Ingram Micro 2006 Annual Report Download - page 70

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New Accounting Standards
In September 2006, the SEC issued Staff Accounting Bulleting No. 108 “Considering the Effects of Prior Year
Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108
provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be
considered in quantifying a potential current year misstatement. SAB 108 requires that companies view financial
statement misstatements as material if either the current year impact of the misstatements or cumulative impact of
previous unadjusted misstatements is considered material to either the financial position or results of operations of
the Company in its current financial statements. The adoption of the provisions of SAB 108, effective as of
December 30, 2006, did not have a material impact on the Company’s consolidated financial position, results of
operations or cash flows.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about
fair value measurements. The Company is required to adopt the provisions of FAS 157 in the first quarter of 2008.
The Company is currently in the process of assessing what impact FAS 157 may have on its consolidated financial
position, results of operations or cash flows.
In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with
FASB Statement No. 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement
attribute for the financial statement treatment of a tax position taken or expected to be taken in a tax return. FIN 48
also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. The Company is required to adopt the provisions of FIN 48 effective at the beginning of
fiscal 2007, or December 31, 2006. The Company currently estimates that the adoption of FIN 48 will result in a
cumulative effect adjustment of $4,000 to reduce the Company’s consolidated retained earnings and to increase
reserves for uncertain tax positions. This estimate is subject to revision as management completes its analysis.
In March 2006, the Emerging Issues Task Force reached a consensus on Issue No. 06-03 “How Taxes Collected
from Customers and Remitted to Government Authorities Should Be Presented in the Income Statement (That Is,
Gross versus Net Presentation)” (“EITF No. 06-03”). The Company is required to adopt the provisions of EITF
No. 06-03 in the first quarter of 2007. The Company does not expect the provisions of EITF No. 06-03 to have a
material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 3 — Reorganization, Integration and Major-Program Costs
In 2005, the Company launched an outsourcing and optimization plan to improve operating efficiencies within
its North American region. The plan, which was substantially completed in 2005, included an outsourcing
arrangement that moved transaction-oriented service and support functions — including certain North America
positions in finance and shared services, customer service, vendor management and certain U.S. positions in
technical support and inside sales (excluding field sales and management positions) — to a leading global business
process outsource provider. As part of the plan, the Company also restructured and consolidated other job functions
within the North American region. Total costs of the actions, or major-program costs, incurred for the year ended
December 31, 2005 were $26,582, comprised of $9,649 of reorganization costs, primarily related to employee
termination benefits for workforce reductions for approximately 580 employees, as well as $16,933 of other costs
charged to selling, general and administrative (“SG&A”) expenses, primarily comprised of consulting and retention
expenses.
In connection with the November 2004 acquisition of all of the outstanding shares of Techpac Holdings
Limited, or Tech Pacific, one of Asia-Pacific’s largest technology distributors, the Company implemented a detailed
46
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)