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| 1 | BOTTLING GROUP LLC |
Note 3—New Accounting Standards
SFAS No. 141(R) as amended
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 141(revised 2007), “Business Combinations” (“SFAS
141(R)”), which addresses the accounting and disclosure for identifiable assets acquired,
liabilities assumed, and noncontrolling interests in a business combination. In April 2009, the
FASB issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”), which
amended certain provisions of SFAS 141(R) related to the recognition, measurement, and disclosure
of assets acquired and liabilities assumed in a business combination that arise from contingencies.
SFAS 141(R) and FSP FAS 141(R)-1 became effective in 2009, and did not have a material impact on
our Condensed Consolidated Financial Statements, but will continue to be evaluated on the outcome
of future matters.
SFAS No. 160
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51” (“SFAS 160”), which addresses the accounting and
reporting framework for noncontrolling interests by a parent company. SFAS 160 also addresses
disclosure requirements to distinguish between interests of the parent and interests of the
noncontrolling owners of a subsidiary. SFAS 160 became effective in the first quarter of 2009.
The provisions of SFAS 160 require that minority interest be renamed noncontrolling interests and
that a company present a consolidated net income measure that includes the amount attributable to
such noncontrolling interests for all periods presented. In addition, SFAS 160 requires reporting
noncontrolling interests as a component of equity in our Condensed Consolidated Balance Sheets and
below income tax expense in our Condensed Consolidated Statements of Operations. As required by
SFAS 160, we have retrospectively applied the presentation to our prior year balances in our
Condensed Consolidated Financial Statements.
SFAS No. 161
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced
disclosures for derivative and hedging activities. SFAS 161 became effective in the first quarter
of 2009. See Note 8 for required disclosure.
FSP FAS 132(R)-1
In December 2008, the FASB issued FASB Staff Position No. SFAS 132(revised 2003)-1,
“Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which
requires employers to disclose information about fair value measurements of plan assets that are
similar to the disclosures about fair value measurements required by SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). FSP FAS 132(R)-1 will become effective for our annual financial
statements for 2009. We are currently evaluating the impact of this standard on our Consolidated
Financial Statements.
FSP FAS 107-1 and APB 28-1
In April 2009, the FASB issued FASB Staff Position No. SFAS 107-1 and APB No. 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which
requires quarterly disclosure of information about the fair value of financial instruments within
the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments.” FSP
FAS 107-1 and APB 28-1 has an effective date requiring adoption by the third quarter of 2009 with
early adoption permitted. We adopted the provisions of FSP FAS 107-1 and APB 28-1 in the first
quarter of 2009. See Note 7 for required disclosures.
SFAS No. 165
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which sets forth
general standards of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. SFAS 165 became
effective in the third quarter of 2009 and did not have a material impact on our Consolidated
Financial Statements.
SFAS No. 167
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”), which amends FASB Interpretation No. 46(revised December 2003) to address the
elimination of the concept of a qualifying special purpose entity. SFAS 167 also replaces the
quantitative-based risks and rewards calculation for determining which enterprise has a controlling
financial interest in a variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity and the obligation
to absorb losses of the entity or the right to receive benefits from the entity. Additionally,
SFAS 167 provides more timely and useful information about an enterprise’s involvement with a
variable interest entity. SFAS 167 will become effective in the first quarter of 2010. We are
currently evaluating the impact of this standard on our Consolidated Financial Statements.
SFAS No. 168
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”), which establishes the FASB Accounting
Standards Codification as the source of authoritative accounting principles recognized by the FASB
to be applied in the preparation of financial statements in conformity with generally accepted
accounting principles. SFAS 168 explicitly recognizes rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for
SEC registrants. SFAS 168 will become effective in the fourth quarter of 2009 and will require the
Company to update all existing GAAP references to the new codification references for all future
filings.
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| 2 | CHEVRON CORP |
In June 2009, the FASB issued an accounting standard for
transfers of financial assets, which will become effective for
the company on January 1, 2010. The standard changes how
companies account for transfers of financial assets and
eliminates the concept of qualifying special-purpose entities.
Adoption of the guidance is not expected to have an impact on
the company’s results of operations, financial position or
liquidity.
In June 2009, the FASB issued an accounting standard for
variable-interest entities (VIEs), which will become effective
for the company January 1, 2010. The standard requires the
enterprise to qualitatively assess if it is the
primary beneficiary of the VIE and, if so, the VIE must be
consolidated. Adoption of the standard is not expected to have a
material impact on the company’s results of operations,
financial position or liquidity.
