparable companies.