Invacare 2008 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2008 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accounting Policies—Continued
expect this to occur during the next twelve months. The company has historically not recognized any
ineffectiveness related to forward contract cash flow hedges because the company generally limits it hedges to
between 60% and 90% of total forecasted transactions for a given entity’s exposure to currency rate changes and
the transactions hedged are recurring in nature.
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities—an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and
gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The company adopted SFAS 161 effective January 1, 2009 and is currently evaluating the
effect that the adoption will have on our 2009 financial statement disclosures.
Foreign Currency Translation: The functional currency of the company’s subsidiaries outside the United
States is the applicable local currency. The assets and liabilities of the company’s foreign subsidiaries are
translated into U.S. dollars at year-end exchange rates. Revenues and expenses are translated at weighted average
exchange rates. Gains and losses resulting from translation are included in accumulated other comprehensive
earnings (loss).
Net Earnings Per Share: Basic earnings per share are computed based on the weighted-average number of
Common Shares and Class B Common Shares outstanding during the year. Diluted earnings per share are
computed based on the weighted-average number of Common Shares and Class B Common Shares outstanding
plus the effects of dilutive stock options and awards outstanding during the year. Diluted earnings per share can
potentially be impacted by the convertible notes should the conditions be met to make the notes convertible.
Defined Benefit Plans: In September 2006, the Financial Accounting Standards Board “FASB” issued
SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,an
amendment of FASB Statements No. 87, 88, 106 and 132(R), or “FAS 158.” FAS 158 requires plan sponsors to
recognize the funded status of their defined benefit postretirement benefit plans in the consolidated balance sheet,
measure the fair value of plan assets and benefit obligations as of the balance sheet date and to recognize changes
in that funded status in the year in which the changes occur through comprehensive income. The company
adopted the provisions of FAS 158 on December 31, 2006. The adoption required the company to recognize the
funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of
our postretirement benefit plan in the December 31, 2006 balance sheet, with a corresponding adjustment of
$14,940,000 to accumulated other comprehensive income on a pre-tax and after-tax basis. The adoption of
FAS 158 did not affect the company’s consolidated statement of operations for the year ended December 31,
2006, or for any prior period presented.
In 2006, the company determined that the reported December 31, 2005 accumulated benefit for the
company’s non-qualified defined benefit Supplemental Executive Retirement Plan (SERP) was understated by
$2,941,000 ($1,912,000 after-tax), or $0.06 per share, as the result of accounting errors in which recorded
expense in prior years was netted by SERP benefit payments. The company assessed the error amounts
considering SEC Staff Accounting Bulletin No. 99, Materiality, as well as SEC Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in
Current Year Financial Statements, or “SAB 108.” The error was not material to any prior period reported
financial statements, but was material in the current year. Accordingly, the company recorded the correction of
the understatement of expense as an adjustment to beginning 2006 retained earnings pursuant to the special
transition provision detailed in SAB 108.
FS-11