Lockheed Martin 2008 Annual Report Download - page 79

and adoption did not have a material impact on our results of operations, financial position, cash flows, or financial statement
disclosures.
In October 2008, the FASB issued FSP 157-3, Determining the Fair Value of a Financial Asset in a Market that is Not
Active. FSP 157-3 clarifies the application of FAS 157 in an inactive market. The provisions of FSP 157-3 are effective
immediately and adoption did not have a material impact on our results of operations, financial position or cash flows.
We adopted FAS 157, Fair Value Measurements, effective January 1, 2008, as it relates to financial assets and liabilities
(see Note 15). FAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value and
expands disclosures about fair value measurements. FAS 157 is applicable whenever another accounting pronouncement
requires or permits assets and liabilities to be measured at fair value, but does not require any new fair value measurements.
The partial adoption of FAS 157 did not have a material impact on our results of operations, financial position or cash flows.
The FAS 157 requirements for certain non-financial assets and liabilities have been deferred until the first quarter of 2009 in
accordance with FASB FSP 157-2, Effective Date of FASB Statement No. 157. We do not expect the adoption of FAS 157 as
it relates to certain non-financial assets and liabilities will have a material impact on our results of operations, financial
position or cash flows.
We adopted FASB Interpretation Number (FIN) 48, Accounting for Uncertainty in Income Taxes, effective January 1,
2007 (see Note 8). FIN 48 clarifies and sets forth consistent rules for accounting for uncertain income tax positions in
accordance with FAS 109, Accounting for Income Taxes. The cumulative effect of applying the provisions of this
interpretation was a $31 million noncash increase to our opening balance of retained earnings in 2007.
Effective December 31, 2006, we adopted FAS 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R), which requires plan sponsors of
defined benefit pension and other postretirement benefit plans to recognize the funded status of their postretirement benefit
plans on the Balance Sheet, measure the fair value of plan assets and benefit obligations as of the Balance Sheet date, and
provide additional disclosures (see Note 10). The effect of adopting the statement on our financial condition at December 31,
2006 has been reflected in these financial statements. The statement’s provisions regarding the change in the measurement
date of postretirement benefit plans are not applicable to us since we already use a measurement date of December 31 for our
plans.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities, which will be effective beginning with our first quarter 2009 financial reporting.
The FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per
share pursuant to the two-class method. Upon adoption, retrospective adjustment to earnings per share data (including any
amounts related to interim periods, summaries of earnings, and selected financial data) is required to conform to the
provisions of the FSP. We do not expect the adoption of the FSP will have a material impact on our results or operations,
financial position or cash flows.
In May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement), which will be effective beginning with our first quarter 2009
financial reporting. The FSP requires retrospective application to all periods presented and does not grandfather existing debt
instruments. The FSP changes the accounting for our previously outstanding $1.0 billion in original principal amount of
floating rate convertible debentures in that it requires that we bifurcate the proceeds from the debt issuance between a debt
and equity component as of the August 2003 issuance date and through the August 2008 date that they were converted or
redeemed. The equity component would reflect the value of the conversion feature of the debentures. We do not plan to
adopt the provisions of the new rule relative to the floating rate convertible debentures we redeemed in August 2008, as the
impact on our previously reported financial statements is not material.
In March 2008, the FASB issued FAS 161, Disclosures about Derivative Instruments and Hedging Activities – an
amendment of FASB Statement No. 133, which requires enhanced qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective beginning with our
first quarter 2009 financial reporting. We do not expect the adoption of FAS 161 will have a material impact on our results of
operations, financial position or cash flows.
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