Alcoa 2010 Annual Report Download - page 94

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.
Effective January 1, 2010, Alcoa adopted changes issued by the FASB on January 21, 2010 to disclosure requirements
for fair value measurements. Specifically, the changes require a reporting entity to disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers. The changes also clarify existing disclosure requirements related to how assets and liabilities should be
grouped by class and valuation techniques used for recurring and nonrecurring fair value measurements. The adoption
of these changes had no impact on the Consolidated Financial Statements.
Business Combinations and Consolidation Accounting—On January 1, 2010, Alcoa adopted changes issued by
the FASB to accounting for variable interest entities. These changes require an enterprise to perform an analysis to
determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable
interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity; to eliminate the solely quantitative approach previously required for determining the primary
beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is
a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment
at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the
entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will
provide users of financial statements with more transparent information about an enterprise’s involvement in a variable
interest entity. The adoption of these changes had no impact on the Consolidated Financial Statements.
Effective January 1, 2010, Alcoa adopted changes issued by the FASB on January 6, 2010 for a scope clarification to
the FASB’s previously-issued guidance (see directly below) on accounting for noncontrolling interests in consolidated
financial statements. These changes clarify the accounting and reporting guidance for noncontrolling interests and
changes in ownership interests of a consolidated subsidiary. An entity is required to deconsolidate a subsidiary when
the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an
entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value.
The gain or loss includes any gain or loss associated with the difference between the fair value of the retained
investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated. In contrast, an entity
is required to account for a decrease in its ownership interest of a subsidiary that does not result in a change of control
of the subsidiary as an equity transaction. The adoption of these changes had no impact on the Consolidated Financial
Statements.
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