In June 2009, the FASB issued its Accounting Standards
Codification (ASC) system, which became effective for the
company in the quarter ending September 30, 2009. This
standard established the ASC as the single authoritative source
of U.S. generally accepted accounting principles (GAAP) and
superseded existing literature of the FASB, Emerging Issues Task
Force, American Institute of CPAs and other sources. The ASC did
not change GAAP but organized the literature into about 90
accounting Topics. Adoption of the ASC did not affect the
company’s accounting.
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| 3 | International Business Machines Corporation |
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| 4 | PEPSI BOTTLING GROUP INC |
Note 3—New Accounting Standards
SFAS No. 141(R) as amended
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 141(revised 2007), “Business Combinations” (“SFAS
141(R)”), which addresses the accounting and disclosure for identifiable assets acquired,
liabilities assumed, and noncontrolling interests in a business combination. In April 2009, the
FASB issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”), which
amended certain provisions of SFAS 141(R) related to the recognition, measurement, and disclosure
of assets acquired and liabilities assumed in a business combination that arise from contingencies.
SFAS 141(R) and FSP FAS 141(R)-1 became effective in 2009, and did not have a material impact on
our Condensed Consolidated Financial Statements, but will continue to be evaluated on the outcome
of future matters.
SFAS No. 160
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51” (“SFAS 160”), which addresses the accounting and
reporting framework for noncontrolling interests by a parent company. SFAS 160 also addresses
disclosure requirements to distinguish between interests of the parent and interests of the
noncontrolling owners of a subsidiary. SFAS 160 became effective in the first quarter of 2009.
The provisions of SFAS 160 require that minority interest be renamed noncontrolling interests and
that a company present a consolidated net income measure that includes the amount attributable to
such noncontrolling interests for all periods presented. In addition, SFAS 160 requires reporting
noncontrolling interests as a component of equity in our Condensed Consolidated Balance Sheets and
below income tax expense in our Condensed Consolidated Statements of Operations. As required by
SFAS 160, we have retrospectively applied the presentation to our prior year balances in our
Condensed Consolidated Financial Statements.
SFAS No. 161
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced
disclosures for derivative and hedging activities. SFAS 161 became effective in the first quarter
of 2009. See Note 9 for required disclosure.
FSP FAS 132(R)-1
In December 2008, the FASB issued FASB Staff Position No. SFAS 132(revised 2003)-1,
“Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which
requires employers to disclose information about fair value measurements of plan assets that are
similar to the disclosures about fair value measurements required by SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). FSP FAS 132(R)-1 will become effective for our annual financial
statements for 2009. We are currently evaluating the impact of this standard on our Consolidated
Financial Statements.
FSP FAS 107-1 and APB 28-1
In April 2009, the FASB issued FASB Staff Position No. SFAS 107-1 and APB No. 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which
requires quarterly disclosure of information about the fair value of financial instruments within
the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments.” FSP
FAS 107-1 and APB 28-1 has an effective date requiring adoption by the third quarter of 2009 with
early adoption permitted. PBG
adopted the provisions of FSP FAS 107-1 and APB 28-1 in the first quarter of 2009. See Note 8
for required disclosures.
SFAS No. 165
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which sets forth
general standards of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. SFAS 165 became
effective in the third quarter of 2009 and did not have a material impact on our Consolidated
Financial Statements.
SFAS No. 167
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”), which amends FASB Interpretation No. 46(revised December 2003) to address the
elimination of the concept of a qualifying special purpose entity. SFAS 167 also replaces the
quantitative-based risks and rewards calculation for determining which enterprise has a controlling
financial interest in a variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity and the obligation
to absorb losses of the entity or the right to receive benefits from the entity. Additionally,
SFAS 167 provides more timely and useful information about an enterprise’s involvement with a
variable interest entity. SFAS 167 will become effective in the first quarter of 2010. We are
currently evaluating the impact of this standard on our Consolidated Financial Statements.
SFAS No. 168
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”), which establishes the FASB Accounting
Standards Codification as the source of authoritative accounting principles recognized by the FASB
to be applied in the preparation of financial statements in conformity with generally accepted
accounting principles. SFAS 168 explicitly recognizes rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for
SEC registrants. SFAS 168 will become effective in the fourth quarter of 2009 and will require the
Company to update all existing GAAP references to the new codification references for all future
filings.
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| 5 | US BANCORP \DE\ |
Note 2 Accounting Changes
Fair Value
Measurements On
April 9, 2009, the Financial Accounting Standards Board
(“FASB”) issued new accounting guidance, which the
Company adopted effective January 1, 2009, for determining
fair value for an asset or liability if there has been a
significant decrease in the volume and level of activity in
relation to normal market activity. In that circumstance,
transactions or quoted prices may not be determinative of fair
value. Significant adjustments may be necessary to quoted prices
or alternative valuation techniques may be required in order to
determine the fair value of the asset or liability under current
market conditions. The adoption of this guidance resulted in the
use of valuation techniques other than quoted prices for the
valuation of the Company’s non-agency mortgage-backed
securities, but the effect was not significant. For additional
information on the fair value of certain financial assets and
liabilities, refer to Note 12.
