Fluor 2008 Annual Report Download - page 95

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Major Accounting Policies
Principles of Consolidation
The financial statements include the accounts of the company and its subsidiaries. The equity method
of accounting is generally used for investment ownership ranging from 20 percent to 50 percent.
Investment ownership of less than 20 percent is generally accounted for on the cost method. Joint ventures
and partnerships in which the company has the ability to exert significant influence, but does not control,
are accounted for using the equity method of accounting. Certain contracts are executed jointly through
partnerships and joint ventures with unrelated third parties. The company recognizes its proportionate
share of joint venture revenue, cost and operating profit in its Consolidated Statement of Earnings and
generally uses the one-line equity method of accounting in the Consolidated Balance Sheet. The company
evaluates the applicability of Financial Accounting Standards Board (‘‘FASB’’) Interpretation No. 46
(Revised) ‘‘Consolidation of Variable Interest Entities’’ (‘‘FIN 46(R)’’) to partnerships and joint ventures
at the inception of its participation and at the time of reconsideration events to ensure its accounting is in
accordance with the appropriate standards.
All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts
in 2007 and 2006 have been reclassified to conform to the 2008 presentation.
Stock Split
On May 7, 2008, the Board of Directors approved a two-for-one stock split that was paid in the form
of a stock dividend on July 16, 2008 to shareholders of record on June 16, 2008. The stock split was
accounted for by transferring approximately $1 million from additional paid-in capital to common stock.
All share and per share data (except par value) have been adjusted to reflect the effect of the stock split for
all periods presented. The number of shares of common stock issuable upon exercise of outstanding stock
options, vesting of other stock awards and the number of shares reserved for issuance under our
convertible notes and various employee benefit plans were proportionately increased in accordance with
the terms of the respective plans.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect reported
amounts. These estimates are based on information available as of the date of the financial statements.
Therefore, actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include securities with maturities of 90 days or less at the date of purchase.
Securities with maturities beyond 90 days are classified as marketable securities within current assets.
Marketable Securities
Marketable securities consist primarily of time deposits placed with investment grade banks with
original maturities greater than 90 days, which by their nature are typically held to maturity, and are
classified as such because the company has the intent and ability to hold them to maturity.
Held-to-maturity securities are carried at amortized cost. The company also has investments in debt
securities which are classified as available-for-sale because the investments may be sold prior to their
maturity date. Available-for-sale securities are carried at fair value based on quoted market prices.
Engineering and Construction Contracts
The company recognizes engineering and construction contract revenue using the
percentage-of-completion method, based primarily on contract cost incurred to date compared to total
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