3M 2010 Annual Report Download - page 60

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In November 2008, the FASB ratified an accounting standard related to intangible assets acquired in a business
combination or asset acquisition that an entity does not intend to use or intends to hold to prevent others from
obtaining access (a defensive intangible asset). Under the standard a defensive intangible asset needs to be
accounted for as a separate unit of accounting and would be assigned a useful life based on the period over which
the asset diminishes in value. For 3M, the standard was effective for transactions occurring after December 31, 2008.
The Company considered this standard in terms of intangible assets acquired in business combinations or asset
acquisitions that closed after December 31, 2008.
In April 2009, the FASB issued three accounting standards which (1) provide guidance on estimating the fair value of
an asset or liability when the volume and level of activity for the asset or liability have significantly declined and
identifying transactions that are not orderly, (2) modify the requirements for recognizing other-than-temporarily
impaired debt securities and change the impairment model for such securities, and (3) add additional disclosure
requirements with respect to fair value measurements including disclosures in interim periods. For 3M, these
standards were effective beginning April 1, 2009. The Company discloses the additional required information. The
other aspects of these standards did not have a material impact on 3M’s consolidated results of operations or
financial condition.
In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending
the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose
entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to
be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a
sale, and require significant additional disclosure. For 3M, this standard was effective for new transfers of financial
assets beginning January 1, 2010. Because 3M does not have significant transfers of financial assets, the adoption
of this standard did not have a material impact on 3M’s consolidated results of operations or financial condition.
In June 2009, the FASB issued a new standard that revises the consolidation guidance for variable-interest entities.
The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for
determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who
should consolidate a variable-interest entity. For 3M, this standard was effective January 1, 2010. The adoption of
this standard did not have a material impact on 3M’s consolidated results of operations or financial condition.
In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, Measuring Liabilities at Fair
Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820.
The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not
available, a entity may use the quoted price of an identical liability when traded as an asset, quoted prices for similar
liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual
restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or
quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements (see Note
13 for a description of level 1 measurements). For 3M, this ASU was effective October 1, 2009. The adoption of this
ASU did not have a material impact on 3M’s consolidated results of operations or financial condition.
In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset
Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the fair value of certain
alternative investments such as hedge funds, private equity funds and venture capital funds. The ASU indicates that,
under certain circumstances, the fair value of such investments may be determined using net asset value (NAV) as a
practical expedient, unless it is probable the investment will be sold at something other than NAV. In those situations,
the practical expedient cannot be used and disclosure of the remaining actions necessary to complete the sale is
required. The ASU also requires additional disclosures of the attributes of all investments within the scope of the new
guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its
investments. The disclosure provisions of this ASU are not applicable to an employer’s disclosures about pension
and other postretirement benefit plan assets. 3M does not have any significant direct investments within the scope of
ASU No. 2009-12, but certain plan assets of the Company’s benefit plans are valued based on NAV as indicated in
Note 11. For 3M, this ASU was effective October 1, 2009. The adoption of this ASU did not have a material impact
on 3M’s consolidated results of operations or financial condition.