Kodak 2001 Annual Report Download - page 45

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New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB or the
Board) issued Statement of Financial Accounting Standards (SFAS) No.
141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other
Intangible Assets,” collectively referred to as the “Standards,” which are
effective for the Company as of January 1, 2002, except as noted below.
SFAS No. 141 supercedes Accounting Principles Board Opinion (APB) No.
16, “Business Combinations.” The provisions of SFAS No. 141 (1) require
that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) provide specific criteria
for the initial recognition and measurement of intangible assets apart
from goodwill, and (3) require that unamortized negative goodwill be
written off immediately as an extraordinary gain instead of being
deferred and amortized. SFAS No. 141 also requires that, upon adoption
of SFAS No. 142, the Company reclassify the carrying amounts of certain
intangible assets into or out of goodwill, based on certain criteria. SFAS
No. 142 supercedes APB No. 17, “Intangible Assets,” and is effective for
fiscal years beginning after December 15, 2001. SFAS No. 142 primarily
addresses the accounting for goodwill and intangible assets subsequent
to their initial recognition. The provisions of SFAS No. 142 (1) prohibit the
amortization of goodwill and indefinite-lived intangible assets, (2)
require that goodwill and indefinite-lived intangible assets be tested
annually for impairment (and in interim periods if certain events occur
indicating that the carrying value of goodwill and/or indefinite-lived
intangible assets may be impaired), (3) require that reporting units be
identified for the purpose of assessing potential future impairments of
goodwill, and (4) remove the forty-year limitation on the amortization
period of intangible assets that have finite lives.
The Company will adopt the provisions of SFAS No. 142 in its first
quarter ended March 31, 2002. The Company is in the process of
preparing for its adoption of SFAS No. 142 and is making the
determinations as to its reporting units and the amounts
of goodwill, intangible assets, other assets, and liabilities allocated to
those reporting units. The Company will no longer record annual
amortization relating to its existing goodwill ($154 million for 2002, $131
million after tax). The Company is evaluating the useful lives assigned to
its intangible assets and does not anticipate any material changes to
such useful lives.
SFAS No. 142 requires that goodwill be tested annually for
impairment using a two-step process. The first step of the goodwill
impairment test is to test for a potential impairment. The second step
of the goodwill impairment test is to measure the amount of the
impairment loss. The Company expects to complete steps one and two
of the goodwill impairment test during the first quarter of 2002. The
Company does not believe that the results of these impairment test
steps will have a material impact on the Company’s consolidated
financial statements.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets to be held and used, to be disposed of other than by
sale and to be disposed of by sale. Although the Statement retains
certain of the provisions of SFAS No. 121, “Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” it
supercedes SFAS No. 121 and APB Opinion No. 30, “Reporting the Results
of Operations–Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions,” for the disposal of a segment of a business. SFAS No.
144 also amends Accounting Research Bulletin (ARB) No. 51,
“Consolidated Financial Statements,” to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary.
The Statement is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and interim periods within those
fiscal years, and will thus be adopted by the Company, as required, on
January 1, 2002. The adoption of SFAS No. 144 is not expected to have a
material impact on the Company’s consolidated financial statements.
The Emerging Issues Task Force (EITF) has issued EITF Issue No. 01-
09, “Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor’s Products).” The EITF provides
guidance with respect to the statement of earnings classification of and
the accounting for recognition and measurement of consideration given
by a vendor to a customer, which includes sales incentive offers labeled
as discounts, coupons, rebates and free product or services as well as
arrangements labeled as slotting fees, cooperative advertising and
buydowns. The guidance with respect to the appropriate statement of
earnings classification of the consideration given by a vendor to a
customer is effective for annual and interim periods beginning after
December 15, 2001. Upon adoption, financial statements for prior periods
presented for comparative purposes should be reclassified to comply with
the requirements under the EITF.
The guidance with respect to the accounting for recognition and
measurement of consideration given by a vendor to a customer is
effective for annual and interim periods beginning after December 15,
2001. The impact on the statement of earnings resulting from the
adoption of the EITF should be reported as a cumulative effect of a
change in accounting principle or applied prospectively to new sales
incentives offered on or after the effective date. The impact of the
guidance under EITF 01-09 on the Company’s financial statements has
not yet been determined.