Alcoa 2011 Annual Report Download - page 99

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.
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.
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
transferred. These changes require an acquirer in a business combination, including business combinations achieved in
stages (step acquisition), to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This guidance
also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as
of the acquisition date, measured at their acquisition-date fair values. Additionally, these changes require acquisition-
related costs to be expensed in the period in which the costs are incurred and the services are received instead of
including such costs as part of the acquisition price. The adoption of these changes resulted in a charge of $18 ($12
after-tax) in Restructuring and other charges on the accompanying Statement of Consolidated Operations for the write
off of previously capitalized third-party costs related to potential business acquisitions (see Note D). Also, this
guidance was applied to an acquisition completed on March 31, 2009 (see Note F).
89