Raytheon 2006 Annual Report Download - page 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following shows the incremental effect of applying SFAS No. 158 on individual line items in the consolidated balance
sheets at December 31, 2006:
(In millions)
Before
Application of
SFAS No. 158 Adjustment
After
Application of
SFAS No. 158
Assets held for sale $ 2,295 $ 1 $ 2,296
Deferred federal and foreign income taxes (508) 697 189
Other assets, net 1,716 (128) 1,588
Total Assets 24,921 570 25,491
Liabilities held for sale 963 46 1,009
Accrued retiree benefits and other noncurrent liabilities 2,370 1,862 4,232
Total Liabilities 12,317 1,908 14,225
Accumulated other comprehensive income (loss) (1,176) (1,338) (2,514)
Total stockholders’ equity 12,439 (1,338) 11,101
Effective January 1, 2004, we changed the measurement date for our Pension Benefits and Other Benefits plans from
October 31 to December 31. This change in measurement date was accounted for as a change in accounting principle.
The cumulative effect of this change in accounting principle was a gain of $53 million pretax for Pension Benefits and a
gain of $10 million pretax for Other Benefits. Using our year end as the measurement date for Pension Benefits and Other
Benefit plans more appropriately reflects the plans’ financial status for the years then ended. In 2004, the total cumulative
effect of the change in accounting principle was a gain of $63 million pretax, $41 million after-tax, or $0.09 per basic and
diluted share. There was no adjustment to income from continuing operations for all periods presented as a result of this
change in accounting principle.
The following adjusts reported net income and basic and diluted earnings per share (EPS) as if the change in accounting
principle had been applied prior to the periods presented:
(In millions except per share amounts) 2006 2005 2004
Reported net income $1,283 $ 871 $ 417
Change in accounting principle, net of tax —— (41)
Adjusted net income $1,283 $ 871 $ 376
Reported basic EPS $ 2.90 $1.95 $ 0.95
Change in accounting principle, net of tax —— (0.09)
Adjusted basic EPS $ 2.90 $1.95 $ 0.86
Reported diluted EPS $ 2.85 $1.92 $ 0.94
Change in accounting principle, net of tax —— (0.09)
Adjusted diluted EPS $ 2.85 $1.92 $ 0.85
The strategic asset allocation of our domestic Pension Benefits and Other Benefits plans is diversified with an average and
moderate level of risk consisting of investments in equity securities (including domestic and international equities and
our common stock), debt securities, real estate and other areas such as private equity and cash. We seek to produce a
return on investment over the long-term commensurate with levels of investment risk which are prudent and reasonable
given the prevailing capital market expectations. Policy range allocations are 50 to 75% for equity securities, 20 to 40%
for debt securities, 2 to 7% for real estate and 2 to 17% for other areas. The long-term return on asset assumption for our
domestic Pension Benefits and Other Benefits plans for 2007 is 8.75%. The long-term return on asset assumption for our
domestic Pension Benefits plans was 8.75% in 2006, 2005 and 2004. The long-term return on asset assumption for our
Other Benefits plans was 8.75% in 2006 and 2005 and 7.75% in 2004. To develop the expected long-term rate of return
on asset assumptions, we considered the current level of expected returns on risk free investments, the historical level of
the risk premium associated with the other asset classes in which we have invested domestic Pension Benefits and Other
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