Union Pacific 2006 Annual Report Download - page 75

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12. Accounting Pronouncements
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation
of FASB Statement No. 109 (FIN 48). Under FIN 48, we will recognize tax benefits only for tax positions that are
more likely than not to be sustained upon examination by tax authorities. The amount recognized will be
measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate
settlement. The interpretation is effective for us beginning in the first quarter of 2007. The cumulative effect of
adopting FIN 48 will be a one-time reduction in the January 1, 2007 balance of retained earnings. Future changes
in uncertain tax positions will be included in income tax expense. We do not expect that the cumulative effect of
adopting FIN 48 will have a material impact on our Consolidated Financial Statements.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurement (FAS 157). While this
statement does not require new fair value measurements, it provides guidance on applying fair value and expands
required disclosures. FAS 157 is effective for us beginning in the first quarter of 2008. We are currently assessing
the impact FAS 157 may have on our Consolidated Financial Statements.
In September 2006, the FASB issued FAS 158. FAS 158 required us to recognize the funded status of our
pension and postretirement plans in the balance sheet, along with a corresponding noncash, after-tax adjustment
to shareholders’ equity. Funded status is determined as the difference between the fair value of plan assets and the
benefit obligation. Changes in the funded status will be recognized in other comprehensive loss. We adopted FAS
158 at the end of 2006 and have disclosed the impact of the adoption in note 7.
In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108), which provides interpretive guidance on how the effects of prior-year
uncorrected misstatements should be considered when quantifying misstatements in the current-year financial
statements. SAB 108 requires registrants to quantify misstatements using both an income statement and balance
sheet approach and then evaluate whether either approach results in a misstatement that, when all relevant
quantitative and qualitative factors are considered, is material. If prior-year errors that had been previously
considered immaterial are now considered material based on either approach, no restatement is required so long
as management properly applied its previous approach and all relevant facts and circumstances were considered.
If prior-year’s financial statements are not restated, the cumulative effect adjustment is recorded in opening
accumulated earnings (deficit) as of the beginning of the fiscal year of adoption. SAB 108 was effective for us at
the end of 2006. The adoption of SAB 108 did not have any impact on our Consolidated Financial Statements.
In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (FAS 159).This statement, which is expected to expand fair value measurement, permits
entities to choose to measure many financial instruments and certain other items at fair value. FAS 159 is effective
for us beginning in the first quarter of 2008. We are currently assessing the impact FAS 159 may have on our
Consolidated Financial Statements.
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