March 30, 2005
via facsimile and U.S. mail
Mr. Terrell K. Crews
Chief Financial Officer
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, MO 63167
Re: Monsanto Company
Form 10-K, Filed November 4, 2004
Form 10-Q, Filed January 10, 2005
File No. 1-16167
Dear Mr. Crews:
We have reviewed the above filings and have the following
accounting comments. Our review has been limited to your
financial
statements and the related disclosures in Management`s Discussion
and
Analysis. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ended August 31, 2004
General
1. We understand you would prefer to limit compliance with many of
our comments to future filings. We are currently considering your
request in response to these prior comments.
Item 7, Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Financial Measures, page 24
2. We reviewed your response to prior comments 1 and 2, and note
that
you have proposed to revise the title of your non-GAAP financial
measure to "Adjusted EBIT". The revised title of your non-GAAP
measures should not refer in any way to EBIT as this measure is
not
calculated consistently with the widely known definition of EBIT.
We
note your measure of EBIT is based on earnings adjusted for
discontinued operations and cumulative effect of a change in
accounting principle. Revise the title of your non-GAAP measure
to
exclude any reference to EBIT.
Note 7. Customer Financing Program, page 83
3. We have reviewed your response to prior comment 9, in which you
describe how the customer financing program complies with the
criteria of paragraph 9 of SFAS 140. Your response however, did
not
specifically address the second portion of our prior comment
relating
to the first-loss guarantee provided by Monsanto. Please tell us
if
this guarantee affects your conclusion that the transfers of
customer
loans meet the criteria of SFAS 140, paragraph 9.
Note 9. Goodwill and Other Intangible Assets, page 84
4. We have reviewed your response to prior comment 14. You have
indicated that the first two components of the arrangement, for
$40
million and $45 million respectively, were recorded as intangible
assets. These assets are comprised of a database of intellectual
property primarily made up of gene sequencing and gene leads,
processes, libraries and other biological materials. Tell us why
you
believe these components should be accounted for as intangible
assets
under the guidance of SFAS 2, paragraph 11(c) as opposed to
research
and development costs to be expensed under paragraph 12.
5. We understand the collaboration agreement with Ceres, Inc.
provides for additional payments for the purchase of rights to
subsequently developed technologies for approximately $45 million,
which has been capitalized as an intangible asset at the contract
price. Tell us why the acquisition of subsequently developed
technology over the five-year agreement should be accounted for
differently than the funding of a joint research program. It
appears
these costs of subsequently developed technologies are similar to
research and development costs that would have otherwise been
expensed in the income statement under SFAS 2, similar to the
amounts
associated with the joint research program component. In your
response, please address why you have used the contract price in
valuing these intangible assets versus the internally developed
discounted cash flow valuation method. In addition, please
identify
the amounts capitalized over the term of the collaboration
agreement
related to the acquisition of rights to subsequently developed
technologies as of each fiscal year presented and interim period
as
of November 30, 2004.
Note 25. Equity Affiliates, page 114
6. We have reviewed your response to prior comment 19, noting you
perform research and development activities funded by Renessen
LLC.
Please tell us how you considered the guidance of SFAS 68 in
determining how to account for these ongoing arrangements and in
concluding the recognition of an obligation and further disclosure
under paragraph 14 are not required.
Note 26. Advertising Costs, page 114
7. We have reviewed the proposed disclosure provided in response
to
prior comment 20. However, we note your proposed disclosure does
not
address the timing of recognition in the income statement of
amounts
due from Scotts over the life of the contract arrangement. In
addition, the terms of the contract and the responsibilities of
each
party under the contractual arrangement remain unclear. Please
expand your proposed disclosure to address the significant terms
of
the agreement and your accounting for the amounts recognized in
the
financial statements related to this agreement.
Closing Comments
As appropriate, please amend your filing(s) and respond to
these comments within 10 business days or tell us when you will
provide us with a response. You may wish to provide us with
marked
copies of amendment(s) to expedite our review. Please furnish a
cover letter with your amendment(s) that keys your responses to
our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment(s) and responses to our comments.
You may contact Gary Newberry at (202) 824-5567 or Shannon
Buskirk at (202) 942-1826 if you have questions regarding comments
on
the financial statements and related matters. Please contact me
at
(202) 942-1870 with any other questions. Direct all
correspondence
to the following ZIP code: 20549-0405.
Sincerely,
H. Roger Schwall
Assistant Director
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Monsanto Company
March 30, 2005
page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0405
DIVISION OF
CORPORATION FINANCE