Alcoa 2015 Annual Report Download - page 128

income tax assets and liabilities to be classified as noncurrent in a classified balance sheet. The current requirement
that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount
is not affected by these changes. As such, all deferred income tax assets and liabilities were classified in the Deferred
income taxes and Other noncurrent liabilities and deferred credits, respectively, line items on the December 31, 2015
Consolidated Balance Sheet. Additionally, management elected to update the December 31, 2014 Consolidated
Balance Sheet for these changes for comparative purposes. As a result $421 of current deferred income tax assets
(previously reported in Prepaid expenses and other current assets) and $83 of current deferred income tax liabilities
(previously reported in Taxes, including income taxes) were reclassified to the aforementioned noncurrent asset ($385)
and liability ($47) line items on the December 31, 2014 Consolidated Balance Sheet.
Recently Issued Accounting Guidance. In January 2015, the FASB issued changes to the presentation of
extraordinary items. Such items are defined as transactions or events that are both unusual in nature and infrequent in
occurrence, and, currently, are required to be presented separately in an entity’s income statement, net of income tax,
after income from continuing operations. The changes eliminate the concept of an extraordinary item and, therefore,
the presentation of such items will no longer be required. Notwithstanding this change, an entity will still be required to
present and disclose a transaction or event that is both unusual in nature and infrequent in occurrence in the notes to the
financial statements. These changes become effective for Alcoa on January 1, 2016. Management has determined that
the adoption of these changes will not have an impact on the Consolidated Financial Statements.
In February 2015, the FASB issued changes to the analysis that an entity must perform to determine whether it should
consolidate certain types of legal entities. These changes (i) modify the evaluation of whether limited partnerships and
similar legal entities are variable interest entities or voting interest entities, (ii) eliminate the presumption that a general
partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are
involved with variable interest entities, particularly those that have fee arrangements and related party relationships,
and (iv) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that
are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the
Investment Company Act of 1940 for registered money market funds. These changes become effective for Alcoa on
January 1, 2016. Management is currently evaluating the potential impact of these changes on the Consolidated
Financial Statements.
In April 2015, the FASB issued changes to the presentation of debt issuance costs. Currently, such costs are required to
be presented as a deferred asset in an entity’s balance sheet and amortized into interest expense over the term of the
related debt instrument. The changes require that debt issuance costs be presented in an entity’s balance sheet as a
direct deduction from the carrying value of the related debt liability. The amortization of debt issuance costs remains
unchanged. These changes become effective for Alcoa on January 1, 2016. In August 2015, the FASB issued an update
to these changes based on an announcement of the staff of the U.S. Securities and Exchange Commission. This change
provides an exception to the April 2015 FASB changes allowing debt issuance costs related to line-of-credit
arrangements to continue to be presented as an asset regardless of whether there are any outstanding borrowings under
such arrangement. This additional change also becomes effective for Alcoa on January 1, 2016. Management has
determined that the adoption of all of these changes will result in a decrease of $58 to both Other noncurrent assets and
Long-term debt, less amount due within one year on the accompanying Consolidated Balance Sheet.
In July 2015, the FASB issued changes to the subsequent measurement of inventory. Currently, an entity is required to
measure its inventory at the lower of cost or market, whereby market can be replacement cost, net realizable value, or
net realizable value less an approximately normal profit margin. The changes require that inventory be measured at the
lower of cost and net realizable value, thereby eliminating the use of the other two market methodologies. Net
realizable value is defined as the estimated selling prices in the ordinary course of business less reasonably predictable
costs of completion, disposal, and transportation. These changes do not apply to inventories measured using LIFO
(last-in, first-out) or the retail inventory method. Currently, Alcoa applies the net realizable value market option to
measure non-LIFO inventories at the lower of cost or market. These changes become effective for Alcoa on January 1,
2017. Management has determined that the adoption of these changes will not have an impact on the Consolidated
Financial Statements.
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