Pakistan is a country with scattered population, limited demand, large average access distances, poor infrastructure, low affordability. These are the factors that have restricted the phone coverage in Pakistan to 30 % and made the installation of a fixed line telephone network prohibitively expensive. Wireless Local Loop is an emerging technology that connects subscribers to the Pubic Switched Telephone Network using radio signals instead of fixed copper or optical fibre lines, which is one of the best possible solution to this problem. Compared to the deployment of wired alternative, WLL offers rapid deployment, reduced construction costs, low network maintenance, low network extension costs, etc. There are various technologies through which WLL can be implemented & no standards have yet emerged. So the selection of appropriate technology is mandatory, here viability of CDMA based WLL solution is discussed.
http://ieeexplore.ieee.org/Xplore/login.jsp?url=http%3A%2F%2Fieeexplore.ieee.org%2Fiel5%2F4382865%2F4382866%2F04382905.pdf%3Farnumber%3D4382905&authDecision=-203
Monday, March 22, 2010
Proud Pakistani by Anjum Niaz
Courtesy Daily Dawn
'Proud Pakistani' may sound good to the ears, but to make others realize its full potential requires a lot of hard work by the expatriate community.
Macabre as it is, the body of a 65 year-old Muslim woman was found covered with bacon in a hospital mortuary in London. She had died of cancer. "How could anyone think of such a thing...I do not know why they chose my mother?" said her devastated daughter.
With hate crimes ascendant in the West, now the Brits are betraying their bias by refusing visas to Muslims - non-whites of course - from all over the world ever since Tony Blair tagged along with Bush to "liberate" Iraq. And nearer home - that is USA, Yahya Jalil, a Stanford graduate from Pakistan now at Wharton School of Business, was stopped from re-entry after he returned from his spring break due to the US Immigration Services (INS) mess up.
A tennis star who left Pakistan many moons ago to seek greener pastures in the US, married a white woman to appear politically correct and became fully Americanized was heard saying: "Man, even I have lost my job!"
Is Fahd Husain then returning to Pakistan for all of the above reasons? "No", says the former editor of The Nation and a PTV host, who came to Columbia School of Journalism three years ago for a Masters degree. "I was the only Pakistani in the class and was elected class president two weeks after 9/11." Also, he stood first and bagged the Pulitzer Travelling Fellowship. Thereafter, he was snapped up by CBS as an Associate Producer.
At age 35, Fahd appears to have climbed the slippery totem pole, but is homeward bound.
"Never for a second have I been tempted to make America my home. While it's been a great learning experience for me, I am very excited to go back - a whole new world of television is waiting out there with so much potential, so much volume of stuff that needs to be done and I can make a difference."
With this as his raison d'etre to return, "running a newsroom back home," thrills him. His cool demeanour changes and his eyes blaze as he repeats again and again that TV in Pakistan is the "real engine for change" and has the "sheer power" to make a difference in the lives of people. "TV is like a wedge which rips open the story...every street corner in Pakistan is crawling with stories that must need be told."
But are the TV guys in Pakistan exactly ripping open stories? "No, there's this incestuous trend between print and electronic media - where you have, for example, newspaper reporters working for private TV channels! Holding a microphone does not make you a professional TV journalist."The 'tyranny of the small picture' demands ardour. "In Pakistan, we merely cover the news, not tell the story. Over there it's 'he said, she said' but over here it's synthesizing the facts. In America, a TV reporter makes a strong pitch to the editor why his story should be aired, he fights over space."
With a decade of journalism behind him, Fahd says what he learnt in one year at Columbia has made all the difference, "I had forgotten what hard work really is. Here I've been eating, sleeping and drinking journalism 24/7. It's in my pores. Shaken out of sahibdom that surrounded me in Pakistan, it's good to come down to earth and then start all over again."
"And I'm going back. I never burnt my bridges."
For those staying back, life in the US is another story. Many feel let down by Musharraf and his policies. "Pakistani professionals here have no input, no clout, no rapport with mainstream America. We have no strategy, no influence in the media to counter Indian propaganda. India is defining Pakistan. Our successive ambassadors have damaged Pakistan's image and they are not being held accountable...one has been made the foreign secretary and the other our ambassador to UK!" The grievance list is long on how Pakistan has lost the race inside the beltway in Washington. "Anyone who tells you that our image on the Hill is hunky-dory is lying!"
