Harman Kardon 2009 Annual Report Download - page 81

Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
account separately for the liability and equity components of the instrument. The debt would be recognized at the
present value of its cash flows discounted using the issuer’s nonconvertible debt borrowing rate at the time of
issuance. The equity component would be recognized as the difference between the proceeds from the issuance
of the note and the fair value of the liability. FSP APB 14-1 will also require an accretion of the resultant debt
discount over the expected life of the debt. The proposed transition guidance requires retrospective application to
all periods presented, and does not grandfather existing instruments. FSP APB 14-1 is effective for fiscal years
beginning after December 15, 2008. Early adoption is not permitted. FSP APB 14-1 is effective for us beginning
July 1, 2009. We expect the implementation of FSP APB 14-1 to have a material impact on our consolidated
financial statements and will result in higher non-cash interest expense from fiscal year 2008 through October 23,
2012 and will be dilutive to earnings per share. The adoption of FSP APB 14-1 will result in additional interest
expense of $75.7 million, before taxes relating to amortization of the debt discount. Of the $75.7 million, $9.5
million and $14.1 million will be recognized retrospectively in fiscal years 2009 and 2008, respectively and
$14.9 million, $15.7 million, $16.6 million and $5.0 million will be recognized in fiscal years 2010 through
2013, respectively, as interest expense in our Consolidated Statements of Operations.
Earnings Per Share: In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF
03-6-1 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. This FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and interim periods within those
years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any
amounts related to interim periods, summaries of earnings and selected financial data) to conform to the
provisions in this FSP. Early application of this FSP is prohibited. FSP EITF 03-6-1 is effective for us beginning
July 1, 2009. We are currently evaluating the impact of FSP EITF 03-6-1 on our consolidated financial
statements.
Impairment of Debt Securities: In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 & FAS 124-2”). FSP
FAS 115-2 & FAS 124-2 amends the other-than-temporary impairment guidance for certain debt securities and
requires an investor to assess the likelihood of selling the security, prior to recovering its cost basis. If an investor
is able to meet the criteria to assert that it will not have to sell a security before recovery, impairment charges
related to credit losses would be recognized in earnings, while impairment charges related to non-credit losses
would be reflected in other comprehensive income. It also amends the disclosure requirements by requiring
entities to disclose information that will help users understand the types of investments held, including
information about investments in an unrealized loss position for which an impairment charge has not been
recognized. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. Early
adoption is permitted for periods ending after March 15, 2009. FSP FAS 115-2 & FAS 124-2 is effective for us
beginning July 1, 2009. We are currently evaluating the impact that FSP FAS 115-2 & FAS 124-2 will have on
our consolidated financial statements.
Intangible Assets: In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS 142 No. “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of the position is to
improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period
of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other U.S. generally
accepted accounting principles. The provisions of FSP FAS 142-3 are effective for the fiscal year beginning July
1, 2009. We do not expect the adoption of FSP FAS 142-3 will have a material impact on our consolidated
financial condition or results of operations.
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