Alcoa 2009 Annual Report Download - page 94

On June 30, 2009, Alcoa adopted changes issued by the FASB to fair value accounting. These changes provide
additional guidance for estimating fair value when the volume and level of activity for an asset or liability have
significantly decreased and includes guidance for identifying circumstances that indicate a transaction is not orderly.
This guidance is necessary to maintain the overall objective of fair value measurements, which is that fair value is the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date under current market conditions. The adoption of these changes had no impact on
the Consolidated Financial Statements.
On October 1, 2009, Alcoa adopted changes issued by the FASB to fair value accounting for liabilities. These changes
clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is
not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of
either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another
valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g.,
present value technique). This guidance also states that both a quoted price in an active market for the identical liability
and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements. The adoption of these changes had no
impact on the Consolidated Financial Statements.
On June 30, 2009, Alcoa adopted changes issued by the FASB to fair value disclosures of financial instruments. These
changes require a publicly traded company to include disclosures about the fair value of its financial instruments
whenever it issues summarized financial information for interim reporting periods. Such disclosures include the fair
value of all financial instruments, for which it is practicable to estimate that value, whether recognized or not
recognized in the statement of financial position; the related carrying amount of these financial instruments; and the
method(s) and significant assumptions used to estimate the fair value. Other than including the required disclosures in
Alcoa’s Forms 10-Q, the adoption of these changes had no impact on the Consolidated Financial Statements (these
disclosures were already required for annual reporting periods – see the Other Financial Instruments section of
Note X).
On June 30, 2009, Alcoa adopted changes issued by the FASB to the recognition and presentation of other-than-
temporary impairments. These changes amend existing other-than-temporary impairment guidance for debt securities
to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary
impairments on debt and equity securities. The adoption of these changes had no impact on the Consolidated Financial
Statements.
Business Combinations and Consolidation Accounting—On January 1, 2009, Alcoa adopted changes issued by
the FASB to consolidation accounting and reporting. These changes establish accounting and reporting for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance defines a
noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable,
directly or indirectly, to a parent. These changes require, among other items, that a noncontrolling interest be included
in the consolidated statement of financial position within equity separate from the parent’s equity; consolidated net
income to be reported at amounts inclusive of both the parent’s and noncontrolling interest’s shares and, separately, the
amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated
statement of operations; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the
former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value.
Other than the change in presentation of noncontrolling interests, the adoption of these changes had no impact on the
Consolidated Financial Statements. The presentation and disclosure requirements of these changes were applied
retrospectively.
On January 1, 2009, Alcoa adopted changes issued by the FASB to accounting for business combinations. While
retaining the fundamental requirements of accounting for business combinations, including that the purchase method
be used for all business combinations and for an acquirer to be identified for each business combination, these changes
define the acquirer as the entity that obtains control of one or more businesses in the business combination and
establishes the acquisition date as the date that the acquirer achieves control instead of the date that the consideration is
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