At a schoomzefest by a Pakistani activist, Rashid Chaudhry, Finance Minister Shaukat Aziz was heard claiming that Pakistan got burnt by 9/11, but his mojo managed to pull it out of the fire. "He should not be taking credit for something he did not do. It's common knowledge that Pakistan gained more than it lost on balance after September 11 by supporting the US against terror."
Asif Alam has a whole new take: He hates Pakistanis who "bleat and whine" (as the above) without really "delivering for their country." Believing in thinking big, but starting small, the systems architect founded the AOPP (Association of Pakistani Professionals) and soon attracted volunteers as passionate about Pakistan as himself to go that extra yard and find a niche to "proactively engage the American media" in defusing the "dangerously false impression that Pakistan begins and ends with gun-toting extremists."
An unenviable task, indeed. Imagine writing scores of letters to major news outlets impugning Pakistan each day? Not surprisingly then, AOPP's voice of reason often gets drowned in the cacophony of Pakistan-bashing; typical American arrogance; and corporate media's indifference, but the charge of the light brigade with 200-strong march on and recently pushed a resolution passed by New Hampshire Legislature demanding a just solution for Kashmir.
AOPP is now preparing a Journalist Review Database that will carry all the articles and editorials published in the media here on Pakistan, along with names and contact information of writers and publishers. Similarly, a congressional database archiving all the statements made by congressmen in reference to Pakistan is in the works.
Asif says there are many doubting Thomases for whom the AOPP is a road to nowhere. "But move on we will with our mission to promote the right image of Pakistan."
Born in Karachi and raised in Paris, Abu Dhabi and New York, Mahnaz Fancy who lives in New York City likes being called a South Asian: "I have enormous pride in my Pakistani heritage, but I choose to identify myself as a "South Asian", placing greater emphasis on the cultural heritage that we share rather than the religious and political differences that divide us."
With a background in arts and currently pursuing her doctoral studies in comparative literature, Mahnaz says children of immigrants - educated, raised or born in the US - prefer to be called South Asians. "Another factor in choosing this term is that the breadth of the South Asian Diaspora has rendered the national categories limiting when talking about our culture in today's world. In a personal sense, living away from our homelands while trying to maintain a cultural identity has forced us to re-examine the limitations of carrying historical enmity into our lives and bridging the prejudices."
"I am founding the South Asian Arts Forum with another Pakistani-born woman, Laleh Ispahani, whose education in law and social justice provides the ideal complement for my experience."
Mahnaz gets "enormous comfort and pleasure" in meeting other South Asians sharing the same "language, cuisine, music, literature and film." This diversity forges "new bonds across the political, national and religious divisions."
"It's not so much a question of assimilation or attachment to one's country," she says of Pakistani professionals here, "but rather finding a comfortable point somewhere in between the two. As immigrants, we move here for educational and professional opportunities but maintain strong ties to our homelands. As Muslims in post-9/11 America, this issue has become more complicated and we need to think about this more carefully."
Admitting that Pakistani-Americans don't have much of a public image here, Mahnaz thinks the solution lies in educating the US population about "our history, religion and culture." This "responsibility falls on my generation of Pakistanis, who are equally conversant in both American and Pakistani culture."
You can't quibble with her there!
'Proud Pakistani' may sound good to the ears, but to make others realize its full potential requires a lot of hard work by the expatriate community.
Macabre as it is, the body of a 65 year-old Muslim woman was found covered with bacon in a hospital mortuary in London. She had died of cancer. "How could anyone think of such a thing...I do not know why they chose my mother?" said her devastated daughter.
With hate crimes ascendant in the West, now the Brits are betraying their bias by refusing visas to Muslims - non-whites of course - from all over the world ever since Tony Blair tagged along with Bush to "liberate" Iraq. And nearer home - that is USA, Yahya Jalil, a Stanford graduate from Pakistan now at Wharton School of Business, was stopped from re-entry after he returned from his spring break due to the US Immigration Services (INS) mess up.
A tennis star who left Pakistan many moons ago to seek greener pastures in the US, married a white woman to appear politically correct and became fully Americanized was heard saying: "Man, even I have lost my job!"
Is Fahd Husain then returning to Pakistan for all of the above reasons? "No", says the former editor of The Nation and a PTV host, who came to Columbia School of Journalism three years ago for a Masters degree. "I was the only Pakistani in the class and was elected class president two weeks after 9/11." Also, he stood first and bagged the Pulitzer Travelling Fellowship. Thereafter, he was snapped up by CBS as an Associate Producer.
