Honeywell 2011 Annual Report Download - page 66

result, these program receivables are not accounted for as a sale and remain on the Consolidated Balance Sheet with a corresponding amount recorded as
either Short-term borrowings or Long-term debt.
At times we also transfer trade and other receivables that qualify as a sale and are thus are removed from the Consolidated Balance Sheet at the time
they are sold. The value assigned to any subordinated interests and undivided interests retained in receivables sold is based on the relative fair values of the
interests retained and sold. The carrying value of the retained interests approximates fair value due to the short-term nature of the collection period for the
receivables.
Income Taxes—Deferred tax liabilities or assets reflect temporary differences between amounts of assets and liabilities for financial and tax reporting.
Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation
allowance is established to offset any deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized. The determination of the amount of a valuation allowance to be provided on recorded deferred tax assets involves estimates
regarding (1) the timing and amount of the reversal of taxable temporary differences, (2) expected future taxable income, and (3) the impact of tax planning
strategies. In assessing the need for a valuation allowance, we consider all available positive and negative evidence, including past operating results,
projections of future taxable income and the feasibility of ongoing tax planning strategies. The projections of future taxable income include a number of
estimates and assumptions regarding our volume, pricing and costs. Additionally, valuation allowances related to deferred tax assets can be impacted by
changes to tax laws.
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish additional reserves for income taxes
when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The
approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance and this guidance determines when a tax position is more
likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the tax filings of the Company and its
subsidiaries are examined by various Federal, State and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any
future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and
amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise
to a revision become known.
Earnings Per Share—Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is
based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.
Use of Estimates—The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts in the financial statements and related disclosures in the accompanying
notes. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the
consolidated financial statements in the period they are determined to be necessary.
Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements—Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are
established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU's) to the FASB's Accounting Standards
Codification.
The Company considers the applicability and impact of all ASU's. ASU's not listed below were assessed and determined to be either not applicable or
are expected to have minimal impact on our consolidated financial position and results of operations.
In May 2011, the FASB issued amendments to disclosure requirements for common fair value measurement. These amendments, effective for the
interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in common definition of fair value and common
requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value
measurement principles and disclosure requirements. The implementation of this amended accounting guidance is not expected to have a material impact on
our consolidated financial position and results of operations.
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