Estee Lauder 2008 Annual Report Download - page 85

THE EST{E LAUDER COMPANIES INC. 83
Lease Classifi cation or Measurement under Statement
13.” This FSP amends SFAS No. 157 to exclude certain
leasing transactions accounted for under previously exist-
ing accounting guidance. However, this scope exception
does not apply to assets acquired and liabilities assumed
in a business combination, regardless of whether those
assets and liabilities are related to leases.
SFAS No. 157 becomes effective for the Company in
the beginning of fi scal 2009. The Company is currently
evaluating the impact of the provisions of SFAS No. 157
on its consolidated fi nancial statements. In February 2008,
the FASB issued FSP No. FAS 157-2, “Effective Date for
FASB Statement No. 157.” This FSP permits the delayed
application of SFAS No. 157 for nonfi nancial assets and
nonfi nancial liabilities, as defi ned in this FSP, except for
those that are recognized or disclosed at fair value in the
fi nancial statements at least annually, until the beginning
of the Company’s fi scal 2010.
In February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial Liabil-
ities” (“SFAS No. 159”), to permit all entities to choose to
elect, at specifi ed election dates, to measure eligible fi nan-
cial instruments at fair value. An entity shall report unreal-
ized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent
reporting date, and recognize upfront costs and fees
related to those items in earnings as incurred and not
deferred. SFAS No. 159 applies to fi scal years beginning
after November 15, 2007, with early adoption permitted
for an entity that has also elected to apply the provisions
of SFAS No. 157. An entity is prohibited from retrospec-
tively applying SFAS No. 159, unless it chooses early
adoption. The Company is currently evaluating the impact
of the provisions of SFAS No. 159 on its consolidated
fi nancial statements, if any, when it becomes effective in
the beginning of fi scal 2009.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), “Business Combinations” (“SFAS No.
141(R)”). SFAS No. 141(R) replaces SFAS No. 141, “Busi-
ness Combinations,” however, it retains the fundamental
requirements of the former Statement that the acquisition
method of accounting (previously referred to as the pur-
chase method) be used for all business combinations and
for an acquirer to be identifi ed for each business combi-
nation. SFAS No. 141(R) defi nes the acquirer as the entity
that obtains control of one or more businesses in the busi-
ness combination and establishes the acquisition date as
the date that the acquirer achieves control. Among other
requirements, SFAS No. 141(R) requires the acquiring
entity in a business combination to recognize the identifi -
able assets acquired, liabilities assumed and any noncon-
trolling interest in the acquiree at their acquisition-date
amended. This statement establishes fi nancial accounting
and reporting standards for the effects of income taxes
that result from an enterprise’s activities during the current
and preceding years. It requires an asset and liability
approach for financial accounting and reporting of
income taxes.
In June 2006, the Financial Accounting Standards
Board (“FASB”) issued FASB Interpretation No. (“FIN”) 48,
“Accounting for Uncertainty in Income Taxes—an interpre-
tation of FASB Statement No. 109” (“FIN 48”). FIN 48
clarifi es the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in
accordance with SFAS No. 109. FIN 48 prescribes a
two-step evaluation process for tax positions taken, or
expected to be taken, in a tax return. The fi rst step is
recognition and the second is measurement. FIN 48 also
provides guidance on derecognition, measurement,
classifi cation, disclosures, transition and accounting for
interim periods. In May 2007, the FASB issued FASB Staff
Position (“FSP”) No. FIN 48-1, “Defi nition of Settlement in
FASB Interpretation No. 48, an amendment of FASB Inter-
pretation (FIN) No. 48, Accounting for Uncertainty in
Income Taxes” (“FSP No. FIN 48-1”). FSP No. FIN 48-1
provides guidance on how to determine whether a tax
position is effectively settled for the purpose of recogniz-
ing previously unrecognized tax benefi ts. The Company
adopted the provisions of FIN 48, as amended, effective
July 1, 2007.
Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157, “Fair
Value Measurements” (“SFAS No. 157”), to clarify the
defi nition of fair value, establish a framework for measur-
ing fair value and expand the disclosures on fair value
measurements. SFAS No. 157 defi nes fair value as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between mar-
ket participants at the measurement date (an exit price).
SFAS No. 157 also stipulates that, as a market-based mea-
surement, fair value measurement should be determined
based on the assumptions that market participants would
use in pricing the asset or liability, and establishes a fair
value hierarchy that distinguishes between (a) market
participant assumptions developed based on market data
obtained from sources independent of the reporting
entity (observable inputs) and (b) the reporting entity’s
own assumptions about market participant assumptions
developed based on the best information available in the
circumstances (unobservable inputs).
In February 2008, the FASB issued FSP No. FAS 157-1,
“Application of FASB Statement No. 157 to FASB State-
ment No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of