Alcoa 2009 Annual Report Download - page 96

benefit pension or other postretirement plan to provide users of financial statements with an understanding of the
following: how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation
techniques used to measure the fair value of plan assets; the effect of fair value measurements using significant
unobservable inputs on changes in plan assets; and significant concentrations of risk within plan assets. Other than the
required disclosures (see Note W), the adoption of these changes had no impact on the Consolidated Financial
Statements.
Effective December 31, 2008, Alcoa adopted a change issued by the FASB in September 2006, among other changes
that were previously adopted effective December 31, 2006, to accounting for defined benefit pension and other
postretirement plans. This change requires an employer to measure the funded status of each of its plans as of the date
of its year-end statement of financial position. The adoption of this change resulted in a charge of $9, which was
recorded as an adjustment to December 31, 2008 retained earnings (see Note W).
On January 1, 2008, Alcoa adopted changes issued by the FASB to accounting for collateral assignment split-dollar life
insurance arrangements. These changes require an employer to recognize a liability for the postretirement benefit
related to a collateral assignment split-dollar life insurance arrangement in accordance with existing guidance for
accounting for postretirement benefits other than pensions or accounting for deferred compensation contracts if the
employer has agreed to maintain a life insurance policy during the employee’s retirement or provide the employee with
a death benefit based on the substantive arrangement with the employee. This guidance also requires an employer to
recognize and measure the asset in a collateral assignment split-dollar life insurance arrangement based on the nature
and substance of the arrangement. The adoption of these changes had no impact on the Consolidated Financial
Statements.
Income Taxes—On January 1, 2007, Alcoa adopted changes issued by the FASB to accounting for income taxes.
These changes prescribe a comprehensive model for how a company should recognize, measure, present, and disclose
in its financial statements, uncertain tax positions that it has taken or expects to take on a tax return. This guidance
requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than
not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of
being realized upon ultimate settlement.
Effective January 1, 2007, Alcoa adopted changes issued by the FASB on May 2, 2007 to accounting for income taxes.
These changes provide guidance on how an entity should determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax benefits. The term “effectively settled” replaces the term
“ultimately settled” when used to describe recognition, and the terms “settlement” or “settled” replace the terms
“ultimate settlement” or “ultimately settled” when used to describe measurement of an uncertain tax position. This
guidance clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing
authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize
the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based
solely on its technical merits and the statute of limitations remains open.
Other than the required disclosures (see Note T), the adoption of these changes had no impact on the Consolidated
Financial Statements.
Other—On June 30, 2009, Alcoa adopted changes issued by the FASB to 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, otherwise
known as “subsequent events.” Specifically, these changes set forth the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should
make about events or transactions that occurred after the balance sheet date. The adoption of these changes had no
impact on the Consolidated Financial Statements as management already followed a similar approach prior to the
adoption of this new guidance (see Note Y).
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