United Technologies 2008 Annual Report Download - page 63

noncontrolling interest will be included in consolidated net income on the face of the income
statement. It also amends certain of ARB No. 51’s consolidation procedures for consistency
with the requirements of SFAS 141(R). This statement also includes expanded disclosure
requirements regarding the interests of the parent and its noncontrolling interest. We have
evaluated this new statement and have determined that the statement will not have a significant
impact on the reporting of our financial position and results of operations.
In December 2007, the EITF issued Issue No. 07-1, “Accounting for Collaborative
Arrangements.” This Issue is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years, and shall be applied
retrospectively to all prior periods presented for all collaborative arrangements existing as of
the effective date. This Issue requires that transactions with third parties (i.e., revenue
generated and costs incurred by the partners) should be reported in the appropriate line item
in each company’s financial statement pursuant to the guidance in EITF Issue No. 99-19,
“Reporting Revenue Gross as a Principal versus Net as an Agent.” This Issue also includes
enhanced disclosure requirements regarding the nature and purpose of the arrangement, rights
and obligations under the arrangement, accounting policy, amount and income statement
classification of collaboration transactions between the parties. The collaborator share of
revenue was approximately $1.1 billion, $.9 billion and $.8 billion for 2008, 2007 and 2006,
respectively. Costs associated with engine programs under collaboration agreements are
expensed as incurred. Under this Issue, revenues would be increased by these amounts with an
offsetting increase to cost of sales in order to reflect the impact of the collaboration
arrangements on a gross basis.
In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157,”
which delays the effective date of SFAS No. 157, “Fair Value Measurements,” (SFAS 157) for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis, with the exception of the application
of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. This FSP
defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 and
interim periods within those fiscal years for items within the scope of this FSP. Refer to Note 14
to the Consolidated Financial Statements for additional discussion on fair value measurements.
We have evaluated this new FSP and have determined that it will not have a significant impact
on the determination or reporting of our financial results.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is
intended to improve transparency in financial reporting by requiring enhanced disclosures of
an entity’s derivative instruments and hedging activities and their effects on the entity’s
financial position, financial performance, and cash flows. SFAS 161 applies to all derivative
instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and
Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and
nonderivative instruments that are designated and qualify as hedging instruments. Entities
with instruments subject to SFAS 161 must provide more robust qualitative disclosures and
expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008, with early
application permitted. We are currently evaluating the disclosure implications of this
statement; however, the new statement will not have an impact on the determination of our
financial results.
In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
Intangible Assets.” This FSP amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a recognized intangible
asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). The objective
of this FSP is to improve the consistency between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows used to measure the fair value of the
asset under SFAS 141(R), and other principles of GAAP. This FSP applies to all intangible
assets, whether acquired in a business combination or otherwise, and shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years and applied prospectively to intangible assets acquired after
the effective date. Early adoption is prohibited. We have evaluated this new FSP and have
determined that it will not have a significant impact on the determination or reporting of our
financial results.
In November 2008, the EITF issued Issue No. 08-6, “Equity Method Investment Accounting
Considerations.” This Issue is effective on a prospective basis in fiscal years beginning on or
after December 15, 2008, and interim periods within those fiscal years, consistent with the
effective dates of SFAS 141(R) and SFAS 160. Earlier application by an entity that has
previously adopted an alternative accounting policy is not permitted. This Issue addresses the
impact that SFAS 141(R) and SFAS 160 might have on the accounting for equity method
investments, including how the initial carrying value of an equity method investment should
be determined, how it should be tested for impairment, and how changes in classification from
equity method to cost method should be treated. We are currently evaluating this new Issue
and anticipate that it will not have a significant impact on the reporting of our results of
operations.
In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets.” This FSP amends SFAS No. 132 (revised 2003),
“Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide
guidance on an employer’s disclosures about plan assets of a defined benefit pension or other
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