U-Haul 2007 Annual Report Download - page 80

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AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Adoption of New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS 158, Employers’ Accounting for
Defined Benefit Pension and Other Post Retirement Plans – an amendment of SFAS 87, 88, 106 and 132(R), which requires
companies to recognize a net liability or asset to report the over-funded or under-funded status of their defined benefit
pension and other postretirement benefit plans on their balance sheets and recognize changes in funded status in the year in
which the changes occur through other comprehensive income. The funded status to be measured is the difference between
plan assets at fair value and the benefit obligation. This Statement requires that gains and losses and prior service costs or
credits, net of tax, that arise during the period be recognized as a component of other comprehensive income and not as
components of net periodic benefit cost.
We adopted the balance sheet provisions of SFAS 158, as required, at March 31, 2007. As a result the Company
recorded after tax unrecognized losses of $0.2 million to accumulated other comprehensive income in fiscal 2007. As
discussed in Note 14 “Employee Benefit Plans” to the “Notes to Consolidated Financial Statements”, the Company
previously used December 31 as the measurement date to measure the assets and obligations of its post retirement and post
employment benefits plans. SFAS 158 requires the Company to perform the measurements at year end. The portion of the
net periodic cost associated with the three month measurement lag was $0.1 million, after tax. This was recorded as an
adjustment to retained earnings in fiscal 2007.
In September 2006, the SEC issued Staff Accounting Bulletin (SAB) 108 “Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements”, which provides interpretive guidance on how the effects of prior
year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements.
There was diversity in practice, with the two commonly used methods to quantify misstatements being the “rollover”
method (which primarily focuses on the income statement impact of misstatements) and the “iron curtain” method (which
focuses on the cumulative amount by which the current year balance sheet is misstated and may not prevent significant
misstatements in the income statement). SAB 108 requires registrants to use a dual approach whereby both of these
methods are considered in evaluating the materiality of financial statement errors. Prior materiality assessments will need to
be reconsidered using both the rollover and iron curtain methods.
Effective March 31, 2007 the Company adopted SAB 108 and recorded a correction in the fourth quarter of fiscal 2007
related to prepaid expenses on leased equipment. In analyzing this error we determined that it was not material to our
statement of earnings in any single quarter or annual period; however, the cumulative adjustment necessary would have
been material in the current period. In accordance with SAB 108, the Company adjusted its beginning retained earnings
balance for fiscal 2007 and its financial results for the first three quarters of fiscal 2007 for this adjustment. The Company
determined that the adjustment would not be material in any specific period and therefore did not restate historical financial
statements.
The error was related to rental equipment originally leased during periods between fiscal 2000 and fiscal 2002. The
rental equipment was sold to the lessor at less than its book value and then subsequently leased back to the Company via an
operating lease. The difference between the sales price to the lessor and the book value prior to the sale was deferred and
amortized over the life of the equipment. Per SFAS 28 the amortization period should have been over the term of the lease.
The Company quantified the error and in fiscal 2007 changed its accounting treatment for prepaid expenses on sales -
leaseback vehicle transactions to ensure that all new instances would be accounted for properly.
F-15