ADT 2007 Annual Report Download - page 157
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Cumulative Effect of Accounting Change
During 2006, the Company adopted Financial Accounting Standards Board Interpretation
(‘‘FIN’’) No. 47, ‘‘Accounting for Conditional Asset Retirement Obligations—an Interpretation of FASB
Statement No. 143.’’ FIN No. 47 clarifies the timing of liability recognition for legal obligations
associated with an asset retirement when the timing and (or) method of settling the obligation are
conditional on a future event that may or may not be within the control of the entity and clarifies when
an entity would have sufficient information to reasonably estimate the fair value of an asset retirement
obligation. FIN No. 47 requires that conditional asset retirement obligations, along with the associated
capitalized asset retirement costs, be initially reported at their fair values. Upon adoption, the Company
recognized a liability of $32 million for asset retirement obligations and an increase of $10 million in
the carrying amount of the related assets, of which $19 million and $5 million are reflected in liabilities
and assets of discontinued operations, respectively. The initial recognition resulted in a cumulative
effect of accounting change of $14 million after-tax loss ($22 million pre-tax), reflecting the
accumulated depreciation and accretion that would have been recognized in prior periods had the
provisions of FIN No. 47 been in effect at the time.
During 2005, the Company changed the measurement date for its pension and postretirement
benefit plans, from September 30th to August 31st, effective October 1, 2004. The Company believes
that the one-month change of measurement date is a preferable change as it allows management
adequate time to evaluate and report the actuarial information in the Company’s Consolidated
Financial Statements under the accelerated reporting deadlines. As a result of this change, the
Company recorded a $21 million after-tax gain ($28 million pre-tax) cumulative effect of accounting
change.
2007 Financials 65