PACCAR 2009 Annual Report Download - page 48

PACCAR Inc and Subsidiaries
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Long-lived Assets, Goodwill and Other Intangible Assets: The Company evaluates the carrying value of long-lived
assets (including property and equipment, goodwill and other intangible assets) when events and circumstances
warrant such a review. Goodwill is tested for impairment on an annual basis. Impairment charges were insignificant
during the three years ended December 31, 2009.
Revenue Recognition: Substantially all sales and revenues of trucks and related aftermarket parts are recorded by the
Company when products are shipped to dealers or customers, except for certain truck shipments that are subject to
a residual value guarantee to the customer. Revenues related to these shipments are recognized on a straight-line
basis over the guarantee period (see Note F). At the time certain truck and parts sales to a dealer are recognized, the
Company records an estimate of the future sales incentive costs related to such sales. The estimate is based on
historical data and announced incentive programs.
Interest income from finance and other receivables is recognized using the interest method. Certain loan origination
costs are deferred and amortized to interest income over the expected life of the contracts, generally three to six
years, using the straight line method which approximates the interest method. For operating leases, rental revenue is
recognized on a straight-line basis over the lease term. Recognition of interest income and rental revenue is
suspended when management determines that collection is not probable (generally after 90 days past the
contractual due date). Recognition is resumed if the receivable becomes contractually current and the collection of
amounts is again considered probable. Payments received while the loan is in non-accrual status are applied to
interest and principal amounts in accordance with the contractual terms.
Foreign Currency Translation: For most of PACCAR’s foreign subsidiaries, the local currency is the functional
currency. All assets and liabilities are translated at year-end exchange rates and all income statement amounts are
translated at the weighted average rates for the period. Translation adjustments are recorded in accumulated other
comprehensive income (loss), a component of stockholders’ equity. PACCAR uses the U.S. dollar as the functional
currency for its Mexican subsidiaries. Accordingly, inventories, cost of sales, property, plant and equipment, and
depreciation are remeasured at historical rates and resulting adjustments are included in net income.
Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average
number of commons shares outstanding, plus the effect of any participating securities. Diluted earnings per
common share are computed assuming that all potentially dilutive securities are converted into common shares
under the treasury stock method. The dilutive and antidilutive options are shown separately in the table below.
Year Ended December 31, 2009 2008 2007
Additional shares 1,103,600 1,721,300 2,206,800
Antidilutive options 2,290,400 1,397,800
New Accounting Pronouncements: The Company adopted Statement No. 161, Disclosures about Derivative Instruments
and Hedging Activities (FAS 161) effective January 1, 2009. FAS 161 amends and expands the disclosure requirements
for derivative instruments and hedging activities. Accordingly, the Company’s disclosure in Note P has been updated
to comply with this standard.
The Company adopted Statement No. 165, Subsequent Events effective July 1, 2009, with no significant effect on the
financial statements.
The Company adopted FASB Staff Position FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan
Assets effective for the year ended December 31, 2009. FSP FAS 132(R)-1 requires additional disclosures relating to
investment of plan assets. Accordingly, the Company’s disclosure in Note M has been updated to comply with this
standard.
Subsequent Events: The Company has evaluated subsequent events through the date the financial statements were
issued on February 26, 2010.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007 (currencies in millions)