American Home Shield 2008 Annual Report Download - page 62

Table of Contents
FASB approved FASB Staff Position FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active"
("FSP 157-3"), which clarified the application of SFAS No. 157 in cases where the market for the asset is not active. FSP 157-3 was effective upon issuance.
The Company considered the guidance provided by FSP 157-3 in the preparation of the accompanying financial statements. The Company has assessed the
impact of this Statement to the Company's consolidated financial position, results of operations and cash flows. The Company has adopted this Statement for
financial assets and liabilities (See Note 18). The Company does not expect the adoption of this Statement for non-financial assets and liabilities recognized at
fair value on a nonrecurring basis to have a material effect on these consolidated financial statements.
In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities". This Statement permits entities to
choose to measure at fair value many financial instruments and certain other items such as investments, debt and derivative instruments. This statement is
effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company has elected not to apply the fair value option to
any of its financial assets or liabilities.
In December 2007, the FASB issued SFAS 141(R), "Business Combinations". This Statement will significantly change the accounting for business
combinations and is effective for business combinations finalized in fiscal years beginning after December 15, 2008. SFAS No. 141(R) changes the method
for applying the accounting for business combinations in a number of significant respects including the requirement to expense transaction fees and expected
restructuring costs as incurred, rather than including these amounts in the allocated purchase price; the requirement to recognize the fair value of contingent
consideration at the acquisition date, rather than the expected amount when the contingency is resolved; the requirement to recognize the fair value of
acquired in-process research and development assets at the acquisition date, rather than immediately expensing; and the requirement to recognize a gain in
relation to a bargain purchase price, rather than reducing the allocated basis of long-lived assets. In addition, SFAS No. 141(R) requires that changes in the
amount of acquired tax attributes be included in the Company's results of operations, rather than adjusting the allocated purchase price. SFAS No. 141(R) will
be effective on January 1, 2009 and will be applied prospectively to business combinations that have an acquisition date on or after January 1, 2009. While
SFAS No. 141(R) applies only to business combinations with an acquisition date after its effective date, the amendments to SFAS No. 109, "Accounting for
Income Taxes," with respect to deferred tax asset valuation allowances and liabilities for income tax uncertainties, will be applied to all deferred tax valuation
allowances and liabilities for income tax uncertainties recognized in prior business combinations. The provisions of FAS 141R will not impact the Company's
consolidated financial statements for prior periods. The Company will adopt this standard during the first quarter of 2009. The Company expects that its
adoption will reduce the Company's operating earnings due to required recognition of acquisition and restructuring costs through operating earnings. The
magnitude of this impact will be dependent on the number, size, and nature of acquisitions in periods subsequent to adoption.
In December 2007, the FASB issued SFAS 160, "Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51".
This Statement establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.
This Statement is effective for fiscal years beginning after December 15, 2008, with presentation and disclosure requirements applied retrospectively to
comparative financial statements. The Company will apply the provisions of this standard in the first quarter of 2009. The Company does not expect that the
adoption of this standard will have a material effect on these consolidated financial statements.
In March 2008, the FASB issued SFAS 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement
No. 133". This statement requires additional disclosures for derivative instruments and hedging activities that include how and why an entity
58