Mattel 2007 Annual Report Download - page 84

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applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The
standard does not expand the use of fair value in any new circumstances. Under SFAS No. 157, fair value refers
to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that
fair value should be based on the assumptions market participants would use when pricing the asset or liability
and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair
value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data, for example, the reporting entity’s own data. Fair value measurements would be separately
disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for Mattel as of January 1, 2008.
However, FSP FAS No. 157-2 delayed the adoption date until January 1, 2009 for nonfinancial assets and
liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring
basis. Mattel does not expect the adoption of SFAS No. 157 to have a material effect on its operating results or
financial position.
SFAS No. 159
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments
and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also
establishes presentation and disclosure requirements designed to facilitate comparisons between companies that
choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for
Mattel as of January 1, 2008. Mattel does not expect the adoption of SFAS No. 159 to have a material effect on
its operating results or financial position.
SFAS No. 141(R)
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which replaces SFAS No. 141,
Business Combinations. SFAS 141(R) (i) requires the acquiring entity in a business combination to record all
assets acquired and liabilities assumed at their acquisition-date fair values, (ii) changes the recognition of assets
acquired and liabilities assumed arising from contingencies, (iii) requires contingent consideration to be
recognized at its fair value on the acquisition date and, for certain arrangements, requires changes in fair value to
be recognized in earnings until settled, (iv) requires companies to revise any previously issued post-acquisition
financial information to reflect any adjustments as if they had been recorded on the acquisition date, (v) requires
the reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax
uncertainties to be recognized in earnings, and (vi) requires the expensing of acquisition-related costs as incurred.
SFAS 141(R) also requires additional disclosure of information surrounding a business combination to enhance
financial statement users’ understanding of the nature and financial impact of the business combination. SFAS
No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008, with the exception of
accounting for changes in a valuation allowance for acquired deferred tax assets and the resolution of uncertain
tax positions accounted for under FIN 48, which is effective on January 1, 2009 for all acquisitions. Mattel has
not completed its evaluation of SFAS No. 141(R), but does not expect the adoption of SFAS No. 141(R) to have
a material effect on its operating results or financial position.
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