Invacare 2009 Annual Report Download - page 57

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adjustments as needed. Historical analysis is primarily used to determine the company’s warranty reserves.
Claims history is reviewed and provisions are adjusted as needed. However, the company does consider other
events, such as a product recall, which could warrant additional warranty reserve provision. No material
adjustments to warranty reserves were necessary in the current year. See Warranty Costs in the Notes to the
Condensed Consolidated Financial Statements included in this report for a reconciliation of the changes in the
warranty accrual.
Accounting for Stock-Based Compensation
The company accounts for share based compensation under the provisions of Compensation—Stock
Compensation, ASC 718.The company has not made any modifications to the terms of any previously granted
options and no changes have been made regarding the valuation methodologies or assumptions used to determine
the fair value of options granted since 2005 and the company continues to use a Black-Scholes valuation model.
As of December 31, 2009, there was $14,619,000 of total unrecognized compensation cost from stock-based
compensation arrangements granted under the plans, which is related to non-vested shares, and includes
$4,866,000 related to restricted stock awards. The company expects the compensation expense to be recognized
over a weighted-average period of approximately two years.
The substantial majority of the options awarded have been granted at exercise prices equal to the market
value of the underlying stock on the date of grant. Restricted stock awards granted without cost to the recipients
are expensed on a straight-line basis over the vesting periods.
Income Taxes
As part of the process of preparing its financial statements, the company is required to estimate income
taxes in various jurisdictions. The process requires estimating the company’s current tax exposure, including
assessing the risks associated with tax audits, as well as estimating temporary differences due to the different
treatment of items for tax and accounting policies. The temporary differences are reported as deferred tax assets
and or liabilities. The company also must estimate the likelihood that its deferred tax assets will be recovered
from future taxable income and whether or not valuation allowances should be established. In the event that
actual results differ from its estimates, the company’s provision for income taxes could be materially impacted.
The company does not believe that there is a substantial likelihood that materially different amounts would
be reported related to its critical accounting policies.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In September, 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 157
(FAS 157), Fair Value Measurements as codified in Fair Value Measurements and Disclosures,ASC 820, which
created a framework for measuring fair value, clarified the definition of fair value and expanded the disclosures
regarding fair value measurements. FAS 157 did not require any new fair value measurements. The company
adopted the new standard as of January 1, 2008 for assets and liabilities measured at fair value on a recurring
basis and the adoption had no material impact on the company’s financial position, results of operations or cash
flows. For assets and liabilities measured at fair value on a nonrecurring basis, such as goodwill and intangibles,
the company elected to adopt as of January 1, 2009 the provisions of FAS 157 as allowed pursuant to FASB Staff
Position 157-2, Effective Date of FASB Statement No. 157. The adoption of FAS 157 on January 1, 2009 for
assets and liabilities measured at fair value on a nonrecurring basis had no material impact on the company’s
financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS 141(R), Business Combinations (SFAS 141R) as codified in
Business Combinations, ASC 805, which changed the accounting for business acquisitions. ASC 805 requires the
acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the
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