|
10. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
|
|
|
September 30, |
|
December 31, |
|
|
(US$ in millions) |
|
2011 |
|
2010 |
|
|
|
|
|
|
|
|
|
Recoverable taxes, net |
|
$ |
801 |
|
$ |
964 |
|
|
Long-term receivables from farmers in Brazil, net |
|
301 |
|
377 |
|
|
Judicial deposits |
|
171 |
|
172 |
|
|
Other long-term receivables |
|
11 |
|
129 |
|
|
Other |
|
324 |
|
303 |
|
|
Total |
|
$ |
1,608 |
|
$ |
1,945 |
|
Recoverable taxes—Recoverable taxes are reported net of valuation allowances of $31 million and $38 million at September 30, 2011 and December 31, 2010, respectively.
Long-term receivables from farmers in Brazil—Bunge provides financing to farmers in Brazil, primarily through secured advances against farmer commitments to deliver agricultural commodities (primarily soybeans) upon harvest of the then-current year’s crop and through credit sales of fertilizer to farmers. These are commercial transactions that are intended to be short-term in nature with amounts expected to be repaid either in cash or through delivery to Bunge of agricultural commodities when the related crops are harvested. These arrangements are typically secured by the farmer’s expected current year crop and liens on land, buildings and equipment to ensure recoverability in the event of crop failure. The terms of fertilizer credit sales do not include interest. The secured advances against commitments to deliver soybeans provide for interest between the advance date and the scheduled soybean delivery date. The credit factors considered by Bunge in evaluating farmers before initial advance or extension of credit include, among other things, the credit history of the farmer, financial strength, available agricultural land and available collateral in addition to the expected crop.
Upon farmer default, Bunge generally initiates legal proceedings to recover the defaulted amounts. However, the legal recovery process through the judicial system is a long-term process, generally spanning a number of years. As a result, once accounts have been submitted to the judicial process for recovery, Bunge may also seek to renegotiate certain terms with the defaulting farmer in order to accelerate recovery.
Bunge adopted the accounting guidance on disclosure about the credit quality of financing receivables and the allowance for credit losses as of December 31, 2010. This guidance requires information to be disclosed at disaggregated levels, defined as portfolio segments and classes. Based upon its analysis of credit losses and risk factors to be considered in determining the allowance for credit losses, Bunge has determined that the long-term receivables from farmers in Brazil represents a single portfolio segment.
Bunge evaluates this single portfolio segment by class of receivables, which is defined as a level of information (below a portfolio segment) in which the receivables have the same initial measurement attribute and a similar method for assessing and monitoring risk. Bunge has identified accounts in legal collection processes and renegotiated amounts as classes of long-term receivables from farmers. Valuation allowances for accounts in legal collection processes are determined by Bunge on individual accounts based on the fair value of the collateral provided as security for the secured advance or credit sale. The fair value is determined using a combination of internal and external resources, including published information concerning Brazilian land values by region. For determination of the valuation allowances for renegotiated amounts, Bunge considers historical experience with the individual farmers, current weather and crop conditions, as well as the fair value of non-crop collateral.
For both classes, a long-term receivable from farmers in Brazil is considered impaired, based on current information and events, if Bunge determines it to be probable that all amounts due under the original terms of the receivable will not be collected. Recognition of interest income on secured advances to farmers is suspended once the farmer defaults on the originally scheduled delivery of agricultural commodities as the collection of future income is determined to not be probable. No additional interest income is accrued from the point of default until ultimate recovery, where amounts collected are credited first against the receivable and then to any unrecognized interest income.
The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil for amounts in the legal collection process and renegotiated amounts.
|
|
|
September 30, |
|
December 31, |
|
|
(US$ in millions) |
|
2011 |
|
2010 |
|
|
Legal collection process (1) |
|
$ |
390 |
|
$ |
441 |
|
|
Renegotiated amounts: |
|
|
|
|
|
|
Current on repayment terms |
|
95 |
|
137 |
|
|
Ending balance |
|
$ |
485 |
|
$ |
578 |
|
(1) All amounts in legal process are considered past due upon initiation of legal action.
The average recorded investment in long-term receivables from farmers in Brazil for the nine months ended September 30, 2011 and the year ended December 31, 2010 was $580 million and $582 million, respectively. The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.
|
|
|
September 30, 2011 |
|
December 31, 2010 |
|
|
|
|
Recorded |
|
|
|
Recorded |
|
|
|
|
(US$ in millions) |
|
Investment |
|
Allowance |
|
Investment |
|
Allowance |
|
|
For which an allowance has been provided: |
|
|
|
|
|
|
|
|
|
|
Legal collection process |
|
$ |
163 |
|
$ |
147 |
|
$ |
180 |
|
$ |
162 |
|
|
Renegotiated amounts |
|
56 |
|
37 |
|
66 |
|
39 |
|
|
For which no allowance has been provided: |
|
|
|
|
|
|
|
|
|
|
Legal collection process |
|
227 |
|
— |
|
261 |
|
— |
|
|
Renegotiated amounts |
|
39 |
|
— |
|
71 |
|
— |
|
|
Total |
|
$ |
485 |
|
$ |
184 |
|
$ |
578 |
|
$ |
201 |
|
The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
(US$ in millions) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
Beginning Balance |
|
$ |
215 |
|
$ |
196 |
|
$ |
201 |
|
$ |
232 |
|
|
Bad debt provision |
|
10 |
|
4 |
|
14 |
|
15 |
|
|
Recoveries |
|
(5 |
) |
— |
|
(10 |
) |
(12 |
) |
|
Write-offs |
|
— |
|
(28 |
) |
— |
|
(55 |
) |
|
Transfers (1) |
|
(2 |
) |
3 |
|
— |
|
3 |
|
|
Foreign exchange translation |
|
(34 |
) |
12 |
|
(21 |
) |
4 |
|
|
Ending balance |
|
$ |
184 |
|
$ |
187 |
|
$ |
184 |
|
$ |
187 |
|
(1) Represents reclassifications from allowance for doubtful accounts — current for secured advances to suppliers.
Judicial deposits—Judicial deposits are funds that Bunge has placed on deposit with the courts in Brazil. These funds are held in judicial escrow relating to certain legal proceedings pending legal resolution and bear interest at the SELIC rate (benchmark rate of the Brazilian central bank).
Other long-term receivables—Other long-term receivables at December 31, 2010 primarily include installment payments to be received from Bunge’s sale of its 33.34% interest in Saipol S.A.S. in December 2009 for 145 million Euros, or its equivalent at that date of approximately $209 million. The sale agreement provided for payment in four equal annual installments, two of which had been received as of January 2011. In the second quarter 2011, Bunge sold this receivable and a loss of $2 million is included in selling, general and administrative expenses in the condensed consolidated statement of income for the nine months ended September 30, 2011.
|