Medtronic 2009 Annual Report Download - page 63

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Medtronic, Inc.
component (issued at a discount) and an equity component.
The resulting debt discount is amortized over the period the
convertible debt is expected to be outstanding as additional
non-cash interest expense. The change in accounting treatment
is effective for the Company beginning in fiscal year 2010, and will
be applied retrospectively to prior periods. FSP APB 14-1 changes
the accounting treatment for the Company’s $2.200 billion
of 1.500 percent and $2.200 billion of 1.625 percent Senior
Convertible Notes due in 2011 and 2013, respectively, which were
issued in April 2006, and the $15 million remaining balance of the
Company’s Contingent Convertible Debentures due 2021. Based
on the Company’s evaluation, upon adoption of FSP APB 14-1 in
fiscal year 2010, the convertible debt liability will decrease by
approximately $520 million and 2009 and 2010 interest expense
for the convertible debt will increase by approximately $154
million and $167 million, respectively. Using diluted weighted
average shares outstanding for the twelve months ended April
24, 2009, the impact to diluted earnings per share is a decrease
of $0.09 for fiscal year 2009. Using an estimate of diluted
weighted average shares outstanding, the Company estimates
the impact to diluted earnings per share is a decrease of $0.10
for fiscal year 2010.
In June 2008, the FASB issued FSP Emerging Issues Task Force
(EITF) Issue No. 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities”
(FSP EITF No. 03-6-1). FSP EITF No. 03-6-1 provides that unvested
share-based payment awards that contain nonforfeitable rights
to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation
of EPS pursuant to the two-class method. FSP EITF No. 03-6-1 is
effective for the Company beginning in the first quarter of fiscal
year 2010. Upon adoption, all prior-period EPS data is required to
be adjusted retrospectively (including interim financial statements,
summaries of earnings and selected financial data) to conform
with the provisions of FSP EITF No. 03-6-1. The Company calculated
that FSP EITF No. 03-6-1 will not have a material impact to diluted
earnings per share for the fiscal year ended April 24, 2009.
In November 2008, the FASB ratified EITF Issue No. 08-6, “Equity
Method Investment Accounting Considerations” (EITF No. 08-6).
EITF No. 08-6 applies to all investments accounted for under
the equity method and clarifies the accounting for certain
transactions and impairment considerations involving equity
method investments. EITF No. 08-6 is effective for the Company
beginning in the first quarter of fiscal year 2010. The adoption of
EITF No. 08-6 will not be material to the consolidated financial
statements.
In November 2008, the FASB ratified EITF Issue No. 08-7,
“Accounting for Defensive Intangible Assets” (EITF No. 08-7). EITF
No. 08-7 applies to defensive intangible assets, which are acquired
intangible assets that an entity does not intend to actively use
but does intend to prevent others from obtaining access to the
asset. EITF No. 08-7 requires an entity to account for defensive
intangible assets as a separate unit of accounting. Defensive
intangible assets should not be included as part of the cost of an
entity’s existing intangible assets because the defensive intangible
assets are separately identifiable. Defensive intangible assets must
be recognized at fair value in accordance with SFAS No. 141(R)
and SFAS No. 157. EITF No. 08-7 is effective for intangible assets
acquired by the Company beginning in the first quarter of fiscal
year 2010. The adoption of EITF No. 08-7 is not expected to be
material to the consolidated financial statements.
In December 2008, the FASB issued FSP SFAS No. 132(R)-1,
“Employers’ Disclosures About Postretirement Benefit Plan Assets”
(FSP SFAS No. 132(R)-1). FSP SFAS No. 132(R)-1 requires increased
disclosures about an entity’s postretirement benefit plan assets.
Specifically, FSP SFAS No. 132(R)-1 requires an entity to disclose
information regarding its investment policies and strategies, its
categories of plan assets, its fair value measurements of plan
assets and any significant concentrations of risk in plan assets. FSP
SFAS No. 132(R)-1 is effective for the Company beginning in the
first quarter of fiscal year 2010 but only requires the revised
disclosures on a prospective basis. The Company will provide the
additional disclosures necessary to the consolidated financial
statements beginning in the Company’s fourth quarter of fiscal
year 2010.
In April 2009, the FASB issued FSP SFAS No. 141(R)-1, “Accounting
for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies” (FSP SFAS No.
141(R)-1). FSP SFAS No. 141(R)-1 amends and clarifies the initial
recognition and measurement, subsequent measurement and
accounting and disclosure of assets and liabilities arising from
contingencies in a business combination under SFAS No. 141(R).
FSP SFAS No. 141(R)-1 is effective for the Company beginning
fiscal year 2010 and must be applied to assets and liabilities
arising from contingencies in business combinations for which
the acquisition date is on or after April 25, 2009. The adoption of
FSP SFAS No. 141(R)-1 will not be material to the consolidated
financial statements.