NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Dollars in millions except per share data) For foreign operations where the U.S. dollar is the functional currency and for countries which are considered highly inflationary, transla- tion practices differ in that inventories, properties, accumulated depreciation and depreciation expense are translated at historical rates of exchange, and related translation adjustments are included in earnings. Gains and losses from foreign currency transactions  are generally included in earnings. instrument and the underlying hedged transaction were disposed  of prior to the settlement date, any deferred gain or loss would be recognized immediately in the Consolidated Statement of Earnings.  Cash Equivalents – For purposes of the Consolidated Statement  of Cash Flows, cash equivalents are considered to be all highly  liquid investments with a maturity of three months or less when  purchased. Inventories – Inventories are valued at the lower of cost or market, with cost generally being determined using average cost or the  first-in, first-out (FIFO) method.  Financial Instruments – Energizer uses financial derivatives in  the management of foreign currency and interest-rate risks that are inherent to its business operations. Such instruments are not held  or issued for trading purposes.  Foreign exchange (F/X) instruments, including currency forwards, purchased options and zero-cost option collars, are used primarily to reduce transaction exposures associated with anticipated inter- company purchases and intercompany borrowings and, to a lesser extent, to manage other transaction and translation exposures.  F/X instruments used are selected based on their risk reduction attributes and the related market conditions. The terms of such instruments are generally 12 months or less.  Capitalized Software Costs – Capitalized software costs are included in Investments and Other Assets. These costs are amortized using the straight-line method over periods of related benefit rang- ing from three to seven years. Property at Cost – Expenditures for new facilities and expendi- tures that substantially increase the useful life of property, including interest during construction, are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and gains or losses  on the disposition are reflected in earnings.  Realized and unrealized gains and losses from F/X instruments  that hedge firm commitments are deferred as part of the cost basis of the asset or liability being hedged and are recognized in the Consolidated Statement of Earnings in the same period as the underlying transaction. Realized and unrealized gains or losses from F/X instruments used as hedges of existing balance sheet exposures or anticipated transactions that are not firmly committed are recog- nized currently in selling, general and administrative expenses in the Consolidated Statement of Earnings. However, gains or losses from F/X instruments that hedge existing balance sheet exposures are  offset in the Consolidated Statement of Earnings by gains or losses recorded on these hedged exposures. Premiums or discounts on foreign exchange forward contracts are recognized, and premiums paid for purchased options are amortized, over the life of the related F/X instrument in selling, general and administrative expenses in  the Consolidated Statement of Earnings. Unrealized gains and  losses, if any, on zero-cost option collars are deferred as part of the cost basis of the asset or liability being hedged. F/X instruments are generally not disposed of prior to settlement date; however, if an F/X Depreciation – Depreciation is generally provided on the straight-line basis by charges to costs or expenses at rates based on the estimated useful lives. Estimated useful lives range from  three to 25 years for machinery and equipment and 10 to 50 years for buildings. Depreciation expense was $57.9, $68.4 and $74.1  in 2000, 1999 and 1998, respectively. Goodwill and Other Intangible Assets – Amortization of goodwill, representing the excess of cost over the net tangible assets of acquired businesses, is recorded on a straight-line basis primarily over a period of 25 years, with some amounts being amortized over 40 years. The cost to purchase or develop other intangible assets, which consist primarily of patents, tradenames and trademarks, is amortized on a straight-line basis over estimated periods of related benefit ranging from seven to 40 years.  ENERGIZER 2000 ANNUAL REPOR T 26