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90 THE EST{E LAUDER COMPANIES INC.
Recently Adopted Accounting Standards
In July 2013, the Financial Accounting Standards Board
(“FASB”) issued authoritative guidance that requires an
entity to present an unrecognized tax benefit, or a portion
of an unrecognized tax benefit, in the financial statements
as a reduction to a deferred tax asset for a net operating
loss (“NOL”) carryforward, a similar tax loss, or a tax
credit carryforward. If either (i) an NOL carryforward, a
similar tax loss, or tax credit carryforward is not available
as of the reporting date under the governing tax law to
settle taxes that would result from the disallowance of the
tax position or (ii) the entity does not intend to use the
deferred tax asset for this purpose (provided that the
tax law permits a choice), an entity should present an
unrecognized tax benefit in the financial statements as a
liability and should not net the unrecognized tax benefit
with a deferred tax asset. This guidance became effective
for unrecognized tax benefits that existed as of the
Company’s fiscal 2015 first quarter. The adoption of this
guidance did not have a significant impact on the
Company’s consolidated financial statements.
In March 2013, the FASB issued authoritative guidance
to resolve the diversity in practice concerning the release
of the cumulative translation adjustment (“CTA”) into net
income (i) when a parent sells a part or all of its invest-
ment in a foreign entity or no longer holds a controlling
financial interest in a subsidiary or group of assets within
a foreign entity, and (ii) in connection with a step acquisi-
tion of a foreign entity. This amended guidance requires
that CTA be released in net income only if the sale or
transfer results in the complete or substantially complete
liquidation of the foreign entity in which the subsidiary or
group of assets had resided, and that a pro rata portion of
the CTA be released into net income upon a partial sale
of an equity method investment in a foreign entity only. In
addition, the amended guidance clarifies the definition of
a sale of an investment in a foreign entity to include both,
events that result in the loss of a controlling financial inter-
est in a foreign entity and events that result in an acquirer
obtaining control of an acquiree in which it held an equity
interest immediately prior to the date of acquisition. The
CTA should be released into net income upon the occur-
rence of such events. This guidance became effective
prospectively for the Company’s fiscal 2015 first quarter.
The adoption of this guidance did not have an impact on
the Company’s consolidated financial statements.
Recently Issued Accounting Standards
In May 2014, the FASB issued authoritative guidance that
defines how companies should report revenues from con-
tracts with customers. The standard requires an entity to
recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects
the
consideration to which the entity expects to be entitled
in
exchange for those goods or services. It provides compa-
nies with a single comprehensive five-step principles- based
model to use in accounting for revenue and supersedes
current revenue recognition requirements, including most
industry-specific and transaction-specific revenue guid-
ance. In August 2015, the FASB deferred the effective
date of the new revenue standard by one year. As a result,
the new standard would not be effective for the Company
until fiscal 2019. In addition, the FASB is allowing compa-
nies to early adopt this guidance for the Company’s fiscal
2018. The guidance permits an entity to apply the stan-
dard retrospectively to all prior periods presented, with
certain practical expedients, or apply the requirements in
the year of adoption, through a cumulative adjustment.
The Company will apply this new guidance when it
becomes effective and has not yet selected a transition
method. The Company is currently evaluating the impact
of adoption on its consolidated financial statements.
No other recently issued accounting pronouncements
are expected to have a material impact on the Company’s
consolidated financial statements.
NOTE 3
—
INVESTMENTS
Gains and losses recorded in AOCI related to the Company’s available-for-sale investments as of June 30, 2015 were
as follows:
Gross Unealized Gross Unrealized
Cost Gains Losses Fair Value
(In millions)
U.S. government and agency securities $265.8 $0.1 $(0.1) $265.8
Foreign government and agency securities 23.9 — — 23.9
Corporate notes and bonds 182.7 0.1 (0.4) 182.4
Time deposits 410.8 — — 410.8
Other securities 34.8 0.1 — 34.9
Total $918.0 $0.3 $(0.5) $917.8
Gross unrealized investment gains recorded in AOCI related to the Company’s available-for-sale investments as of
June 30, 2014 were $2.1 million.