Unum 2007 Annual Report Download - page 99

Unum 2007 Annual Report 97
Effective January 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards No. 109 (SFAS 109). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. Unlike SFAS 109,
FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The cumulative effect of applying the provisions of FIN 48 increased
our 2007 opening balance of retained earnings $22.7 million.
Effective January 1, 2007, we adopted the provisions of Statement of Financial Accounting Standards No. 155 (SFAS 155), Accounting
for Certain Hybrid Financial Instruments, an amendment of Statement of Financial Accounting Standards Nos. 133 (SFAS 133) and 140
(SFAS 140). SFAS 155: (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of
SFAS 133; (c) establishes a requirement to evaluate beneficial interests in securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (d) clarifies that concentrations
of credit risk in the form of subordination are not embedded derivatives; and, (e) eliminates restrictions on a qualifying special-purpose
entity’s ability to hold passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial
instrument. The adoption of SFAS 155 did not have a material effect on our financial position or results of operations.
Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS 123(R)), Share-Based
Payment, which is a revision to Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation.
SFAS 123(R) focuses primarily on accounting for transactions in which an entity obtains employee service in exchange for share-based
payments. Under SFAS 123(R), share-based awards that do not require future service (i.e., vesting awards) are expensed immediately.
Share-based employee awards that require future service are amortized over the relevant service period. We adopted SFAS 123(R) using
the modified prospective transition method. In accordance with the modified prospective transition method, the provisions are generally
applied only to share-based awards granted subsequent to adoption. Prior to adoption of SFAS 123(R), the unrecognized compensation
cost related to nonvested stock awards was reported as additional paid-in capital and deferred compensation, a contra equity account.
The value of this contra equity account at the adoption of SFAS 123(R) was $13.8 million. The adoption of SFAS 123(R) did not have a
material effect on our financial position or results of operations.
Had we applied the fair value recognition provisions of SFAS 123 as of its original effective date, pro forma net income for the year
ended December 31, 2005 would have been $513.1 million, and net income per common share–basic would have been $1.73. Net income
per common share–assuming dilution would not have changed.
Effective January 1, 2006, we adopted the provisions of Financial Accounting Standards Board (FASB) Staff Position No. FAS 115-1
(FSP 115-1), The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which addresses the determination
of when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment
loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of other-than-temporary impairment and requires
certain disclosures about unrealized losses. The adoption of FSP 115-1 did not have a material effect on our financial position or results
of operations.
Effective December 31, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 158 (SFAS 158), Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).
SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit pension and other postretirement
plans as an asset or liability in its balance sheet and to recognize changes in that funded status through comprehensive income. Also,
under SFAS 158, defined benefit pension and other postretirement plan assets and obligations are to be measured as of the date of the
employer’s fiscal year-end. The adoption of SFAS 158 resulted in the following adjustments to our balance sheet: a decrease in other
assets of $55.0 million, a decrease in deferred income tax of $40.3 million, an increase in other liabilities of $69.4 million, and a decrease
in accumulated other comprehensive income of $84.1 million. The adoption of SFAS 158 had no effect on our results of operations.