Northrop Grumman 2014 Annual Report Download - page 59

NORTHROP GRUMMAN CORPORATION
-50-
recognizing revenue under U.S. GAAP. Among other things, it requires companies to identify contractual
performance obligations and determine whether revenue should be recognized at a point in time or over time. These
concepts, as well as other aspects of ASU 2014-09, may change the method and/or timing of revenue recognition for
certain of our contracts. ASU 2014-09 will be effective January 1, 2017, and may be applied either retrospectively or
through the use of a modified-retrospective method. We are currently evaluating both methods of adoption as well as
the effect ASU 2014-09 will have on the company’s consolidated financial position, annual results of operations and/
or cash flows.
Other accounting standards updates effective after December 31, 2014, are not expected to have a material effect on
the company’s financial position, annual results of operations and/or cash flows.
Reclassifications
Our consolidated statements of cash flows for 2014 and 2013 reflect cash flows from operating activities presented
solely on the indirect method. The company previously presented both the direct method and indirect method for our
cash flows from operating activities. This change in reporting method had no effect on the amount of our net cash
flows from operating activities.
In the first quarter of 2014, we reclassified our cash awards incentive compensation accrual from other current
liabilities to accrued employee compensation, which are both reported within current liabilities on the consolidated
statement of financial position. The reclassification reduced other current liabilities and increased accrued employee
compensation by $226 million and $277 million, as of December 31, 2014 and 2013, respectively.
Shareholders' Equity
The company records the difference between the cost of shares repurchased and their par value as a reduction of
paid-in capital to the extent of its balance and then as a reduction of retained earnings.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
December 31
$ in millions 2014 2013
Unamortized benefit plan costs, net of tax benefit of $3,395 in 2014 and $1,972 in 2013 $(5,316)$(3,000)
Cumulative translation adjustment (41)18
Net unrealized gain (loss) on marketable securities and cash flow hedges, net of tax 1(2)
Total accumulated other comprehensive loss $(5,356)$(2,984)
Unamortized benefit plan costs consist primarily of net after-tax actuarial losses totaling $5.6 billion and $3.3 billion
as of December 31, 2014 and 2013, respectively. Net actuarial gains or losses are re-determined annually or upon
remeasurement events and principally arise from changes in the rate used to discount our benefit obligations and
differences between expected and actual returns on plan assets.
Reclassifications from accumulated other comprehensive income to net earnings related to the amortization of
benefit plan costs were $145 million, $319 million and $204 million, net of taxes, for the years ended December 31,
2014, 2013 and 2012, respectively. The reclassifications represent the amortization of net actuarial losses and prior
service credits for the company's retirement benefit plans, and are included in the computation of net periodic
pension cost (See Note 12 for further information).
Reclassifications from accumulated other comprehensive income to net earnings, relating to cumulative translation
adjustments, marketable securities and effective cash flow hedges for the years ended December 31, 2014, 2013 and
2012, respectively, were not material. Reclassifications for cumulative translation adjustments and marketable
securities are recorded in other income, and reclassifications for effective cash flow hedges are recorded in operating
income.
2. EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK
Basic Earnings Per Share
We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of
common stock outstanding during each period.