Lockheed Martin 2007 Annual Report Download - page 74

Lockheed Martin Corporation
Notes to Consolidated Financial Statements
December 31, 2007
Note 1 – Significant Accounting Policies
Organization – Lockheed Martin Corporation is engaged in the research, design, development, manufacture,
integration, operation and sustainment of advanced technology systems and products, and provides a broad range of
management, engineering, technical, scientific, logistic and information services. As a leading systems integrator, our
products and services range from electronics and information systems, including integrated net-centric solutions, to missiles,
aircraft and spacecraft. We serve both domestic and international customers with products and services that have defense,
civil and commercial applications, with our principal customers being agencies of the U.S. Government.
Basis of consolidation and classifications – Our consolidated financial statements include the accounts of wholly-
owned subsidiaries and other entities we control. We eliminate intercompany balances and transactions in consolidation. Our
Receivables, Inventories and Customer advances are primarily attributable to long-term contracts or programs in progress for
which the related operating cycles are longer than one year. In accordance with industry practice, we include these items in
current assets.
We have reclassified certain amounts for prior years to conform with the 2007 presentation, primarily to reflect the
realignment of our segments (see Note 15) and to reclassify interest income from Other income (expense), net to Other
non-operating income (expense), net (see Note 9).
Use of estimates – We prepare our consolidated financial statements in conformity with accounting principles generally
accepted in the United States (GAAP). In doing so, we are required to make estimates and assumptions, including estimates
of anticipated contract costs and revenues utilized in the earnings recognition process, that affect the reported amounts in the
financial statements and accompanying notes. Due to the size and nature of many of our programs, the estimation of total
revenues and cost at completion is subject to a wide range of variables, including assumptions for schedule and technical
issues. Our actual results may differ from those estimates.
Cash and cash equivalents – Cash equivalents include highly liquid instruments with original maturities of 90 days or
less. Due to the short maturity of these instruments, the carrying value on our consolidated Balance Sheet approximates fair
value.
Short-term investments – Our Short-term investments include marketable securities that are categorized as
available-for-sale securities as defined by Statement of Financial Accounting Standards (FAS) 115, Accounting for Certain
Investments in Debt and Equity Securities. We record realized gains and losses in Other non-operating income and expenses,
net. For purposes of computing realized gains and losses, we determine cost on a specific identification basis. The fair values
of our marketable securities are estimated based on quoted market prices for the respective securities.
We record Short-term investments at fair value. At year end, our investment portfolio included the following:
December 31,
2007 2006
(In millions)
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Government-sponsored enterprise securities $116 $116 $96 $95
Commercial paper 115 114 55 55
Corporate debt securities 91 90 139 139
U.S. Treasury and other securities 13 13 92 92
$335 $333 $382 $381
Approximately 71% of the securities in our portfolio had contractual maturities of one year or less at December 31,
2007. An additional 27% of the securities had contractual maturities of one to five years, with the remainder greater than five
years. Proceeds from sales of marketable securities totaled $53 million in 2007 and $167 million in 2006. Gross gains and
losses related to sales of marketable securities for both years, as well as net unrealized gains and losses at each year end,
were not material.
66