At age 35, Fahd appears to have climbed the slippery totem pole, but is homeward bound.
"Never for a second have I been tempted to make America my home. While it's been a great learning experience for me, I am very excited to go back - a whole new world of television is waiting out there with so much potential, so much volume of stuff that needs to be done and I can make a difference."
With this as his raison d'etre to return, "running a newsroom back home," thrills him. His cool demeanour changes and his eyes blaze as he repeats again and again that TV in Pakistan is the "real engine for change" and has the "sheer power" to make a difference in the lives of people. "TV is like a wedge which rips open the story...every street corner in Pakistan is crawling with stories that must need be told."
But are the TV guys in Pakistan exactly ripping open stories? "No, there's this incestuous trend between print and electronic media - where you have, for example, newspaper reporters working for private TV channels! Holding a microphone does not make you a professional TV journalist."The 'tyranny of the small picture' demands ardour. "In Pakistan, we merely cover the news, not tell the story. Over there it's 'he said, she said' but over here it's synthesizing the facts. In America, a TV reporter makes a strong pitch to the editor why his story should be aired, he fights over space."
With a decade of journalism behind him, Fahd says what he learnt in one year at Columbia has made all the difference, "I had forgotten what hard work really is. Here I've been eating, sleeping and drinking journalism 24/7. It's in my pores. Shaken out of sahibdom that surrounded me in Pakistan, it's good to come down to earth and then start all over again."
"And I'm going back. I never burnt my bridges."
For those staying back, life in the US is another story. Many feel let down by Musharraf and his policies. "Pakistani professionals here have no input, no clout, no rapport with mainstream America. We have no strategy, no influence in the media to counter Indian propaganda. India is defining Pakistan. Our successive ambassadors have damaged Pakistan's image and they are not being held accountable...one has been made the foreign secretary and the other our ambassador to UK!" The grievance list is long on how Pakistan has lost the race inside the beltway in Washington. "Anyone who tells you that our image on the Hill is hunky-dory is lying!"
At a schoomzefest by a Pakistani activist, Rashid Chaudhry, Finance Minister Shaukat Aziz was heard claiming that Pakistan got burnt by 9/11, but his mojo managed to pull it out of the fire. "He should not be taking credit for something he did not do. It's common knowledge that Pakistan gained more than it lost on balance after September 11 by supporting the US against terror."
Asif Alam has a whole new take: He hates Pakistanis who "bleat and whine" (as the above) without really "delivering for their country." Believing in thinking big, but starting small, the systems architect founded the AOPP (Association of Pakistani Professionals) and soon attracted volunteers as passionate about Pakistan as himself to go that extra yard and find a niche to "proactively engage the American media" in defusing the "dangerously false impression that Pakistan begins and ends with gun-toting extremists."
An unenviable task, indeed. Imagine writing scores of letters to major news outlets impugning Pakistan each day? Not surprisingly then, AOPP's voice of reason often gets drowned in the cacophony of Pakistan-bashing; typical American arrogance; and corporate media's indifference, but the charge of the light brigade with 200-strong march on and recently pushed a resolution passed by New Hampshire Legislature demanding a just solution for Kashmir.
AOPP is now preparing a Journalist Review Database that will carry all the articles and editorials published in the media here on Pakistan, along with names and contact information of writers and publishers. Similarly, a congressional database archiving all the statements made by congressmen in reference to Pakistan is in the works.
Asif says there are many doubting Thomases for whom the AOPP is a road to nowhere. "But move on we will with our mission to promote the right image of Pakistan."
Born in Karachi and raised in Paris, Abu Dhabi and New York, Mahnaz Fancy who lives in New York City likes being called a South Asian: "I have enormous pride in my Pakistani heritage, but I choose to identify myself as a "South Asian", placing greater emphasis on the cultural heritage that we share rather than the religious and political differences that divide us."
With a background in arts and currently pursuing her doctoral studies in comparative literature, Mahnaz says children of immigrants - educated, raised or born in the US - prefer to be called South Asians. "Another factor in choosing this term is that the breadth of the South Asian Diaspora has rendered the national categories limiting when talking about our culture in today's world. In a personal sense, living away from our homelands while trying to maintain a cultural identity has forced us to re-examine the limitations of carrying historical enmity into our lives and bridging the prejudices."
"I am founding the South Asian Arts Forum with another Pakistani-born woman, Laleh Ispahani, whose education in law and social justice provides the ideal complement for my experience."
