Freeport-McMoRan 2008 Annual Report Download - page 76

Notes to Consolidated Financial Statements
74 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report
FCX’s convertible instruments are excluded from the computation
of diluted net (loss) income per share of common stock when
including the conversion of these instruments results in an
anti-dilutive effect on earnings per share (see footnotes a and b in
the table above). Outstanding stock options with exercise prices
greater than the average market price of FCX’s common stock
during the period are excluded from the computation of diluted
net (loss) income per share of common stock. There were
approximately two million stock options with a weighted-average
exercise price of $69.89 excluded in 2008, none in 2007 and
approximately one million stock options with a weighted-average
exercise price of $63.77 in 2006.
New Accounting Standards. Fair Value Measurements. In
September 2006, FASB issued SFAS No. 157, “Fair Value
Measurements,” which provides enhanced guidance for using
fair value to measure assets and liabilities. SFAS No. 157 does not
require any new fair value measurements under U.S. generally
accepted accounting principles (GAAP); rather this statement
establishes a common definition of fair value, provides a
framework for measuring fair value under U.S. GAAP and
expands disclosure requirements about fair value measurements.
In February 2008, FASB issued FASB Staff Position (FSP) No. FAS
157-2, which delays the effective date of SFAS No. 157 for
nonfinancial assets or liabilities that are not required or permitted
to be measured at fair value on a recurring basis to fiscal years
beginning after November 15, 2008, and interim periods within
those years. FCX adopted SFAS No. 157 for financial assets and
liabilities recognized at fair value on a recurring basis effective
January 1, 2008. This partial adoption of SFAS No. 157 did not
have a material impact on our financial reporting and disclosures
as FCX’s financial assets are measured using quoted market
prices, or Level 1 inputs. FCX is currently evaluating the impact
that the adoption of SFAS No. 157 will have on its financial
reporting for nonfinancial assets or liabilities not valued on a
recurring basis (at least annually).
Fair Value Option for Financial Assets and Liabilities. In February
2007, FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities – Including an amendment of
FASB No. 115,” which permits entities to choose to measure
many financial instruments and certain other items at fair value
that are not currently required to be measured at fair value. FCX
adopted SFAS No. 159 effective January 1, 2008, and FCX did
not measure any additional financial instruments at fair value
that are not required to be measured at fair value.
Business Combinations. In December 2007, FASB issued SFAS
No. 141 (revised 2007), “Business Combinations” (SFAS No.
141R). Under SFAS No. 141R, all business combinations will be
accounted for under the acquisition method, and the new
standard makes certain other changes to the accounting for
business combinations, of which the most significant are as
follows: (i) whether all or a partial interest is acquired, the
acquirer will recognize the full value of assets acquired, liabilities
assumed and noncontrolling interests; (ii) direct costs of a
business combination will be charged to expense if they are
not associated with issuing debt or equity securities; (iii) any
contingent consideration will be recognized and measured at fair
value on the acquisition date, with subsequent changes to the
fair value recognized in earnings; and (iv) equity issued in
consideration for a business combination will be measured at
fair value as of the acquisition date. SFAS No. 141R applies
prospectively to business combinations for which the acquisition
date is on or after fiscal years beginning after December 15, 2008.
Early adoption is prohibited.
Noncontrolling Interests in Consolidated Financial Statements.
In December 2007, FASB issued SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements – an amendment
of ARB No. 51,” which clarifies that noncontrolling interests
(minority interests) are to be treated as a separate component
of equity and any changes in the ownership interest (in which
control is retained) are to be accounted for as capital transactions.
However, a change in ownership of a consolidated subsidiary
that results in a loss of control is considered a significant event
that triggers gain or loss recognition, with the establishment of a
new fair value basis in any remaining ownership interests. SFAS
No. 160 also provides additional disclosure requirements for each
reporting period. SFAS No. 160 applies to fiscal years beginning
on or after December 15, 2008, with early adoption prohibited.
This statement is required to be adopted prospectively, except
for the following provisions, which are expected to be applied
retrospectively: (i) the reclassification of noncontrolling interests
to equity in the consolidated balance sheets and (ii) the
adjustment to consolidated net income to include net income
attributable to both the controlling and noncontrolling interests.
Disclosures about Derivative Instruments and Hedging Activities.
In March 2008, FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities – an amendment
of FASB Statement No. 133.” SFAS No. 161 amends the disclosure
requirements for derivative instruments and hedging activities
contained in SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” Under SFAS No. 161,
entities are required to provide enhanced disclosures about
(i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedged items are accounted
for under SFAS No. 133 and related interpretations and (iii) how
derivative instruments and related hedged items affect an
entity’s financial position, financial performance and cash flows.
SFAS No. 161 is effective for fiscal years and interim periods
beginning after November 15, 2008, with early application
encouraged. SFAS No. 161 encourages, but does not require
disclosure for earlier periods presented for comparative purposes
at initial adoption. FCX adopted SFAS No. 161 for the year ended
December 31, 2008.