Ingram Micro 2008 Annual Report Download - page 64

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in which it operates and prudent and feasible tax planning strategies. If, based upon available evidence, recovery of
the full amount of the deferred tax assets is not likely, the Company provides a valuation allowance on any amount
not likely to be realized. The Company’s effective tax rate includes the impact of not providing U.S. taxes on
undistributed foreign earnings considered indefinitely reinvested. Material changes in the Company’s estimates of
cash, working capital and long-term investment requirements in the various jurisdictions in which it does business
could impact the Company’s effective tax rate.
The provision for tax liabilities and recognition of tax benefits involves evaluations and judgments of
uncertainties in the interpretation of complex tax regulations by various taxing authorities. In situations involving
uncertain tax positions related to income tax matters, the Company does not recognize benefits unless it is more
likely than not that they will be sustained. As additional information becomes available, or these uncertainties are
resolved with the taxing authorities, revisions to these liabilities or benefits may be required, resulting in additional
provision for or benefit from income taxes reflected in the Company’s consolidated statement of income.
Accounting for Stock-Based Compensation
The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options. Stock-
based compensation expense is recorded for all stock options, restricted stock and restricted stock units that are
ultimately expected to vest as the requisite service is rendered. The Company recognizes these compensation costs,
net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award, which is the
vesting term of outstanding stock-based awards. The Company estimates the forfeiture rate based on its historical
experience during the preceding five fiscal years.
New Accounting Standards
In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB
Statement No. 133” (“FAS 161”). FAS 161 requires enhanced disclosures about an entity’s derivative and hedging
activities. Under FAS 161, entities are required to provide enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance, and cash flows. FAS 161 became effective for the Company
beginning January 4, 2009 (the first day of fiscal 2009). Early adoption is encouraged. FAS 161 also encourages, but
does not require, comparative disclosures for earlier periods at initial adoption. The Company does not expect the
provisions of FAS 161 to have a material impact on the Company’s disclosures in its consolidated financial
statements.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 141(R), “Business Combinations” (“FAS 141R”). FAS 141R supersedes Statement of Financial
Accounting Standards No. 141, “Business Combinations,” and establishes principles and requirements as to how an
acquirer in a business combination recognizes and measures in its financial statements: the identifiable assets
acquired, the liabilities assumed and any controlling interest; the goodwill acquired in the business combination; or
a gain from a bargain purchase. FAS 141R also requires the acquirer to record contingent consideration at the
estimated fair value at the time of purchase and establishes principles for treating subsequent changes in such
estimates which could affect earnings in those periods. This statement also calls for additional disclosure regarding
the nature and financial effects of the business combination. FAS 141R is to be applied prospectively by the
Company to business combinations completed after January 4, 2009 (the first day of fiscal 2009). Early adoption is
prohibited. The Company will comply with the requirements of FAS 141R if and when future acquisitions occur.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB
No. 51” (“FAS 160”). FAS 160 establishes new accounting and reporting standards for the noncontrolling interest in
54
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)