Invacare 2009 Annual Report Download - page 58

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transaction and establishes principles and requirements as to how an acquirer should recognize and measure in its
financial statements the assets acquired, liabilities assumed, any non-controlling interest and goodwill
acquired. ASC 805 also requires expanded disclosure regarding the nature and financial effects of a business
combination. The company adopted SFAS 141R as of January 1, 2009 and the adoption had no material impact
on the company’s financial position, results of operations or cash flows. ASC 805 could have a material impact
on the company’s financial statements in future periods if the company completes significant acquisitions in the
future.
In March 2008, SFAS 161, Disclosures about Derivative Instruments and Hedging Activities—an
amendment of FASB Statement No. 133 (SFAS 161) as codified in Derivatives and Hedging, ASC 815 was
issued which 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 ASC 815 effective
January 1, 2009 and the adoption had no material impact on the company’s financial position, results of
operations or cash flows.
On May 9, 2008, FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May
Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) as codified in Debt
with Conversion and Other Options, ASC 470-20, was issued to provide clarification of the accounting for
convertible debt that can be settled in cash upon conversion. The FASB believed this clarification was needed
because the accounting that was being applied for convertible debt prior to FSP APB 14-1 did not fully reflect the
true economic impact on the issuer since the conversion option was not captured as a borrowing cost and its full
dilutive effect was not included in earnings per share. ASC 470-20 required separate accounting for the liability
and equity components of the convertible debt in a manner that would reflect Invacare’s nonconvertible debt
borrowing rate. Accordingly, the company split the total debt amount of $135,000,000 into a convertible debt
amount of $75,988,000 and a stockholders’ equity (debt discount) amount of $59,012,000 as of the retrospective
adoption date of February 12, 2007 and is accreting the resulting debt discount as interest expense over a 10 year
life. The adoption of FSP APB 14-1, effective January 1, 2009, resulted in retrospective application and
accordingly reported interest expense was increased and net earnings decreased by $3,694,000 ($0.12 per share)
and $2,904,000 ($0.09 per share) for 2008 and 2007, respectively. Also as a result of the adoption of FSP APB
14-1, the Consolidated Balance Sheet as of December 31, 2008 reflects a decrease in long-term debt and an
offsetting increase in paid in capital of $52,414,000 and a deferred tax liability of $18,345,000 offset by a
valuation reserve of the same amount.
In May 2009, Subsequent Events, ASC 855, was issued that provides authoritative guidance regarding
subsequent events as this guidance was previously only addressed in auditing literature. The company adopted
ASC 855 effective June 30, 2009 and the adoption had no material impact on the company’s financial position,
results of operations or cash flows.
On July 1, 2009, the FASB issued ASC 105, The Accounting Standards Codification (Codification) is the
single source of authoritative U.S. accounting and reporting standards, with the exception of guidance issued by
the SEC. Although the Codification is not intended to change U.S. GAAP, it does reorganize and supersede
current U.S. GAAP and therefore all references to U.S. GAAP in the company’s filings were changed to
Codification references, beginning with the company’s third quarter Form 10-Q.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
The company is exposed to market risk through various financial instruments, including fixed rate and
floating rate debt instruments. The company does at times use interest swap agreements to mitigate its exposure
to interest rate fluctuations. Based on December 31, 2009 debt levels, a 1% change in interest rates would impact
interest expense by approximately $17,000. Additionally, the company operates internationally and, as a result, is
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