ADT 2008 Annual Report Download - page 211

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies (Continued)
Recently Adopted Accounting Pronouncements—In June 2006, the Financial Accounting Standards
Board (‘‘FASB’’) issued Financial Accounting Standards Board Interpretation (‘‘FIN’’) No. 48,
‘‘Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.’’ This
Interpretation prescribes a comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax
returns. FIN No. 48 became effective for Tyco in the first quarter of 2008. As a result of adopting FIN
No. 48, Tyco increased its reserve for uncertain tax positions by $55 million and reduced its deferred
tax assets by $24 million with a corresponding $79 million cumulative effect adjustment to shareholders’
equity. See Note 6 for additional information related to the adoption of FIN No. 48.
Recently Issued Accounting Pronouncements—In May 2008, the FASB issued Statement of Financial
Accounting Standards (‘‘SFAS’’) No. 162, ‘‘The Hierarchy of Generally Accepted Accounting
Principles’’ (SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles and the
framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is
effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, ‘‘The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles’’. The Company does not expect that this standard will have a material
impact on its results of operations, financial position or cash flows.
In April 2008, the FASB issued Staff Position (‘‘FSP’’) No. 142-3, ‘‘Determination of the Useful
Life of Intangible Assets’’. FSP No. 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, ‘‘Goodwill and Other Intangible Assets’’. FSP No. 142-3 is effective for Tyco in
the first quarter of 2010. The Company is currently assessing the impact of FSP No. 142-3 on its results
of operations, financial position or cash flows.
In March 2008, the FASB issued SFAS No. 161, ‘‘Disclosures about Derivative Instruments and
Hedging Activities.’’ SFAS No. 161 is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s results of operations, financial position or cash flows. The
disclosure provisions of SFAS No. 161 are effective for Tyco in the second quarter of 2009.
In December 2007, the FASB issued SFAS 141 (Revised 2007), ‘‘Business Combinations.’’ SFAS
No. 141R retains the underlying concepts of SFAS No. 141 in that business combinations are still
accounted for at fair value. However, the accounting for certain other aspects of business combinations
will be affected. Acquisition costs will generally be expensed as incurred. Restructuring costs associated
with a business combination will generally be expensed subsequent to the acquisition date. In-process
research and development will be recorded at fair value as an indefinite-lived intangible at the
acquisition date until it is completed or abandoned and its useful life can be determined. Changes in
deferred tax asset valuation allowances and uncertain tax positions after the acquisition date will
generally impact income tax expense. SFAS No. 141R also expands required disclosures surrounding the
nature and financial effects of business combinations. SFAS No. 141R is effective, on a prospective
basis, for Tyco in the first quarter of fiscal 2010.
In December 2007, the FASB issued SFAS No. 160, ‘‘Noncontrolling Interests in Consolidated
Financial Statements—an amendment of ARB No. 51’’. SFAS No. 160 requires the recognition of a
noncontrolling interest (minority interest prior to the adoption of SFAS 160) as equity in the
consolidated financial statements. The amount of net income attributable to the noncontrolling interest
should be included in consolidated net income on the face of the statement of income. SFAS No. 160
108 2008 Financials