Mahnaz gets "enormous comfort and pleasure" in meeting other South Asians sharing the same "language, cuisine, music, literature and film." This diversity forges "new bonds across the political, national and religious divisions."
"It's not so much a question of assimilation or attachment to one's country," she says of Pakistani professionals here, "but rather finding a comfortable point somewhere in between the two. As immigrants, we move here for educational and professional opportunities but maintain strong ties to our homelands. As Muslims in post-9/11 America, this issue has become more complicated and we need to think about this more carefully."
Admitting that Pakistani-Americans don't have much of a public image here, Mahnaz thinks the solution lies in educating the US population about "our history, religion and culture." This "responsibility falls on my generation of Pakistanis, who are equally conversant in both American and Pakistani culture."
You can't quibble with her there!
Monday, February 1, 2010
Microsoft highest & lowest prices of stock of the past year
Dividend stocks: Still your best bet
Despite the dividend depression we've just been through, you're still better off with stocks that pay you to own them.
[Related content: stocks, investing strategy, funds, dividends, bonds]
By Jeremy J. Siegel, Kiplinger's Personal Finance
The past year was a tough one for stocks that pay dividends. Through the first 11 months of 2009, non-dividend-paying stocks in the Standard & Poor's 500 Index ($INX) left dividend payers in the dust. What’s more, a record 78 companies in the S&P index either reduced or suspended their dividends.
Nevertheless, the evidence is overwhelming that dividend-paying stocks are still your best long-term investment. Through the years, diversified portfolios of stocks that pay dividends have not only beaten those that don't but have also handily outperformed the S&P 500.
Looking to invest? Start here
Here's an illustration of how dominant dividend payers have been over the long run. Starting with Jan. 1, 1957, I sorted the index's 500 companies by their dividend yield, going from highest to lowest. Then I recorded the return on the top 100 dividend yielders versus the bottom 100 and repeated this exercise for every year.
The result? The top dividend yielders are hands-down winners. If an investor had put $1,000 in a portfolio of the 100 highest-yielding stocks on Jan. 1, 1957, by Dec. 1, 2009, he would have accumulated more than $450,000 (assuming all dividends were reinvested).
That’s a hefty annualized return of 12.5%, an average of almost 2.5 percentage points per year greater than the return on the S&P index. That same $1,000 invested in the 100 lowest-yielding stocks returned only 8.8% per year.
Despite the dividend depression we've just been through, you're still better off with stocks that pay you to own them.
[Related content: stocks, investing strategy, funds, dividends, bonds]
By Jeremy J. Siegel, Kiplinger's Personal Finance
The past year was a tough one for stocks that pay dividends. Through the first 11 months of 2009, non-dividend-paying stocks in the Standard & Poor's 500 Index ($INX) left dividend payers in the dust. What’s more, a record 78 companies in the S&P index either reduced or suspended their dividends.
Nevertheless, the evidence is overwhelming that dividend-paying stocks are still your best long-term investment. Through the years, diversified portfolios of stocks that pay dividends have not only beaten those that don't but have also handily outperformed the S&P 500.
Looking to invest? Start here
Here's an illustration of how dominant dividend payers have been over the long run. Starting with Jan. 1, 1957, I sorted the index's 500 companies by their dividend yield, going from highest to lowest. Then I recorded the return on the top 100 dividend yielders versus the bottom 100 and repeated this exercise for every year.
The result? The top dividend yielders are hands-down winners. If an investor had put $1,000 in a portfolio of the 100 highest-yielding stocks on Jan. 1, 1957, by Dec. 1, 2009, he would have accumulated more than $450,000 (assuming all dividends were reinvested).
That’s a hefty annualized return of 12.5%, an average of almost 2.5 percentage points per year greater than the return on the S&P index. That same $1,000 invested in the 100 lowest-yielding stocks returned only 8.8% per year.
Microsft Financial staement Analysis...
ACCOUNTING PRINCIPLES
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method.
ESTIMATES AND ASSUMPTIONS
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples include estimates of loss contingencies, product warranties, product life cycles, product returns, and stock-based compensation forfeiture rates; assumptions such as the elements comprising a software arrangement, including the distinction between upgrades/enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized in our financial statements or tax returns; estimating the fair value and/or goodwill impairment for our reporting units; and determining when investment impairments are other-than-temporary. Actual results and outcomes may differ from management’s estimates and assumptions.
FOREIGN CURRENCIES
Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to Other Comprehensive Income (“OCI”).
