Union Pacific 2001 Annual Report Download - page 53

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As of December 31, 2001, expected trucking fuel consumption for 2002 is 16% hedged at 58 cents per gallon excluding
taxes, transportation costs and regional pricing spread. As of December 31, 2001, expected trucking fuel consumption
for 2003 is 5% hedged at 58 cents per gallon excluding taxes, transportation costs and regional pricing spreads. If trucking
fuel prices decrease 10% from the December 31, 2001 level, the corresponding increase in fuel expense would be less than
$1 million after tax. As of December 31, 2000, the trucking segment had not hedged any expected fuel consumption for
2001.
Accounting Pronouncements – Effective January 1, 2001, the Corporation adopted FAS 133 and FASB No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities" (FAS 138). FAS 133 and FAS 138 require
that the changes in fair value of all derivative financial instruments the Corporation uses for fuel or interest rate hedging
purposes be recorded in the Corporation's Consolidated Statements of Financial Position. In addition, to the extent fuel
hedges are ineffective due to pricing differentials resulting from the geographic dispersion of the Corporation's operations,
income statement recognition of the ineffective portion of the hedge position may be required. Also, derivative
instruments that do not qualify for hedge accounting treatment per FAS 133 and FAS 138 may require income statement
recognition. The adoption of FAS 133 and FAS 138 resulted in the recognition of a $2 million asset on January 1, 2001,
(see note 4 to the Consolidated Financial Statements, Item 8).
In September 2000, the FASB issued Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities” (FAS 140), replacing FASB No. 125, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities” (FAS 125). FAS 140 revises criteria for accounting for securitizations,
other financial asset transfers and collateral and introduces new disclosures. FAS 140 was effective for fiscal 2000 with
respect to the new disclosure requirements and amendments of the collateral provisions originally presented in FAS 125.
All other provisions were effective for transfers of financial assets and extinguishments of liabilities occurring after March
31, 2001. The provisions are to be applied prospectively with certain exceptions. The adoption of FAS 140 did not have
a significant impact on the Corporation's Consolidated Financial Statements.
In July 2001, the FASB issued Statement No. 141, "Business Combinations" (FAS 141). FAS 141 revises the method
of accounting for business combinations and eliminates the pooling method of accounting. FAS 141 was effective for
all business combinations that were initiated or completed after June 30, 2001. Management believes that FAS 141 will
not have a material impact on the Corporation's Consolidated Financial Statements.
Also in July 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets" (FAS 142). FAS 142
revises the method of accounting for goodwill and other intangible assets. FAS 142 eliminates the amortization of
goodwill, but requires goodwill to be tested for impairment at least annually at a reporting unit level. FAS 142 is effective
for the Corporation's fiscal year beginning January 1, 2002. Management believes that FAS 142 will not have a material
impact on the Corporation's Consolidated Financial Statements. In accordance with FAS 142, the Corporation will
eliminate annual goodwill amortization of $2 million. At December 31, 2001, the Corporation had $50 million of
goodwill remaining.
In August 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS
143 is effective for the Corporation's fiscal year beginning January 1, 2003, and requires the Corporation to record the
fair value of a liability for an asset retirement obligation in the period in which it is incurred. Management is in the
process of evaluating the impact this standard will have on the Corporation's Consolidated Financial Statements.
In addition, in October 2001, the FASB issued Statement No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets" (FAS 144). FAS 144 replaces FASB Statement No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed of" (FAS 121). FAS 144 develops one accounting model, based
on the framework established in FAS 121, for long-lived assets to be disposed of by sale. The accounting model applies
to all long-lived assets, including discontinued operations, and it replaces the provisions of APB Opinion No. 30,
"Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," for disposal of segments of a business. FAS 144 requires that long-
lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. FAS 144 also broadens the definition of discontinued operations. FAS 144 is