Aetna 2006 Annual Report Download - page 52

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Page 50
FAS 158 also requires the measurement of the funded status of pension and OPEB plans at the year end balance
sheet date. This provision of FAS 158 is effective at December 31, 2008; however early adoption is encouraged.
We have elected to adopt this provision at December 31, 2007. This will represent a change for us, as we
previously used September 30 as our measurement date, as permitted under GAAP. FAS 158 provides two
approaches to transition to a fiscal year end measurement date. In the first approach, we must remeasure plan assets
and benefit obligations at January 1, 2007 to determine the effect of the measurement date change on 2007 expense.
In the second approach, we would continue to use the measurement at September 30, 2006 to estimate the effects of
this change. We will apply the first transition approach provided in FAS 158 and do not expect this change to have
a material impact on our financial position or results of operations.
Other-Than-Temporary Impairments
Effective January 1, 2006, we adopted FASB Staff Position (“FSP”) No. FAS 115-1 and FAS 124-1, “The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments.” An impairment of an
investment occurs when the fair value of the investment is less than its amortized cost. This FSP provides
accounting guidance regarding the determination of when an impairment of debt or equity securities should be
considered other-than-temporary, as well as the subsequent accounting for these investments. The adoption of this
FSP did not have a material impact on our financial position or results of operations.
Future Application of Accounting Standards
Certain Financial Instruments
In February 2006, the Financial Accounting Standards Board (“FASB”) issued FAS 155, “Accounting for Certain
Hybrid Financial Instruments,” which clarifies when certain financial instruments and features of financial
instruments must be treated as derivatives and reported on the balance sheet at fair value with changes in fair value
reported in net income. We will implement FAS 155 beginning with financial instruments acquired on or after
January 1, 2007, which is the effective date of FAS 155. Also, in January 2007, the FASB released Statement 133
Implementation Issue B40, “Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests In
Prepayable Financial Assets” (“DIG B40”). DIG B40 provides a narrow exception to the provisions of FAS 155
specific to financial instruments that contain embedded derivatives related to underlying prepayable financial
assets. As a result of this exception, we do not expect the adoption of FAS 155 to have a material effect on our
financial position or results of operations.
Uncertain Tax Positions
In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income
taxes by defining criteria that a tax position on an individual matter must meet before that position is recognized in
the financial statements. Additionally, FIN 48 provides guidance on measurement, derecognition, classification,
interest and penalties, interim period accounting, disclosures and transition. We will adopt FIN 48 beginning
January 1, 2007, which is its effective date. We do not expect the adoption of FIN 48 to have a material impact on
our financial position or results of operation.
Fair Value Measurements
In September 2006, the FASB issued FAS 157 “Fair Value Measurements.” FAS 157 defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 does not
require new fair value measurements. We will adopt FAS 157 on its effective date, January 1, 2008. We do not
expect the adoption of FAS 157 to have a material impact on our financial position or results of operations.