Alcoa 2010 Annual Report Download - page 98

unobservable inputs (Level 3), separate information about purchases, sales, issuances, and settlements (that is, on a
gross basis rather than as one net number). These changes become effective for Alcoa beginning January 1, 2011.
Other than the additional disclosure requirements, management has determined these changes will not have an impact
on the Consolidated Financial Statements.
In April 2010, the FASB issued changes to the classification of certain employee share-based payment awards. These
changes clarify that there is not an indication of a condition that is other than market, performance, or service if an
employee share-based payment award’s exercise price is denominated in the currency of a market in which a
substantial portion of the entity’s equity securities trade and differs from the functional currency of the employer entity
or payroll currency of the employee. An employee share-based payment award is required to be classified as a liability
if the award does not contain a market, performance, or service condition. These changes become effective for Alcoa
on January 1, 2011. Prior to this guidance, Alcoa did not consider the difference between the currency denomination of
an employee share-based payment award’s exercise price and the functional currency of the employer entity or payroll
currency of the employee in determining the proper classification of the share-based payment award. As a result,
management has determined these changes will not have an impact on the Consolidated Financial Statements.
In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These
changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not
the same as fair value) for determining the selling price of a deliverable, which will be based on available information
in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate
the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to
all deliverables using the relative selling price method, which allocates any discount in the arrangement to each
deliverable on the basis of each deliverable’s selling price; require that a vendor determine its best estimate of selling
price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis;
and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective for
Alcoa on January 1, 2011. Management has determined that the adoption of these changes will not have an impact on
the Consolidated Financial Statements, as Alcoa does not currently have any such arrangements with its customers.
B. Discontinued Operations and Assets Held for Sale
For the year ended December 31, 2010, there were no active businesses classified as discontinued operations. The
Electrical and Electronic Solutions (EES) business was the only active business classified as discontinued operations in
the accompanying Statement of Consolidated Operations for the years ended December 31, 2009 and 2008.
In late 2008, Alcoa reclassified the EES business to discontinued operations based on the decision to divest the
business. The divestiture of the wire harness and electrical portion of the EES business was completed in June 2009
and the divestiture of the electronics portion of the EES business was completed in December 2009 (see Note F). The
results of the Engineered Products and Solutions segment were reclassified to reflect the movement of the EES
business into discontinued operations.
The following table details selected financial information of discontinued operations:
2010 2009 2008
Sales $ - $ 306 $1,218
Loss from operations before income taxes $(11) $(221) $ (424)
Benefit for income taxes 3 55 121
Loss from discontinued operations $ (8) $(166) $ (303)
In 2010, discontinued operations included an additional loss of $6 ($9 pretax) related to the wire harness and electrical
portion of the EES business as a result of a contract settlement with a former customer of this business (see Note F) and
an additional loss of $2 ($4 pretax) related to the electronics portion of the EES business for the settling of working
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