Archer Daniels Midland 2009 Annual Report Download - page 49

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43
Notes to Consolidated Financial Statements (Continued)
Note 1.
Summary of Significant Accounting Policies (Continued)
During December 2007, the FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It
also amends the consolidation procedures of Accounting Research Bulletin No. 51, Consolidated Financial
Statements (ARB 51) for consistency with the requirements of SFAS 141(R). The Company is required to adopt
SFAS 160 on July 1, 2009 and will apply it prospectively, except for the presentation and disclosure requirements,
which will apply retrospectively. The Company believes the adoption of SFAS 160 will not have a material impact
on its consolidated financial statements.
During May 2008, the FASB issued FSP Accounting Principles Board (APB) Opinion 14-1, Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
(FSP APB 14-1). FSP APB 14-1 addresses the accounting for convertible debt securities that, upon conversion,
may be settled by the issuer fully or partially in cash. Previously, most forms of convertible debt securities were
treated solely as debt. Under this FSP, issuers of convertible debt securities within its scope must separate these
securities into two accounting components; a debt component, representing the issuer’s contractual obligation to
pay principal and interest; and an equity component, representing the holder’s option to convert the debt security
into equity of the issuer or, if the issuer so elects, an equivalent amount of cash. The Company is required to adopt
FSP APB 14-1 on July 1, 2009, in connection with its outstanding convertible debt and must apply it
retrospectively to all past periods presented, even if the instrument has matured, been converted, or otherwise been
extinguished as of the FSP’s effective date. Upon adoption of FSP APB 14-1, the Company will record a debt
discount equivalent to the fair value of the embedded equity conversion feature as of July 1, 2009, thereby reducing
long term debt by $208 million and increasing shareholders’ equity by $128 million. The debt discount will be
amortized over the seven year term of the convertible debt using the effective interest rate method, increasing
annual interest expense by approximately $13 million in fiscal year 2007, $37 million to $48 million in fiscal years
2008 to 2013 and $31 million in fiscal year 2014.
During June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1).
FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per
share (EPS) under the two-class method. The FSP clarifies that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common
shareholders and are considered to be participating securities. As such, the issuing entity is required to apply the
two-class method of computing basic and diluted EPS. The Company is required to adopt FSP EITF 03-6-1 on
July 1, 2009. The adoption of FSP EITF 03-6-1 will not have a material impact on the Company’s consolidated
financial statements.
During December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement
Benefit Plan Assets – an amendment of FASB Statement No. 132(R) (FSP FAS 132(R)-1). FSP FAS 132(R)-1
expands the disclosure requirements of SFAS No. 132(R), Employers’ Disclosures about Pensions and Other
Postretirement Benefits (SFAS 132(R)). FSP FAS 132(R)-1 requires entities to disclose investment policies and
strategies, major categories of plan assets, fair value measurements for each major category of plan assets
segregated by fair value hierarchy level as defined in SFAS No. 157, Fair Value Measurements (SFAS 157), the
effect of fair value measurements using Level 3 inputs on changes in plan assets for the period, and significant
concentrations of risk within plan assets. The Company will be required to adopt FSP FAS 132(R)-1 on June 30,
2010. The adoption of this standard will require expanded disclosure in the notes to the Company’s consolidated
financial statements but will not impact financial results.
Archer Daniels Midland Company