Avnet 2007 Annual Report Download - page 67

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Implementation of SFAS 158
As previously discussed in Note 1, the FASB issued SFAS 158, Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans in September 2006 which requires the Company to recognize the funded
status (defined as the difference between the fair value of the plan assets and the benefit obligation) of its defined
benefit pension plan in its consolidated balance sheet, with a corresponding adjustment to “accumulated other
comprehensive income.” The Company’s pension plan does not take into account projected salary increases;
instead, it is a cash balance plan whereby service costs are based solely on current year salary levels. Prior to
SFAS 158, the Company recorded the accumulated benefit obligation which represents the pension liability for cash
balance plans. Under SFAS 158, the Company will continue to record the accumulated benefit obligation for its cash
balance plan.
Upon adoption, SFAS 158 requires an adjustment to “accumulated other comprehensive income” for the net
unrecognized actuarial losses, unrecognized prior service costs and unrecognized transition obligations remaining
from the initial adoption of SFAS 87, Employers’ Accounting for Pensions (“SFAS 87”), which, pursuant to the
provisions of SFAS 87, were previously netted against the pension plans’ funded status in the consolidated balance
sheet. Furthermore, amounts recognized in “accumulated other comprehensive income” will subsequently be
recognized as net periodic pension cost in accordance with the recognition and amortization provisions of SFAS 87.
The adoption of SFAS 158 had no effect on the Company’s consolidated financial statements for the fiscal year end
June 30, 2007, or for any prior period, and it will not affect operating results in future periods.
The incremental effect of applying SFAS 158 on the consolidated balance sheet at June 30, 2007 for the
Company’s pension plan is presented in the following table (in thousands):
Prior to
Adoption of
SFAS 158
SFAS 158
Adoption
Adjustments
After
Adoption of
SFAS 158
Prepaid cost/(accrued liability) ....................... $(21,021) $ — $(21,021)
Intangible assets ................................. — $ — $ —
Accumulated other comprehensive income (AOCI) ........ $53,237 $ — $ 53,237
As a result of the adoption of SFAS 158, there was no change in the Company’s total liabilities or stockholders’
equity.
Included in “accumulated other comprehensive income” at June 30, 2007 is a pre-tax charge of $53,237,000 of
net actuarial losses which have not yet been recognized in net periodic pension cost, of which $3,096,000 is
expected to be recognized as a component of net periodic benefit cost during fiscal 2008.
67
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)