Effective July 1, 2008, we began presenting gains and losses resulting from foreign currency remeasurements as a component of other income (expense). Prior to July 1, 2008, we included gains and losses resulting from foreign currency remeasurements as a component of sales and marketing expense. We changed our presentation because this better reflects how we manage these foreign currency exposures, as such gains and losses arising from the remeasurement of foreign currency transactions are incidental to our operations. Prior period amounts have been recast to conform to the current period presentation. See Note 3 – Other Income (Expense).
REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. We enter into certain arrangements where we are obligated to deliver multiple products and/or services (multiple elements). In these arrangements, we generally allocate the total revenue among the elements based on the sales price of each element when sold separately (vendor-specific objective evidence).
Revenue for retail packaged products, products licensed to original equipment manufacturers (“OEMs”), and perpetual licenses for current products under our Open and Select volume licensing programs generally is recognized as products are shipped. A portion of the revenue related to Windows XP is recorded as unearned due to undelivered elements including, in some cases, free post-delivery telephone support and the right to receive unspecified upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis. The amount of revenue allocated to undelivered elements is based on the vendor-specific objective evidence of fair value for those elements using the residual method or relative fair value method. Unearned revenue due to undelivered elements is recognized ratably on a straight-line basis over the related products’ life cycles. Revenue related to Windows Vista is not subject to a similar deferral because there are no significant undelivered elements. However, Windows Vista revenue is subject to deferral as a result of the Windows 7 Upgrade Option program which started June 26, 2009. The program allows customers who purchase PCs from participating computer makers or retailers with certain versions of Windows Vista to receive an upgrade to the corresponding version of Windows 7 at minimal or no cost. In addition, purchasers of retail packaged Windows Vista may also qualify for a free or discounted upgrade to the equivalent Windows 7 product with participating retailers in participating markets when the product becomes generally available. Accordingly, estimated revenue related to the undelivered Windows 7 product is deferred until the product is delivered.
Revenue from multi-year licensing arrangements are accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. Certain multi-year licensing arrangements include rights to receive future versions of software product on a when-and-if-available basis under Open and Select volume licensing programs (software assurance). In addition, other multi-year licensing arrangements include a perpetual license for current products combined with rights to receive future versions of software products on a when-and-if-available basis under Open, Select, and Enterprise Agreement volume licensing programs. Premier support services agreements, MSN Internet Access subscriptions, Xbox Live, and Microsoft Developer Network subscriptions are also accounted for as subscriptions.
Revenue related to our Xbox 360 game console, games published by us, and other hardware components is generally recognized when ownership is transferred to the retailers. Revenue related to games published by third parties for use on the Xbox 360 platform is recognized when games are manufactured by the game publishers. Display advertising revenue is recognized as advertisements are displayed. Search advertising revenue is recognized when the ad appears in the search results or when the action necessary to earn the revenue has been completed. Consulting services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services are provided.
Revenue generally is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.
COST OF REVENUE
Cost of revenue includes manufacturing and distribution costs for products sold and programs licensed, operating costs related to product support service centers and product distribution centers, costs incurred to drive traffic to our website and/or acquire online advertising space (“traffic acquisitions costs”), costs incurred to support and maintain Internet-based products and services, warranty costs, inventory valuation adjustments, costs associated with the delivery of consulting services, and the amortization of capitalized research and development costs associated with software products that have reached technological feasibility. Capitalized research and development costs are amortized over the estimated lives of the products.
PRODUCT WARRANTY
We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. For hardware warranties, we estimate the costs based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). The specific hardware warranty terms and conditions vary depending upon the product sold and the country in which we do business, but generally include parts and labor over a period generally ranging from 90 days to three years. For software warranties, we estimate the costs to provide bug fixes, such as security patches, over the estimated life of the software.
RESEARCH AND DEVELOPMENT
Research and development expenses include payroll, employee benefits, stock-based compensation, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, the amortization of purchased software code and services content, and in-process research and development. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to manufacturing. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products.
SALES AND MARKETING
Sales and marketing expenses include payroll, employee benefits, stock-based compensation, and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, tradeshows, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $1.4 billion, $1.2 billion, and $1.3 billion in fiscal years 2009, 2008, and 2007, respectively.
EMPLOYEE SEVERANCE
We record employee severance when a specific plan has been approved by management, the plan has been communicated to employees, and it is unlikely that significant changes will be made to the plan.
STOCK-BASED COMPENSATION
We account for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally four to five years) using the straight-line method.
