Lockheed Martin 2007 Annual Report Download - page 78

for postretirement benefit plans included on the Statement of Stockholders’ Equity totaled $1,706 million (net of $938
million in income taxes) in 2007, $1,186 million (net of $712 million in income taxes) in 2006 and $(105) million (net of $60
million in tax benefits) in 2005, In 2006, Comprehensive income also included a reclassification adjustment of $(92) million
(net of $54 million in tax benefits) related to available-for-sale investments. The remaining components included amounts for
activities related to hedging and foreign currency translation.
The Accumulated other comprehensive loss of $1,851 million at December 31, 2007 included $1,806 million related to
our postretirement benefit plans that were recorded in accordance with FAS 158, Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (see Note 12). The
Accumulated other comprehensive loss of $3,561 million at December 31, 2006 included $3,512 million pertaining to our
postretirement benefit plans, primarily from the adoption of FAS 158 which resulted in an adjustment to the ending balance
of Accumulated other comprehensive loss of $(3,069) million (net of $1,696 million in tax benefits). The remaining
accumulated balance in both years primarily was composed of accumulated balances related to hedging and foreign currency
translation activities.
Recent accounting pronouncements – We adopted Financial Accounting Standards Board (FASB) Interpretation
Number (FIN) 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007 (see Note 8). FIN 48 clarifies and
sets forth consistent rules for accounting for uncertain income tax positions in accordance with FAS 109, Accounting for
Income Taxes. The cumulative effect of applying the provisions of this interpretation was a $31 million noncash increase to
our opening balance of Retained earnings in 2007.
Effective December 31, 2006, we adopted FAS 158, which requires plan sponsors of defined benefit pension and other
postretirement benefit plans to recognize the funded status of their postretirement benefit plans on the Balance Sheet,
measure the fair value of plan assets and benefit obligations as of the Balance Sheet date, and provide additional disclosures
(see Note 12). The effect of adopting the statement on our financial condition at December 31, 2006 has been reflected in
these financial statements. FAS 158 did not have an effect on prior years. The statement’s provisions regarding the change in
the measurement date of postretirement benefit plans are not applicable to us since we already use a measurement date of
December 31 for our plans.
In December 2007, the FASB issued FAS 141(R), Business Combinations, which will become effective January 1,
2009. The new standard will replace existing guidance and significantly change accounting and reporting relative to business
combinations in consolidated financial statements, including requirements to recognize acquisition-related transaction and
post acquisition restructuring costs in our results of operations as incurred. FAS 141(R) will be effective for businesses
acquired after the effective date.
In September 2006, the FASB issued FAS 157, Fair Value Measurements, which is effective January 1, 2008 with the
exception of leases and certain nonfinancial assets and liabilities. FAS 157 defines fair value, establishes a market-based
framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. The new standard
generally is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured
at fair value. We currently do not expect that the adoption of FAS 157 will have a material impact on our results of
operations, financial position or cash flows.
In February 2007, the FASB issued FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities –
Including an Amendment of FASB Statement No. 115, which also becomes effective January 1, 2008. Under FAS 159, a
company may choose to measure certain financial instruments (e.g., assets and liabilities) and certain other items not
currently subject to fair value measurement at fair value. If so elected, any unrealized gains and losses from marking those
items to market will be included in earnings in each subsequent reporting period. The fair value option may be elected on an
instrument-by-instrument basis, with few exceptions. We do not plan to elect the fair value option.
Note 2 – Acquisitions and Divestitures
Acquisitions
We used a total of approximately $160 million in 2007 for acquisition activities including the acquisition of, among
others, Management Systems Designers Inc., a provider of information technology (IT) and scientific solutions supporting
government life science, national security, and other civil agency missions. The amount also includes certain payments
related to acquisitions completed in prior years. We account for the acquisition of businesses under the purchase method of
accounting by allocating the purchase price to the assets acquired and liabilities assumed based on their estimated fair values.
Purchase accounting adjustments recorded related to business acquisitions completed in 2007 included recording Goodwill
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