Accumulated Other Comprehensive Loss: The components of accumulated other comprehensive loss are as follows: Unrealized Gain Accumulated Other Foreign Currency  Minimum (Loss) on Available- Deferred Loss Comprehensive (In Thousands) Translation Pension Liability for-Sale Securities – Hedging Loss Balance at October 27, 2001 (net of tax) $(16,908) $ (8,953) $(25,861) Unrealized gains (losses) 3,822 3,610 $(10,609) $(2,583) (5,760) Tax effect (1,338) (1,338) Net of Tax Amount 3,822 2,272 (10,609) (2,583) (7,098) Balance at October 26, 2002 (13,086) (6,681) (10,609) (2,583) (32,959) Unrealized gains (losses) (913) (11,142) 19,036 (4,954) 2,027 Reclassification into net earnings 3,759 3,759 Tax effect 4,129 (3,500) 1,400 2,029 Net of Tax Amount (913) (7,013) 15,536 205 7,815 Balance at October 25, 2003 (13,999) (13,694) 4,927 (2,378) (25,144) Unrealized gains (losses) 8,776 (4,131) (4,927) (6,260) (6,542) Reclassification into net earnings 6,035 6,035 Tax effect 2,002 115 2,117 Net of Tax Amount 8,776 (2,129) (4,927) (110) 1,610 Balance at October 30, 2004 $ (5,223) $(15,823) $ 0 $(2,488) $(23,534) At the end of the third quarter of fiscal 2002, the company changed from the equity method to the cost method of accounting for its investment in Campofrio Alimentacion, S.A., a publicly traded company in Spain, because its ownership level was reduced below 20 percent. This investment was sold in fiscal 2004 for a pre-tax gain of $6.2 million. As of October 25, 2003, the invest- ment was recorded at a market value of $86.4 million with unreal- ized gains of $4.9 million, net of tax, reflected in accumulated other comprehensive loss. Revenue Recognition: The company recognizes sales upon delivery of its products to customers, net of applicable provisions for discounts, returns, and allowances. Products are delivered upon receipt of customer purchase orders with acceptable terms, including price and collectibility that is reasonably assured. The company offers various sales incentives to customers and consumers. Incentives that are offered off-invoice include prompt pay allowances, spoilage allowances, and temporary price reduc- tions. These incentives are recognized as a reduction of revenue  at the time title passes. Coupons are used as an incentive for  consumers to purchase various products. The coupons reduce revenues at the time they are offered. Promotional contracts and voluntary promotions are performed by customers to promote the company’s products to the consumers. These incentives reduce revenues at the time of performance through direct payments and accrued promotional funds. Accrued promotional funds are unpaid liabilities for promotional contracts and voluntary promotions in Equity Method Investments:  The company has a number of investments in joint ventures and other entities where its voting interests are in excess of 20 percent but not greater than 50 per- cent. The company accounts for such investments under the equity method of accounting, and its underlying share of each investee’s equity is reported in the consolidated balance sheet  as part of investments in affiliates. The only material equity method investment is a 40 percent ownership interest in a Philippine joint venture, Purefoods-Hormel Company, which has an October 30, 2004, book value of $35.5 million.  Derivatives and Hedging Activity: The company uses commodity and currency futures to manage its exposure to price fluctuations in those markets. The futures contracts are recorded at fair value on the balance sheet within prepaid expenses and other current assets. Additional information on hedging activities is presented  in Note J. The company regularly monitors and evaluates the fair value of  its equity investments. If events and circumstances indicate that  a decline in the fair value of these assets has occurred and is other than temporary, the company will record a charge in “equity in earnings of affiliates.” The company’s equity investments do not have a readily determinable fair value as none of them are publicly traded. The fair values of the company’s private equity investments are determined by discounting the estimated future cash flows of each entity. These cash flow estimates include assumptions on growth rates and future currency exchange rates. The company did not record an impairment charge on any of its equity invest- ments in fiscal 2004, 2003, or 2002. 36 Hormel Foods Corporation