Other-Than-Temporary
Impairments On
April 9, 2009, the FASB issued new accounting guidance,
which the Company adopted effective January 1, 2009, for
the measurement and recognition of
other-than-temporary
impairment for debt securities. If an entity does not intend to
sell, and it is more likely than not that the entity will not be
required to sell, a debt security before recovery of its cost
basis,
other-than-temporary
impairment should be separated into (a) the amount
representing credit loss and (b) the amount related to all
other factors. The amount of
other-than-temporary
impairment related to credit loss is recognized in earnings and
other-than-temporary
impairment related to other factors is recognized in other
comprehensive income (loss). To determine the amount related to
credit loss, the Company applied a methodology similar to that
used for accounting by creditors for impairment of loans. The
Company’s adoption of this guidance resulted in the
recognition of a cumulative-effect adjustment to January 1,
2009 retained earnings, with a corresponding adjustment to
accumulated other comprehensive income (loss), of
$141 million. For additional information on investment
securities, refer to Note 3.
Business
Combinations Effective January 1, 2009, the
Company adopted accounting guidance issued by the FASB which
establishes principles and requirements for the acquirer in a
business combination, including the recognition and measurement
of the identifiable assets acquired, the liabilities assumed and
any noncontrolling interest in the acquired entity as of the
acquisition date; the recognition and measurement of the
goodwill acquired in the business combination or gain from a
bargain purchase as of the acquisition date; and additional
disclosures related to the nature and financial effects of the
business combination. Under this guidance, nearly all acquired
assets and liabilities assumed are required to be recorded at
fair value at the acquisition date, including loans. The
recognition at the acquisition date of an allowance for loan
losses on acquired loans was eliminated, as credit-related
factors are now
incorporated directly into the fair value of the loans. Other
significant changes include recognizing transaction costs and
most restructuring costs as expenses when incurred. These
accounting requirements are applied on a prospective basis for
all transactions completed after the effective date. As a result
of applying this guidance, the Company recognized a
$92 million gain in the first quarter of 2009 associated
with the increase in value of a partnership interest in a
commercial office building upon the purchase by the Company of
the other partner’s interest.
Noncontrolling
Interests Effective
January 1, 2009, the Company adopted accounting guidance
issue by the FASB which changes the accounting and reporting for
third-party ownership interests in the Company’s
consolidated subsidiaries. Under the new guidance, these
interests are characterized as noncontrolling interests and
classified as a component of equity, separate from
U.S. Bancorp’s own equity. In addition, the amount of
net income attributable to the entity and to the noncontrolling
interests is required to be shown separately on the consolidated
statement of income. Upon adoption of this guidance, the Company
reclassified $733 million in noncontrolling interests from
other liabilities to equity and reclassified noncontrolling
interests’ share of net income from other noninterest
expense to income attributable to noncontrolling interests.
Accounting for
Transfers of Financial
Assets In June
2009, the FASB issued accounting guidance, effective for the
Company January 1, 2010, related to the transfer of
financial assets. This guidance removes the exception for
qualifying special-purpose entities from consolidation guidance
and the exception that permitted sale accounting for certain
mortgage securitizations when a transferor had not surrendered
control over the transferred financial assets. In addition, the
guidance provides clarification of the requirements for
isolation and limitations on portions of financial assets that
are eligible for sale accounting. The guidance also requires
additional disclosure about transfers of financial assets and a
transferor’s continuing involvement with transferred
assets. The Company expects the adoption of this guidance will
not be significant to its financial statements.
Variable Interest
Entities In June
2009, the FASB issued accounting guidance, effective for the
Company January 1, 2010, related to variable interest
entities. This guidance replaces a quantitative-based risks and
rewards calculation for determining which entity, if any, has
both (a) a controlling financial interest in a variable
interest entity with an approach focused on identifying which
entity has the power to direct the activities of a variable
interest entity that most significantly impact the entity’s
economic performance and (b) the obligation to absorb
losses of the entity or the right to receive benefits from the
entity that could potentially be significant to the variable
interest entity. This guidance requires reconsideration of
whether an entity is a variable interest entity when any changes
in facts or circumstances occur such that the holders of the
equity investment at risk, as a group, lose the power to direct
the activities of the entity that most significantly impact the
entity’s economic performance. It also requires ongoing
assessments of whether a variable interest holder is the primary
beneficiary of a variable interest entity. The Company is
currently assessing the impact of this guidance on its financial
statements.
