Raytheon 2010 Annual Report Download - page 86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Computer Software, Net—Internal use computer software, net, included in other assets, net, which consists primarily of
an integrated financial software package used across the Company, is stated at cost less accumulated amortization and is
amortized using the straight-line method over its estimated useful life, generally ten years.
Advance Payments and Billings in Excess of Costs Incurred—We receive advances, performance-based payments and
progress payments from customers that may exceed costs incurred on certain contracts. We classify advance payments
and billings in excess of costs incurred, other than those reflected as a reduction of contracts in process, as current
liabilities.
Comprehensive Income—Comprehensive income and its components are presented in the consolidated statements of
equity.
Accumulated other comprehensive loss (AOCL) consisted of the following at December 31:
(In millions) 2010 2009
Unfunded projected benefit obligation $(5,167) $(4,892)
Foreign exchange translation 28 46
Cash flow hedges 322
Unrealized gains on investments —2
Interest rate lock (10) (2)
Total $(5,146) $(4,824)
The unfunded projected benefit obligation is shown net of tax benefits of $2,764 million and $2,634 million at
December 31, 2010 and December 31, 2009, respectively. The cash flow hedges are shown net of tax liability of $2 million
and net of tax liability of $11 million at December 31, 2010 and December 31, 2009, respectively. The unrealized gains on
investments are shown net of tax liabilities of less than $1 million and $1 million at December 31, 2010 and December 31,
2009, respectively. The interest rate locks are shown net of tax benefits of $6 million and $1 million at December 31, 2010
and December 31, 2009, respectively. We expect approximately $4 million of after-tax net unrealized gains on our cash
flow hedges at December 31, 2010, to be reclassified into earnings at then-current values over the next twelve months as
the underlying hedged transactions occur.
Translation of Foreign Currencies—Assets and liabilities of foreign subsidiaries are translated at current exchange rates
and the effects of these translation adjustments are reported as a component of AOCL in stockholders’ equity. Deferred
taxes are not recognized for translation related temporary differences of foreign subsidiaries as their undistributed
earnings are considered to be indefinitely reinvested. Income and expenses in foreign currencies are translated at the
average exchange rate during the period. Foreign exchange transaction gains and losses in 2010, 2009 and 2008 were not
material.
Treasury Stock—We account for treasury stock under the cost method. When shares are reissued or retired from
treasury stock they are accounted for at average price. Upon retirement the excess over par value is charged against
additional paid-in capital. The remaining treasury stock activity primarily relates to stock-based compensation awards
and the related shares withheld to settle employee tax obligations.
Pension Costs—We have pension plans covering the majority of our employees, including certain employees in foreign
countries. We must calculate our pension costs as required under GAAP and the calculations and assumptions utilized
require judgment. GAAP outlines the methodology used to determine pension expense or income for financial reporting
purposes.
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