Raytheon 2007 Annual Report Download - page 95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
any, is reflected in the statement of cash flows as a financing activity rather than an operating activity. In connection with
the implementation of Statement of Financial Accounting Standards No. 123(R) (SFAS No. 123R), on January 1, 2006,
we elected the short-cut method in determining our additional paid-in capital pool of windfall benefits and the graded
vesting method to amortize compensation expense over the service period for our restricted stock and restricted stock
unit awards and the straight line amortization method for our Long Term Performance Plan (LTPP).
Prior to the adoption of SFAS No. 123R, we accounted for stock options to employees in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations (APB No. 25).
We also provided the disclosures required under Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123), as amended by Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation—Transition and Disclosures (SFAS No. 148). As a result, no expense was
reflected in 2005 for stock options, as all options granted had an exercise price equal to the market value of the underlying
common stock on the date of grant. However, stock-based compensation expense was recognized for restricted stock
awards and the LTPP awards.
Accounting Standards—In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a
framework for measuring fair value and requires expanded disclosures regarding fair value measurements. This
accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2007.
However, in January 2008, the FASB issued FASB Staff Position FAS 157-b, Effective Date of FASB Statement No. 157
(FSP FAS 157-b). This FSP permits entities to elect to defer the effective date of SFAS No. 157 for all nonfinancial assets
and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis. We have elected to defer the adoption of SFAS No. 157 for those assets and liabilities included in FSP FAS
157-b. The adoption of SFAS No. 157 will not have a material impact on our financial position and results of operations.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS No. 159). SFAS
No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value
option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting period. This accounting standard is effective for financial statements
issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 will not have a material impact
on our financial position and results of operations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141, Business Combinations. SFAS No. 141(R) requires
the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the
transaction; requires certain contingent assets and liabilities acquired to be recognized at their fair values on the acquisition date;
requires contingent consideration to be recognized at its fair value on the acquisition date and changes in the fair value to be
recognized in earnings until settled; requires the expensing of most transaction and restructuring costs; and generally requires
the reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax uncertainties to
also be recognized in earnings. This accounting standard is effective for financial statements issued for fiscal years beginning
after December 15, 2008. We are currently evaluating the provisions of SFAS No. 141(R) to determine the potential impact, if
any, the adoption will have on our financial position and results of operations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 requires the ownership
interests in subsidiaries held by parties other than the parent be clearly identified in the consolidated statement of
financial position within equity, but separate from the parent’s equity. This standard also requires the amount of
consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented
on the face of the consolidated statement of income. This accounting standard is effective for financial statements issued
for fiscal years beginning after December 15, 2008. We are currently evaluating the provisions of SFAS No. 160 to
determine the potential impact, if any, the adoption will have on our financial position and results of operations.
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