Mercury Insurance 2009 Annual Report Download - page 91

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
January 1, 2006 is based on the estimated grant-date fair value. The Company recognizes these compensation
costs on a straight-line basis over the requisite service period of the award, which is the option vesting term of
four or five years for options granted prior to 2008 and four years for options granted subsequent to January 1,
2008, for only those shares expected to vest. The fair value of stock option awards is estimated using the Black-
Scholes option pricing model with the grant-date assumptions and weighted-average fair values, as discussed in
Note 15.
Recently Issued Accounting Standards
In August 2009, the FASB issued a new accounting standard related to fair value measurements and
disclosures for liabilities, which amends the earlier FASB standard related to fair value measurements and
disclosures. The new standard provides clarification in circumstances that a quoted price in an active market for
an identical liability is not available, and a reporting entity is required to measure fair value using one or more
valuation techniques. In addition, the new standard also addresses practice difficulties caused by the tension
between fair value measurements based on the price that would be paid to transfer a liability to a new obligor and
contractual or legal requirements that prevent such transfers from taking place. The Company adopted the new
standard which became effective for the annual reporting period ended December 31, 2009. The adoption of the
new standard did not have a material impact on the Company’s consolidated financial statements.
In June 2009, the FASB issued a new standard related to accounting standards codification and the hierarchy
of generally accepted accounting principles. The new standard establishes the FASB Accounting Standards
Codification TM as the source of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The Company adopted the new standard which became
effective for the interim reporting period ended September 30, 2009. The adoption of the new standard did not
have a material impact on the Company’s consolidated financial statements.
In May 2009, the FASB adopted the new standard related to subsequent events. The new standard
establishes general standards of accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that date. The Company adopted the
new accounting standard which became effective for the interim reporting period ended June 30, 2009. The
adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.
In April 2009, the FASB issued a new standard related to determining fair value when the volume and level
of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly.
The new standard relates to selected transactions in disrupted markets and adopts guidelines related to a
significant decrease in the volume and level of activity for an asset or liability. When the reporting entity
concludes there has been a significant decrease in the volume and level of activity for an asset or liability, further
analysis of the information from that market is needed and significant adjustments to the related prices may be
necessary to estimate fair value in accordance with earlier FASB standards related to fair value measurements.
The Company adopted the new standard which became effective for the interim reporting period ended June 30,
2009. The adoption of the new standard did not have a material impact on the Company’s consolidated financial
statements.
In April 2009, the FASB issued a new standard related to interim disclosures about fair value of financial
instruments which amends the earlier FASB standard related to such disclosures. The new standard requires
disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies,
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