Estee Lauder 2009 Annual Report Download - page 113

112 THE EST{E LAUDER COMPANIES INC.
activities. We are currently evaluating the impact of the
provisions for such nonfi nancial assets and nonfi nancial
liabilities on our consolidated fi nancial statements.
In October 2008, the FASB issued FSP No. FAS 157-3,
“Determining the Fair Value of a Financial Asset When
the Market for That Asset Is Not Active” (“FSP No. FAS
157-3”), which clarifi es the application of SFAS No. 157 in
a market that is not active and provides an example to
illustrate key considerations in determining the fair value
of a fi nancial asset when the market for that fi nancial asset
is not active. The FSP is effective upon issuance, including
prior periods for which fi nancial statements have not been
issued. Revisions resulting from a change in the valuation
technique or its application should be accounted for as a
change in accounting estimate following the guidance in
SFAS No. 154, “Accounting Changes and Error Correc-
tions” (“SFAS No. 154”). However, the disclosure provi-
sions in SFAS No. 154 for a change in accounting estimate
are not required for revisions resulting from a change in
valuation technique or its application. We adopted SFAS
No. 157 beginning in our fi scal 2009 fi rst quarter. As part
of this adoption, we evaluated the fair value measure-
ments of our fi nancial assets and liabilities and determined
that these instruments are valued in active markets. As
such, the guidance in this FSP did not impact our consoli-
dated fi nancial statements.
In April 2009, the FASB issued FSP No. FAS 157-4,
“Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not
Orderly” (“FSP No. FAS 157-4”). This FSP provides addi-
tional guidance for estimating fair value in accordance
with SFAS No. 157 when there has been a signifi cant
decrease in market activity for a fi nancial asset. An entity
is required to base its conclusion about whether a transac-
tion was distressed on the weight of the evidence
presented. This FSP also re-affi rms that the objective of
fair value, when the market for an asset is not active, is the
price that would be received to sell the asset in an orderly
market (as opposed to a distressed or forced transaction).
Additional enhanced disclosures are also required in
accordance with this FSP. FSP No. FAS 157-4 must be
applied prospectively and is effective for interim and
annual periods ending after June 15, 2009. The adoption
of this standard did not have an impact on our consoli-
dated financial statements as our financial assets are
currently valued in active markets.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS No. 159”), to permit all entities to
choose to elect, at specifi ed election dates, to measure
features. SFAS No. 161 also requires cross-referencing
within footnotes to enable fi nancial statement users to
locate important information about derivative instruments.
We adopted this disclosure-only standard beginning in
our fi scal 2009 third quarter.
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 mea-
suring 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 par-
ticipant 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 FASB Staff Position
(“FSP”) No. FAS 157-1, “Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements
for Purposes of Lease Classifi cation or Measurement
under Statement 13.” This FSP amends SFAS No. 157 to
exclude certain leasing transactions accounted for under
previously existing 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.
In February 2008, the FASB issued FSP No. FAS 157-2,
“Effective Date for FASB Statement No. 157” (“FSP No.
FAS 157-2”). This FSP permits the delayed application of
SFAS No. 157 for nonfi nancial assets and nonfi nancial lia-
bilities, as defi ned in this FSP, except for those that are
recognized or disclosed at fair value in the fi nancial state-
ments at least annually, until the beginning of our fi scal
2010. As of July 1, 2008, we adopted SFAS No. 157, with
the exception of its application to nonfi nancial assets and
nonfi nancial liabilities, which we will defer in accordance
with FSP No. FAS 157-2 until the beginning of fi scal 2010.
Nonfi nancial assets and nonfi nancial liabilities principally
consist of intangible assets acquired through business
combinations, long-lived assets when assessing potential
impairment, and liabilities associated with restructuring