Fluor 2007 Annual Report Download - page 91

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
substantially all incurred cost associated with contract work in progress at December 31, 2007 will be billed
and collected in 2008. The company recognizes certain significant claims for recovery of incurred cost
when it is probable that the claim will result in additional contract revenue and when the amount of the
claim can be reliably estimated. Unapproved change orders are accounted for in revenue and cost when it
is probable that the cost will be recovered through a change in the contract price. In circumstances where
recovery is considered probable but the revenue cannot be reliably estimated, cost attributable to change
orders is deferred pending determination of contract price.
Depreciation and Amortization
Property, plant and equipment are recorded at cost. Assets are depreciated principally using the
straight-line method over the following ranges of estimated useful service lives, in years:
Estimated
Useful
December 31, Service
2007 2006 Lives
(cost in thousands)
Buildings $298,049 $281,389 20 – 40
Leasehold improvements 54,216 28,632 6 – 10
Machinery and equipment* 844,946 766,916 2 – 10
Furniture and fixtures 126,244 102,604 1 – 10
* Approximately 50 percent of the machinery and equipment is construction equipment that is depreciated over service lives
ranging from 2 to 5 years.
Leasehold improvements are amortized over the shorter of their economic lives or the lease terms.
Goodwill is not amortized but is subject to annual impairment tests. For purposes of impairment
testing, goodwill is allocated to the applicable reporting units based on the current reporting structure.
During 2007, the company completed its annual goodwill impairment tests in the first quarter and has
determined that none of the goodwill is impaired.
Intangibles arising from business acquisitions are amortized over the useful lives of those assets,
ranging from one to nine years.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events
that have been recognized in the company’s financial statements or tax returns.
Judgment is required in determining the consolidated provision for income taxes as the company
considers its worldwide taxable earnings and the impact of the continuing audit process conducted by
various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue
Service and various state governments could differ materially from that which is reflected in the
Consolidated Financial Statements.
In June 2006, the FASB issued FASB No. 48, ‘‘Accounting for Uncertainty in Income Taxes’’
(‘‘FIN 48’’), an interpretation of FASB Statement of Financial Accounting Standards (‘‘SFAS’’), No. 109
‘‘Accounting for Income Taxes’’ (‘‘SFAS 109’’). FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in enterprises’ financial statements in accordance with SFAS 109. The interpretation
prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. Also, the interpretation
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
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