Raytheon 2014 Annual Report Download - page 97

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
88
Government, were 29%, 27% and 26% of total net sales in 2014, 2013 and 2012, respectively. Sales to the U.S. Government
may be affected by changes in procurement policies, budget considerations, changing concepts of national defense, political
developments abroad and other factors. Sales to international customers may be affected by changes in the priorities and
budgets of international customers, which may be driven by changes in threat environments, geo-political uncertainties,
potentially volatile worldwide economic conditions, various regional and local economic and political factors, risks and
uncertainties and U.S. foreign policy.
Note 2: Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 Revenue
from Contracts with Customers (Topic 606) which will replace numerous requirements in U.S. GAAP, including industry-
specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts
with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the company expects to be
entitled in exchange for those goods or services. The new standard will be effective for annual reporting periods beginning
after December 15, 2016, including interim periods within that reporting period. For Raytheon, the standard will be effective
in the first quarter of 2017. The two permitted transition methods under the new standard are the full retrospective method,
in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method,
in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We have
not yet selected a transition method. We are currently evaluating the potential changes from this ASU to our future financial
reporting and disclosures. However, under the new standard we expect to continue using the cost-to-cost percentage of
completion method to recognize revenue for most of our long-term contracts.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management
will be required to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in
certain circumstances. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and
for annual and interim periods thereafter. This ASU is not expected to have an impact on our financial statements or disclosures.
Other new pronouncements issued but not effective until after December 31, 2014 are not expected to have a material impact
on our financial position, results of operations or liquidity.
Note 3: Acquisitions
In pursuing our business strategies, we acquire and make investments in certain businesses that meet strategic and financial
criteria.
In November 2014, we acquired Blackbird Technologies, Incorporated, subsequently renamed Raytheon Blackbird
Technologies (RBT), for $427 million in cash, net of cash acquired, and exclusive of retention payments. RBT is a leading
provider of persistent surveillance, secure tactical communications and cybersecurity solutions to the Intelligence Community
and special operations market and further expands our Intelligence, Information and Services (IIS) offerings. In connection
with this acquisition, we have preliminarily recorded $301 million of goodwill, all of which was allocated to our IIS business
segment, primarily related to expected synergies from combining operations and the value of the existing workforce, and
$126 million of intangible assets, primarily related to contractual relationships, completed technology and trade names with
a weighted average life of nine years. We expect to complete the purchase price allocation process in the first quarter of 2015
when we receive final valuation results and complete our review.