INCOME TAXES
Income tax expense includes U.S. and international income taxes, plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes.
FINANCIAL INSTRUMENTS
We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair value of these investments approximates their carrying value. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. All cash equivalents and short-term investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in OCI.
Equity and other investments classified as long-term include both debt and equity instruments. Debt and publicly-traded equity securities are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in OCI. Common and preferred stock and other investments that are restricted for more than one year or are not publicly traded are recorded at cost or using the equity method.
We lend certain fixed-income and equity securities to enhance investment income. The loaned securities continue to be carried as investments on our balance sheet. Collateral and/or security interests received (securities pledged as collateral) are determined based upon the underlying security lent and the creditworthiness of the borrower. Cash collateral is recorded as an asset with a corresponding liability.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. We employ a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to which the fair value is less than cost, and for equity securities, our intent and ability to hold, or plans to sell, the investment. For fixed income securities, we also evaluate whether we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery. We also consider specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense) and a new cost basis in the investment is established.
Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. See Note 5 – Derivatives.
Our current financial liabilities, including our short-term debt, have fair values that approximate their carrying values. Our long-term financial liabilities consist of long-term debt which is recorded on the balance sheet at issuance price less unamortized discount.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. Activity in the allowance for doubtful accounts was as follows:
(In millions)
2009
2008
2007
Year Ended June 30,
Balance, beginning of period
$153
$117
$142
Charged to costs and other
360
88
64
Write-offs
(62)
(52)
(89)
Balance, end of period
$451
$153
$117
INVENTORIES
Inventories are stated at the lower of cost or market, using the average cost method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term, ranging from one to 15 years. Computer software developed or obtained for internal use is depreciated using the straight-line method over the estimated useful life of the software, generally three years.
GOODWILL
Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. During the second quarter of fiscal year 2009, we changed the date of our annual impairment test from July 1 to May 1. The change was made to more closely align the impairment testing date with our long-range planning and forecasting process. We believe the change in our annual impairment testing date did not delay, accelerate, or avoid an impairment charge. We have determined that this change in accounting principle is preferable under the circumstances and does not result in adjustments to our financial statements when applied retrospectively. See Note 10 – Goodwill.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to 10 years. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that may indicate the asset may be impaired. All of our intangible assets are subject to amortization. No material impairments of intangible assets have been identified during any of the periods presented.
SUBSEQUENT EVENTS
We evaluated events occurring between the end of our most recent fiscal year and July 29, 2009, the date the financial statements were issued.
RECENTLY ISSUED ACCOUNTING STANDARDS
Recently Adopted Accounting Pronouncements
On April 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Staff Positions (“FSP”) FAS 157-4, FSP FAS 115-2 and FAS 124-2, and FSP FAS 107-1 and APB 28-1. These FSPs are intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities. FSP FAS 157-4 clarifies the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. FSP FAS 115-2 and FAS 124-2 establishes a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings versus other comprehensive income. FSP FAS 107-1 and APB 28-1 expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to interim periods. Adoption of these FSPs did not have a significant impact on our accounting for financial instruments but did expand our associated disclosures.
On January 1, 2009, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 requires additional disclosures about the Company’s objectives in using derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and tabular disclosures of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. See Note 5 – Derivatives.
On July 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. See Note 4 – Investments.
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115, became effective for us on July 1, 2008. SFAS No. 159 gives us the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair value recorded upon election as an adjustment to beginning retained deficit. As of June 30, 2009, we had not elected the fair value option for any eligible financial asset or liability.
Recent Accounting Pronouncements Not Yet Adopted
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which is effective for us beginning July 1, 2010. This Statement amends Financial Accounting Standards Board Interpretation (“FIN”) No. 46(R), Consolidation of Variable Interest Entities an interpretation of ARB No. 51, to require revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe the adoption of this pronouncement will not have a material impact on our financial statements.
In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157 for us to July 1, 2009, for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We believe the adoption of the delayed items of SFAS No. 157 will not have a material impact on our financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which replaces SFAS No. 141. The statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. In April 2009, the FASB issued FSP FAS 141(R)-1 which amends SFAS No. 141(R) by establishing a model to account for certain pre-acquisition contingencies. Under the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5. SFAS No. 141(R) and FSP FAS 141(R)-1 are effective for us beginning July 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141(R) and FSP FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in net income. SFAS No. 160 is effective for us beginning July 1, 2009, and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. We believe the adoption of SFAS No. 160 will not have a material impact on our financial statements.
