Kraft 2009 Annual Report Download - page 69

component of the change in other current assets within the net cash provided by operating activities section of the consolidated statement of cash
flows.
In July 2006, new guidance was issued which addressed accounting for the uncertainty in income taxes. We adopted the guidance effective
January 1, 2007. The guidance clarified when tax benefits should be recorded in the financial statements and provided measurement criteria for
valuing such benefits. In order for us to recognize benefits, our tax position must be more likely than not to be sustained upon audit. The amount
we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Before
the implementation of the guidance, we established additional provisions for certain positions that were likely to be challenged even though we
believe that those existing tax positions were fully supportable. The adoption of this guidance resulted in an increase to equity as of January 1,
2007 of $213 million.
We recognize deferred tax assets for deductible temporary differences, operating loss carryforwards and tax credit carryforwards. Deferred tax
assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
Reclassification:
In 2009, we separately disclosed other non-cash expense, net within the net cash provided by operating activities section of the consolidated
statement of cash flows and made conforming changes to the presentation in prior years. This change did not have an impact on cash provided by
operating activities for any of the periods presented. In 2009, we also changed our cost assignment methodology for headquarter functional costs
across our operating structure. As a result, we reclassified $188 million in 2008 and $83 million in 2007 from marketing, administration and
research costs to cost of sales. This change did not have an impact on net earnings for any of the periods presented.
New Accounting Pronouncements:
In September 2006, new guidance was issued on fair value measurements. The guidance defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. The effective date of the guidance for items recognized or
disclosed at fair value on an annual or more frequently recurring basis was January 1, 2008. The effective date of the guidance for all other
nonfinancial assets and liabilities was January 1, 2009. As such, we partially adopted the guidance effective January 1, 2008. The partial adoption
of this guidance did not have a material impact on our financial statements. We adopted the remaining provisions effective January 1, 2009. This
adoption affects the way that we calculate fair value for our annual impairment review of goodwill and non-amortizable intangible assets, and when
conditions exist that require us to calculate the fair value of long-lived assets; however, this adoption did not have a material impact on our
financial statements.
In December 2007, new guidance was issued on business combinations. We adopted the guidance effective January 1, 2009. The guidance
requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose all
information needed by investors to understand the nature and financial effect of the business combination. The adoption of this guidance did not
have a material impact on our financial statements.
In December 2007, new guidance was also issued on noncontrolling interests in consolidated financial statements. We adopted the guidance
effective January 1, 2009. The guidance requires us to classify noncontrolling interests in subsidiaries as a separate component of equity instead
of within other liabilities. Additionally, transactions between an entity and noncontrolling interests must be treated as equity transactions.
Therefore, they no longer are removed from net income, but rather are accounted for as equity. The adoption of this guidance did not have a
material impact on our financial statements.
In June 2008, new guidance was issued to assist in determining whether instruments granted in share-based payment transactions are
participating securities. We adopted the guidance effective January 1, 2009. The guidance considers unvested share-based payment awards with
the right to receive nonforfeitable dividends, or their equivalents, participating securities that should be included in the calculation of EPS under the
two-class method. Accordingly, our restricted and deferred stock awards are now considered participating units in our calculation of EPS. The
adoption of this guidance did not have a material impact on our financial statements.
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