Tyson Foods 2002 Annual Report Download - page 27

management’s
discussion
and analysis
p 25
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets” (SFAS142). Under SFAS 142, goodwill and indefinite lived intangible assets are no longer
amortized but are reviewed annually or more frequently if impairment indicators arise, for impairment. Separable intangible assets
that have finite lives will continue to be amortized over their useful lives. The Company elected to early adopt the provisions of
SFAS142 and discontinued the amortization of its goodwill balances and intangible assets with indefinite useful lives effective
September 30, 2001. The Company assessed its goodwill for impairment upon adoption, and completed its required annual test
for impairment in the fourth quarter of fiscal 2002. Neither impairment test indicated any impairment losses. Had the provisions
of SFAS142 been in effect during fiscal years 2001 and 2000, a reduction in amortization expense and an increase to net income
of $30 million or $0.14 per diluted share and $29 million or $0.13 per diluted share respectively, would have been recorded.
In accordance with the guidance provided in Emerging Issues Task Force (EITF) Issue No. 00-14, “Accounting for Certain Sales
Incentives,” and EITF Issue No. 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the
Vendor’s Products,” beginning in the first quarter of fiscal 2002, the Company classifies the costs associated with sales incentives
provided to retailers and payments such as slotting fees and cooperative advertising to vendors as a reduction in sales. These costs
were previously included in selling, general and administrative expense. These reclassifications resulted in a reduction to sales and
selling, general and administrative expense of approximately $188 million and $142 million for fiscal years 2001 and 2000, respectively,
and had no impact on reported income before income taxes and minority interest, net income or earnings per share amounts.
In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This statement requires the
Company to recognize the fair value of a liability associated with the cost the Company would be obligated to incur in order
to retire an asset at some point in the future. The liability would be recognized in the period in which it is incurred and can be
reasonably estimated. The standard is effective for fiscal years beginning after June 15, 2002. The Company expects to adopt this
standard at the beginning of its fiscal 2003. The Company believes the adoption of SFAS No.143 will not have a material impact
on its financial position or results of operations.
In October 2001, the FASB issued SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144
develops an accounting model, based upon the framework established in SFAS No.121, for long-lived assets to be disposed by sales.
The accounting model applies to all long-lived assets, including discontinued operations, and it replaces the provisions of ABP Opinion
No. 30, “Reporting Results of Operations –Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions,” for disposal of segments of a business. SFAS No.144 requires long-lived assets held
for disposal to be measured at the lower of carrying amount or fair values less costs to sell, whether reported in continuing operations
or in discontinued operations. The statement is effective for fiscal years beginning after December 15, 2001. The Company intends
to adopt this standard at the beginning of its fiscal 2003. The Company believes the adoption of SFAS No.144 will not have a material
impact on its financial position or results of operations.
In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or disposal activities and replaces EITF Issue No. 94-3,
“Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring).” SFAS No.146 requres that a liability for a cost associated with an exit or disposal activity be recognized when
the liability is incurred. SFAS No.146 also establishes that fair value is the objective for initial measurement of the liability. The statement
is effective for exit or disposal activities initiated after December 31, 2002. The Company believes the adoption of SFAS No. 146 will
not have a material impact on its financial position or results of operations.
Critical Accounting Estimates
The preparation of consolidated financial statements requires management to make estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of certain accounting estimates considered critical by the Company.
Tyson Foods, Inc. 2002 annual report