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The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method.
ESTIMATES AND ASSUMPTIONS
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples include estimates of loss contingencies, product warranties, product life cycles, product returns, and stock-based compensation forfeiture rates; assumptions such as the elements comprising a software arrangement, including the distinction between upgrades/enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized in our financial statements or tax returns; estimating the fair value and/or goodwill impairment for our reporting units; and determining when investment impairments are other-than-temporary. Actual results and outcomes may differ from management’s estimates and assumptions.
FOREIGN CURRENCIES
Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to Other Comprehensive Income (“OCI”).
Effective July 1, 2008, we began presenting gains and losses resulting from foreign currency remeasurements as a component of other income (expense). Prior to July 1, 2008, we included gains and losses resulting from foreign currency remeasurements as a component of sales and marketing expense. We changed our presentation because this better reflects how we manage these foreign currency exposures, as such gains and losses arising from the remeasurement of foreign currency transactions are incidental to our operations. Prior period amounts have been recast to conform to the current period presentation. See Note 3 – Other Income (Expense).
REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. We enter into certain arrangements where we are obligated to deliver multiple products and/or services (multiple elements). In these arrangements, we generally allocate the total revenue among the elements based on the sales price of each element when sold separately (vendor-specific objective evidence).
Revenue for retail packaged products, products licensed to original equipment manufacturers (“OEMs”), and perpetual licenses for current products under our Open and Select volume licensing programs generally is recognized as products are shipped. A portion of the revenue related to Windows XP is recorded as unearned due to undelivered elements including, in some cases, free post-delivery telephone support and the right to receive unspecified upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis. The amount of revenue allocated to undelivered elements is based on the vendor-specific objective evidence of fair value for those elements using the residual method or relative fair value method. Unearned revenue due to undelivered elements is recognized ratably on a straight-line basis over the related products’ life cycles. Revenue related to Windows Vista is not subject to a similar deferral because there are no significant undelivered elements. However, Windows Vista revenue is subject to deferral as a result of the Windows 7 Upgrade Option program which started June 26, 2009. The program allows customers who purchase PCs from participating computer makers or retailers with certain versions of Windows Vista to receive an upgrade to the corresponding version of Windows 7 at minimal or no cost. In addition, purchasers of retail packaged Windows Vista may also qualify for a free or discounted upgrade to the equivalent Windows 7 product with participating retailers in participating markets when the product becomes generally available. Accordingly, estimated revenue related to the undelivered Windows 7 product is deferred until the product is delivered.
Revenue from multi-year licensing arrangements are accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. Certain multi-year licensing arrangements include rights to receive future versions of software product on a when-and-if-available basis under Open and Select volume licensing programs (software assurance). In addition, other multi-year licensing arrangements include a perpetual license for current products combined with rights to receive future versions of software products on a when-and-if-available basis under Open, Select, and Enterprise Agreement volume licensing programs. Premier support services agreements, MSN Internet Access subscriptions, Xbox Live, and Microsoft Developer Network subscriptions are also accounted for as subscriptions.
Revenue related to our Xbox 360 game console, games published by us, and other hardware components is generally recognized when ownership is transferred to the retailers. Revenue related to games published by third parties for use on the Xbox 360 platform is recognized when games are manufactured by the game publishers. Display advertising revenue is recognized as advertisements are displayed. Search advertising revenue is recognized when the ad appears in the search results or when the action necessary to earn the revenue has been completed. Consulting services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services are provided.
Revenue generally is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.
COST OF REVENUE
Cost of revenue includes manufacturing and distribution costs for products sold and programs licensed, operating costs related to product support service centers and product distribution centers, costs incurred to drive traffic to our website and/or acquire online advertising space (“traffic acquisitions costs”), costs incurred to support and maintain Internet-based products and services, warranty costs, inventory valuation adjustments, costs associated with the delivery of consulting services, and the amortization of capitalized research and development costs associated with software products that have reached technological feasibility. Capitalized research and development costs are amortized over the estimated lives of the products.
PRODUCT WARRANTY
We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. For hardware warranties, we estimate the costs based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). The specific hardware warranty terms and conditions vary depending upon the product sold and the country in which we do business, but generally include parts and labor over a period generally ranging from 90 days to three years. For software warranties, we estimate the costs to provide bug fixes, such as security patches, over the estimated life of the software.