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| 6 | WATERS CORP /DE/ |
During the second quarter of 2008, the Company identified errors originating in periods prior to the three months ended June 28, 2008. The errors primarily related to (i) an overstatement of the Company's income tax expense of $16 million as a result of errors in recording its income tax provision during the period from 2000 to March 29, 2008 and (ii) an understatement of amortization expense of $9 million for certain capitalized software. The Company incorrectly calculated its provision for income taxes by tax-effecting its tax liability utilizing a U.S. tax rate of 35% instead of an Irish tax rate of 10%. In addition, the Company incorrectly accounted for Irish-based capitalized software and the related amortization expense as U.S. Dollar-denominated instead of Euro-denominated, resulting in an understatement of amortization expense and cumulative translation adjustment.
The Company identified and corrected the errors in the three months ended June 28, 2008, which had the effect of increasing cost of sales by $9 million; reducing gross profit and income from operations before income tax by $9 million; reducing the provision for income taxes by $16 million and increasing net income by $8 million. For the nine months ended September 27, 2008, the errors reduced the Company’s effective tax rate by 5.6 percentage points. In addition, the out-of-period adjustments had the following effect on the consolidated balance sheet as of June 28, 2008: increased the gross carrying value of capitalized software by $46 million; increased accumulated amortization for capitalized software by $36 million; reduced deferred tax liabilities by $14 million and increased accumulated other comprehensive income by $17 million.
The Company did not believe that the prior period errors, individually or in the aggregate, were material to any previously issued annual or quarterly financial statements. In addition, the Company did not believe that the adjustments described above to correct the cumulative effect of the errors in the three months ended June 28, 2008 were material to the three months ended June 28, 2008 or to the full year results for 2008. As a result, the Company did not restate its previously issued annual financial statements or interim financial data.
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| 7 | WILLIAMS COMPANIES INC | Note 14. Accounting Standards Issued But Not Yet Adopted In September 2009, The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2009-12, “Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value Per Share (or Its Equivalent).” This Update amends Topic 820 by providing additional guidance for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this Update permit, as a practical expedient, a reporting entity to estimate the fair value of an investment that is within its scope using the net asset value per share of the investment (or its equivalent) if the net asset value of the investment is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee. The amendments also require disclosures, by major category of investment, about the attributes of investments within the scope of this Update, such as the nature of any restrictions on the investor’s ability to redeem its investments at the measurement date, any unfunded commitments, and the investment strategies of the investees. The amendments in this Update are effective for interim and annual periods ending after December 15, 2009. We will assess the application of this Update on our Consolidated Financial Statements. In August 2009, the FASB issued Accounting Standards Update No. 2009-5, “Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value.” This Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more prescribed techniques. The amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Additionally, this Update clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance provided in this Update is effective for us beginning with the fourth quarter of 2009. We are currently evaluating this Update to determine the impact to our Consolidated Financial Statements. In December 2008, the FASB issued FASB Staff Position No. FAS 132 (R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP FAS 132 (R)-1). This FASB Staff Position (FSP) amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (SFAS No. 132 (R)), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132 (R)-1 applies to an employer that is subject to the disclosure requirements of SFAS No. 132(R). An employer is required to disclose information about how investment allocation decisions are made, including factors that are pertinent to an understanding of investment policies and strategies. An employer should disclose separately for pension plans and other postretirement benefit plans the fair value of each major category of plan assets as of each annual reporting date for which a statement of financial position is presented. Asset categories should be based on the nature and risks of assets in an employer’s plan(s). An employer is required to disclose information that enables users of financial statements to assess the inputs and valuation techniques used to develop fair value measurements of plan assets at the annual reporting date. For fair value measurements using significant unobservable inputs (Level 3), an employer should disclose the effect of the measurements on changes in plan assets for the period. An employer should provide users of financial statements with an understanding of significant concentrations of risk in plan assets. The disclosures about plan assets required by FSP FAS 132 (R)-1 are to be provided for fiscal years ending after December 15, 2009. Upon initial application, the provisions of FSP FAS 132 (R)-1 are not required for earlier periods that are otherwise presented for comparative purposes. Earlier application of the provisions of FSP FAS 132 (R)-1 is permitted. We are evaluating the application of this FSP on our disclosures in our Consolidated Financial Statements. In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS No. 167). This Statement amends Interpretation 46(R) to require an entity to perform a qualitative analysis to determine whether the entity’s variable interest or interests give it a controlling financial interest in a variable interest entity (VIE). This analysis identifies the primary beneficiary of a VIE as the entity that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE. SFAS No. 167 amends Interpretation 46(R) to replace the quantitative-based risks and rewards approach previously required for determining the primary beneficiary of a VIE. SFAS No. 167 is effective as of the beginning of an entity’s first annual reporting period that begins after November 15, 2009 and for interim periods within that first annual reporting period. Earlier application is prohibited. We will assess the application of this Statement on our Consolidated Financial Statements. |