Black & Decker 2010 Annual Report Download - page 82

NEW ACCOUNTING STANDARDS
Implemented: In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”)
codified in ASC 820, “Fair Value Measurement and Disclosure” (“ASC 820”). SFAS 157 establishes a single
definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to
classify the source of information used in fair value measurements, and requires new disclosures of assets and
liabilities measured at fair value based on their level in the hierarchy. SFAS 157 indicates that an exit value
(selling price) should be utilized in fair value measurements rather than an entrance value, or cost basis, and
that performance risks, such as credit risk, should be included in the measurements of fair value even when
the risk of non-performance is remote. SFAS 157 also clarifies the principle that fair value measurements
should be based on assumptions the marketplace would use when pricing an asset whenever practicable, rather
than company-specific assumptions. In February 2008, the FASB issued FSP No. 157-1 and 157-2, which
respectively removed leasing transactions and deferred its effective date for one year relative to nonfinancial
assets and nonfinancial liabilities except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). Accordingly, in fiscal 2008 the Company applied SFAS 157
guidance to: (i) all applicable financial assets and liabilities; and (ii) nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least
annually). In January 2009, the Company applied this guidance to all remaining assets and liabilities measured
on a non-recurring basis at fair value. The adoption of SFAS 157 for these items did not have an effect on the
Company. Refer to Note M, Fair Value Measurements, for disclosures relating to ASC 820.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS 141(R)”) codified
in ASC 805, “Business Combinations”. SFAS 141(R) requires the acquiring entity in a business combination
to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or
partial acquisition), establishes the acquisition-date fair value as the measurement objective for all assets
acquired and liabilities assumed, and requires the acquirer to disclose the information needed to evaluate and
understand the nature and effect of the business combination. This statement applies to all transactions or other
events in which the acquirer obtains control of one or more businesses, including those sometimes referred to
as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration, for
example, by contract alone or through the lapse of minority veto rights. For new acquisitions made following
the adoption of SFAS 141(R), significant costs directly related to the acquisition including legal, audit and
other fees, as well as most acquisition-related restructuring, must be expensed as incurred. For the years ended
January 1, 2011 and January 2, 2010 the Company expensed $83.5 million and $24.1 million of acquisition-
related costs, respectively. Additionally, as part of SFAS 141(R) contingent purchase price arrangements (also
known as earn-outs) must be re-measured to estimated fair value with the impact reported in earnings. With
respect to all acquisitions, including those consummated in prior years, changes in tax reserves pertaining to
resolution of contingencies or other post acquisition developments are recorded to earnings rather than
goodwill. SFAS 141(R) was applied to the Company’s business combinations completed in fiscal 2010 and
2009.
In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-16, “Accounting for
Transfers of Financial Assets”. This ASU eliminates the concept of a “qualifying special-purpose entity,”
clarifies when a transferor of financial assets has surrendered control over the transferred financial assets,
defines specific conditions for reporting a transfer of a portion of a financial asset as a sale, requires that a
transferor recognize and initially measure at fair value all assets obtained and liabilities incurred as a result of
a transfer of financial assets accounted for as a sale, and requires enhanced disclosures to provide financial
statement users with greater transparency about a transferor’s continuing involvement with transferred financial
assets. The adoption of this ASU did not have any impact on the consolidated financial statements.
In December 2009, the FASB issued ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities.” This ASU eliminates the concept of a “qualifying special-purpose
entity”, replaces the quantitative approach for determining which enterprise has a controlling financial interest
in a variable interest entity with a qualitative approach focused on identifying which enterprise has a
controlling financial interest through the power to direct the activities of a variable interest entity that most
significantly impact the entity’s economic performance. Additionally, this ASU requires enhanced disclosures
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