Fluor 2008 Annual Report Download - page 99

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
minimize concentration of counterparty credit risk. The company has not incurred any credit risk losses
related to these deposits.
There are no significant concentrations of credit risk with any individual counterparty related to our
derivative contracts. The company’s counterparties for derivative contracts are large financial institutions
selected based on profitability, balance sheet, credit ratings and capacity for timely payment of financial
commitments, which are unlikely to be adversely affected by foreseeable events.
The company monitors credit risk by continuously assessing the credit quality of its counterparties.
Stock Plans
The company applies the provisions of SFAS No. 123-R ‘‘Accounting for Share-Based Payment’’
(‘‘SFAS 123-R’’) in its accounting and reporting for stock-based compensation. SFAS 123-R requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Recorded compensation cost for new stock option grants is
measured using the requirements of SFAS 123-R for 2008, 2007 and 2006. All unvested options
outstanding under the company’s option plans have grant prices equal to the market price of the
company’s stock on the dates of grant. Compensation cost for restricted stock is determined based on the
fair value of the stock at the date of grant. Compensation cost for stock appreciation rights and
performance equity units is determined based on the change in the fair market value of the company’s
stock during the period.
Upon adoption of SFAS 123-R in 2006, the company elected the modified prospective method of
application and, accordingly, did not restate the previously reported financial condition, operating results
or the presentation of cash flows. In addition, the elimination of additional capital associated with unvested
restricted shares resulted in an offsetting reversal of unamortized executive stock plan expense. Under
SFAS 123-R, stock-based compensation for new awards granted to retirement eligible employees is
recognized over the period from the grant date to the retirement eligibility date. As part of the adoption of
SFAS 123-R in 2006, the impact of the accelerated expense recognition for retirement eligible participants
for those share-based awards granted during the year ended December 31, 2006 resulted in recognition of
approximately $3 million and $9 million for stock options and restricted stock awards, respectively, in
additional compensation expense for an aggregate after-tax impact of $0.04 per diluted share (split
adjusted). Compensation expense associated with restricted stock awards granted prior to 2006 continue to
be recognized using historical straight-line amortization practices based on award-specific vesting periods.
Comprehensive Income (Loss)
SFAS No. 130, ‘‘Reporting Comprehensive Income,’’ establishes standards for reporting and
displaying comprehensive income and its components in the consolidated financial statements. The
company reports the cumulative foreign currency translation adjustments, unrealized gains and losses on
debt securities and derivative contracts, adjustments related to recognition of minimum pension liabilities
and, starting in 2006, unrecognized net actuarial losses on such pension plans, as components of
F-11