notes to  consolidated financial statements October 30, 2004 > note A Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial state- ments include the accounts of Hormel Foods Corporation and all of its majority-owned subsidiaries after elimination of all material intercompany accounts, transactions, and profits. Reclassifications: Certain reclassifications of previously reported amounts have been made to conform to the current year presen- tation and to conform with recent accounting pronouncements and guidance. The reclassifications had no impact on net earnings as previously reported. Use of Estimates: The preparation of financial statements in con- formity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fiscal Year: The company’s fiscal year ends on the last Saturday in October. Fiscal year 2004 consisted of 53 weeks and fiscal years 2003 and 2002 consisted of 52 weeks. Beginning in 2005, the company’s fiscal year will end on the last Sunday in October. Securities: The company considers all investments with an original maturity of three months or less on their acquisition date to be cash equivalents. The company classifies investments with an original maturity of more than three months on their acquisition date as short-term marketable securities. Cash and Cash Equivalents and Short-term Marketable Inventories: Inventories are stated at the lower of cost or market. Livestock and the materials portion of products are valued on  the first-in, first-out method with the exception of the materials  portion of turkey products, which are valued on the last-in, first- out method. Substantially all inventoriable expenses, packages, and supplies are valued by the last-in, first-out method. Property, Plant, and Equipment: Property, plant, and equipment are stated at cost. The company generally uses the straight-line method in computing depreciation. The annual provisions for depreciation have been computed principally using the following ranges of asset lives: buildings 20 to 40 years, machinery and equipment 5 to 10 years. Software development and implementation costs are expensed until the company has determined that the software will result in probable future economic benefits, and management has commit- ted to funding the project. Thereafter, all direct, external implemen- tation costs and purchased software costs are capitalized and amortized using the straight-line method over the remaining esti- mated useful lives, not exceeding five years. Goodwill and Intangibles: Goodwill and other intangibles  are originally recorded at their estimated fair values at date  of acquisition. Goodwill and indefinite-lived intangibles are no longer amortized but are tested annually for impairment, or more frequently if impairment indicators arise. Definite-lived intangibles are amortized over their estimated useful lives and are evaluated for impairment annually, or more frequently if impairment indicators  are present, using a process similar to that used to test long-lived assets for impairment. Impairment of Long-lived Assets: The company reviews long- lived assets and definite-lived intangibles for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undis- counted cash flows are less than the carrying value of the assets and any related goodwill, the carrying value is reduced to the  estimated fair value. In the first quarter of fiscal 2003, the company’s Jennie-O Turkey Store subsidiary announced it would close its Heartland Foods processing plant in Marshall, Minnesota, effective February 28, 2003. The company classified the Marshall facility as an “asset to be disposed of by sale” in accordance with Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In fiscal 2003,  the company recognized a pre-tax loss of $2.5 million in cost of products sold to write the asset down to fair value. The $1.8 million carrying value of the plant was included in other assets on the consolidated balance sheet. In fiscal 2004, the company recog- nized an additional writedown of $0.6 million to adjust the asset to fair value. The asset was sold in fiscal 2004. Foreign Currency Translation: Assets and liabilities denominated in foreign currency are translated at the current exchange rate as of the balance sheet date, and income statement amounts are translated at the average monthly exchange rate. Translation adjustments resulting from fluctuations in exchange rates are recorded as a component of accumulated other comprehensive loss in shareholders’ investment. When calculating foreign currency translation, the company deemed its foreign investments to be permanent in nature and has not  provided for taxes on currency translation adjustments arising from converting the investment in a foreign currency to U.S. dollars. 2004 Annual Report 35