Harman Kardon 2010 Annual Report Download - page 83

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
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. 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 new
provisions. The adoption of the new provisions did not have a material impact on our financial condition or
results of operations.
Fair Value: We adopted ASC 820, “Fair Value Measurements and Disclosures” which defines fair value,
establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair
value measurements in two steps. We adopted this guidance for financial assets and liabilities effective July 1,
2008 and for non-financial assets and liabilities effective July 1, 2009. This guidance is applicable whenever
another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. It does
not expand or require any new fair value measures; however the application of this statement may change current
practice. Refer to Note 11 – Fair Value Measurements for more information.
Accounting guidance allows an entity the irrevocable option to elect fair value for the initial and subsequent
measurement for certain financial assets and liabilities on an instrument-by-instrument basis. Unrealized gains
and losses on items for which the fair value option has been elected are reported in earnings. We did not elect the
fair value measurement for any financial assets and liabilities.
On July 1, 2009, we adopted the updated provisions for determining fair value when the volume and level of
activity for the asset or liability have significantly decreased and for identifying transactions that are not orderly,
issued by the FASB within ASC 820-10-35-51. The new provisions provide additional guidance for estimating
fair value, when the volume and level of activity for the asset or liability have significantly decreased when
compared with normal market activity for the asset or liability. The new approach is designed to address whether
a market is inactive, and if so whether a market should be considered distressed. The objective of the new
guidance is to remain consistent with the principles of fair value accounting, yet provide additional guidance on
how fair value measurements might be determined in an inactive market. The new guidance also requires
additional disclosures relating to an entity’s valuation techniques and its major categories of investments in debt
and equity securities. The adoption of the new provisions did not have any impact on our financial condition or
results of operations.
On July 1, 2009, we adopted the updated provisions relating to interim disclosures about fair value of
financial instruments, issued by the FASB within ASC 825-10-65. The new provisions require disclosures about
fair value of financial instruments for interim reporting periods of publicly-held companies, as well as in annual
financial statements. The adoption of the new provisions did not have any impact on our financial condition or
results of operations.
In August 2009, FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value” which provides
updated guidance on the fair value measurement of liabilities. This update provides clarification for
circumstances in which a quoted price in an active market for the identical liability is not available. In such
instances, a reporting entity is required to measure fair value using one or more of the following techniques: 1) a
valuation technique that uses either the quoted price of the identical liability when traded as an asset or quoted
prices for similar liabilities when traded as an asset; or 2) another valuation technique that is consistent with the
principles in ASC 820, “Fair Value Measurements and Disclosures,” such as the income and market approach to
valuation. The amendments in this update also clarify that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence
of a restriction that prevents the transfer of the liability. This update further clarifies that if the fair value of a
liability is determined by reference to a quoted price in an active market for an identical liability, that price would
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