Baker Hughes 2007 Annual Report Download - page 130

2007 Form 10-K 47
increase to beginning retained earnings as of January 1, 2007.
We did not restate any prior periods as the impact was not
material to our financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements (“SFAS 157”), which is intended to
increase consistency and comparability in fair value measure-
ments by defining fair value, establishing a framework for
measuring fair value and expanding disclosures about fair
value measurements. SFAS 157 was originally effective for
financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years. In November 2007, the FASB placed a one year deferral
for the implementation of SFAS 157 for nonfinancial assets
and liabilities; however, SFAS 157 is effective for fiscal years
beginning after November 15, 2007 for financial assets and
liabilities, as well as for any other assets and liabilities that
are carried at fair value on a recurring basis in financial state-
ments. We adopted SFAS 157 on January 1, 2008 for financial
assets and liabilities, as well as for any other assets and liabili-
ties that are carried at fair value on a recurring basis in finan-
cial statements, with no impact on our consolidated financial
statements. We will begin the new disclosure requirements in
the first quarter of 2008.
In September 2006, the FASB issued SFAS No. 158,
Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132(R) (“SFAS 158”). SFAS 158 requires
an employer to recognize the overfunded or underfunded
status of a defined benefit postretirement plan as an asset or
liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes
occur through comprehensive income. Additionally, it requires
an employer to measure the funded status of a plan as of
the date of its year end statement of financial position, with
limited exceptions. SFAS 158 is effective as of the end of the
fiscal year ending after December 15, 2006; however, the
requirement to measure plan assets and benefit obligations
as of the date of the employer’s fiscal year end statement
of financial position is effective for fiscal years ending after
December 15, 2008. We adopted all requirements of SFAS 158
on December 31, 2006, except for the funded status measure-
ment date requirement, which will be adopted on December 31,
2008, as allowed under SFAS 158. We currently do not expect
there to be a material impact on our consolidated financial
statements as a result of the adoption of the funded status
measurement date requirement.
In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities – Includ-
ing an amendment of FASB Statement No. 115 (“SFAS 159”).
SFAS 159 permits entities to choose to measure eligible finan-
cial assets and liabilities at fair value. Unrealized gains and
losses on items for which the fair value option has been elected
are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. We adopted SFAS 159
on January 1, 2008. We will continue to evaluate the applica-
tion of SFAS 159, and we currently do not expect there to be
a material, if any, impact on our consolidated financial state-
ments as a result of this adoption.
In December 2007, the FASB issued SFAS No. 160, Non-
controlling Interests in Consolidated Financial Statements –
an amendment of ARB No. 51. SFAS 160 establishes accounting
and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary in an
effort to improve the relevance, comparability and transparency
of the financial information that a reporting entity provides in
its consolidated financial statements. SFAS 160 is effective for
fiscal years beginning after December 15, 2008. We will adopt
SFAS 160 on January 1, 2009, and have not yet determined
the impact, if any, on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised
2007), Business Combinations (“SFAS 141R”). SFAS 141R
replaces FASB Statement No. 141, Business Combinations. The
statement retains the purchase method of accounting used in
business combinations but replaces SFAS 141 by establishing
principles and requirements for the recognition and measure-
ment of assets, liabilities and goodwill, including the require-
ment that most transaction costs and restructuring costs be
expensed. In addition, the statement requires disclosures to
enable users to evaluate the nature and financial effects of
the business combination. SFAS 141 is effective for business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on
or after December 15, 2008. We will adopt SFAS 141R on
January 1, 2009 for acquisitions on or after this date.
NOTE 2. DISCONTINUED OPERATIONS
In the fourth quarter of 2005, our management initiated
and our Board of Directors approved a plan to sell the Baker
Supply Products Division (“Baker SPD”), a product line group
within the Completion and Production segment, which dis-
tributes basic supplies, products and small tools to the drill-
ing industry. In March 2006, we completed the sale of Baker
SPD and received cash proceeds of $42.5 million. We recorded
a gain on the sale of $19.2 million, net of tax of $11.0 mil-
lion, which consisted of an after-tax gain on the disposal
of $16.9 million and $2.3 million related to the recognition
of the cumulative foreign currency translation adjustments
into earnings.
We have reclassified the consolidated financial statements
for all prior periods presented to reflect these operations as dis-
continued. Summarized financial information from discontin-
ued operations is as follows for the years ended December 31:
2007 2006 2005
Revenues $ – $ 6.7 $ 32.5
Income before income taxes $ – $ 1.8 $ 7.7
Income taxes – (0.6) (2.8)
Income before gain
on disposal – 1.2 4.9
Gain on disposal, net of tax – 19.2 –
Income from
discontinued operations $ – $ 20.4 $ 4.9