International Paper 2012 Annual Report Download - page 81

While the judgments and estimates made by the
Company are based on management’s evaluation of
the technical merits of a matter, assisted as neces-
sary by consultation with outside consultants, histor-
ical experience and other assumptions that
management believes are appropriate and reason-
able under current circumstances, actual resolution
of these matters may differ from recorded estimated
amounts, resulting in charges or credits that could
materially affect future financial statements.
STOCK-BASED COMPENSATION
Compensation costs resulting from all stock-based
compensation transactions are measured and
recorded in the consolidated financial statements
based on the grant-date fair value of the equity or
liability instruments issued. In addition, liability
awards are remeasured each reporting period. Com-
pensation cost is recognized over the period that an
employee provides service in exchange for the award.
ENVIRONMENTAL REMEDIATION COSTS
Costs associated with environmental remediation
obligations are accrued when such costs are prob-
able and reasonably estimable. Such accruals are
adjusted as further information develops or circum-
stances change. Costs of future expenditures for
environmental remediation obligations are dis-
counted to their present value when the amount and
timing of expected cash payments are reliably
determinable.
ASSET RETIREMENT OBLIGATIONS
A liability and an asset are recorded equal to the
present value of the estimated costs associated with
the retirement of long-lived assets where a legal or
contractual obligation exists and the liability can be
reasonably estimated. The liability is accreted over
time and the asset is depreciated over the life of the
related equipment or facility. International Paper’s
asset retirement obligations principally relate to
closure costs for landfills. Revisions to the liability
could occur due to changes in the estimated costs or
timing of closures, or possible new federal or state
regulations affecting these closures.
In connection with potential future closures or rede-
signs of certain production facilities, it is possible
that the Company may be required to take steps to
remove certain materials from these facilities. Appli-
cable regulations and standards provide that the
removal of certain materials would only be required
if the facility were to be demolished or underwent
major renovations. At this time, any such obligations
have an indeterminate settlement date, and the
Company believes that adequate information does
not exist to apply an expected-present-value tech-
nique to estimate any such potential obligations.
Accordingly, the Company does not record a liability
for such remediation until a decision is made that
allows reasonable estimation of the timing of such
remediation.
TRANSLATION OF FINANCIAL
STATEMENTS
Balance sheets of international operations are trans-
lated into U.S. dollars at year-end exchange rates,
while statements of operations are translated at
average rates. Adjustments resulting from financial
statement translations are included as cumulative
translation adjustments in Accumulated other com-
prehensive loss.
NOTE 2 RECENT ACCOUNTING
DEVELOPMENTS
Other than as described below, no new accounting
pronouncement issued or effective during the fiscal
year has had or is expected to have a material
impact on the consolidated financial statements.
DISCLOSURES ABOUT OFFSETTING
ASSETS AND LIABILITIES
In December 2011, the Financial Accounting Stan-
dards Board (FASB) issued ASU No. 2011-11,
“Disclosures about Offsetting Assets and Liabilities”,
which amends ASC 210, “Balance Sheet”. This ASU
requires entities to disclose gross and net
information about both instruments and transactions
eligible for offset in the statement of financial posi-
tion and those subject to an agreement similar to a
master netting arrangement. This would include
derivatives and other financial securities arrange-
ments. This guidance is effective for fiscal years, and
interim periods within those years, beginning on or
after January 1, 2013 and must be applied retro-
spectively. The adoption will not have a material
effect on the Company’s consolidated financial
statements.
INTANGIBLES – GOODWILL AND OTHER
In September 2011, the FASB issued Accounting Stan-
dards Update (ASU) 2011-8, “Intangibles – Goodwill
and Other.” This guidance provides an entity the option
to first assess qualitative factors to determine whether
the existence of events or circumstances leads to a
determination that it is more likely than not that the fair
value of a reporting unit is less than its carrying
amount. If, after assessing the totality of events or cir-
cumstances, an entity determines it is not more likely
than not that the fair value of a reporting unit is less
than its carrying amount, then performing the two-step
impairment test is unnecessary. However, if an entity
concludes otherwise, then it is required to perform the
first step of the two-step impairment test by calculating
the fair value of the reporting unit and comparing the
fair value with the carrying amount of the reporting unit
as described in ASC paragraph 350-20-35-4. This guid-
ance was effective for annual and interim goodwill
impairment tests performed for fiscal years beginning
after December 15, 2011. The Company adopted the
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