RESEARCH AND DEVELOPMENT
Research and development expenses include payroll, employee benefits, stock-based compensation, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, the amortization of purchased software code and services content, and in-process research and development. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to manufacturing. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products.
SALES AND MARKETING
Sales and marketing expenses include payroll, employee benefits, stock-based compensation, and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, tradeshows, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $1.4 billion, $1.2 billion, and $1.3 billion in fiscal years 2009, 2008, and 2007, respectively.
EMPLOYEE SEVERANCE
We record employee severance when a specific plan has been approved by management, the plan has been communicated to employees, and it is unlikely that significant changes will be made to the plan.
STOCK-BASED COMPENSATION
We account for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally four to five years) using the straight-line method.
INCOME TAXES
Income tax expense includes U.S. and international income taxes, plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes.
FINANCIAL INSTRUMENTS
We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair value of these investments approximates their carrying value. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. All cash equivalents and short-term investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in OCI.
Equity and other investments classified as long-term include both debt and equity instruments. Debt and publicly-traded equity securities are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in OCI. Common and preferred stock and other investments that are restricted for more than one year or are not publicly traded are recorded at cost or using the equity method.
We lend certain fixed-income and equity securities to enhance investment income. The loaned securities continue to be carried as investments on our balance sheet. Collateral and/or security interests received (securities pledged as collateral) are determined based upon the underlying security lent and the creditworthiness of the borrower. Cash collateral is recorded as an asset with a corresponding liability.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. We employ a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to which the fair value is less than cost, and for equity securities, our intent and ability to hold, or plans to sell, the investment. For fixed income securities, we also evaluate whether we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery. We also consider specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense) and a new cost basis in the investment is established.
Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. See Note 5 – Derivatives.
Our current financial liabilities, including our short-term debt, have fair values that approximate their carrying values. Our long-term financial liabilities consist of long-term debt which is recorded on the balance sheet at issuance price less unamortized discount.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. Activity in the allowance for doubtful accounts was as follows:
(In millions)
2009
2008
2007
Year Ended June 30,
Balance, beginning of period
$153
$117
$142
Charged to costs and other
360
88
64
Write-offs
(62)
(52)
(89)
Balance, end of period
$451
$153
$117
INVENTORIES
Inventories are stated at the lower of cost or market, using the average cost method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term, ranging from one to 15 years. Computer software developed or obtained for internal use is depreciated using the straight-line method over the estimated useful life of the software, generally three years.
GOODWILL
Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. During the second quarter of fiscal year 2009, we changed the date of our annual impairment test from July 1 to May 1. The change was made to more closely align the impairment testing date with our long-range planning and forecasting process. We believe the change in our annual impairment testing date did not delay, accelerate, or avoid an impairment charge. We have determined that this change in accounting principle is preferable under the circumstances and does not result in adjustments to our financial statements when applied retrospectively. See Note 10 – Goodwill.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to 10 years. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that may indicate the asset may be impaired. All of our intangible assets are subject to amortization. No material impairments of intangible assets have been identified during any of the periods presented.
SUBSEQUENT EVENTS
We evaluated events occurring between the end of our most recent fiscal year and July 29, 2009, the date the financial statements were issued.
RECENTLY ISSUED ACCOUNTING STANDARDS
Recently Adopted Accounting Pronouncements
On April 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Staff Positions (“FSP”) FAS 157-4, FSP FAS 115-2 and FAS 124-2, and FSP FAS 107-1 and APB 28-1. These FSPs are intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities. FSP FAS 157-4 clarifies the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. FSP FAS 115-2 and FAS 124-2 establishes a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings versus other comprehensive income. FSP FAS 107-1 and APB 28-1 expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to interim periods. Adoption of these FSPs did not have a significant impact on our accounting for financial instruments but did expand our associated disclosures.
On January 1, 2009, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 requires additional disclosures about the Company’s objectives in using derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and tabular disclosures of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. See Note 5 – Derivatives.
On July 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. See Note 4 – Investments.
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115, became effective for us on July 1, 2008. SFAS No. 159 gives us the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair value recorded upon election as an adjustment to beginning retained deficit. As of June 30, 2009, we had not elected the fair value option for any eligible financial asset or liability.
Recent Accounting Pronouncements Not Yet Adopted
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which is effective for us beginning July 1, 2010. This Statement amends Financial Accounting Standards Board Interpretation (“FIN”) No. 46(R), Consolidation of Variable Interest Entities an interpretation of ARB No. 51, to require revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe the adoption of this pronouncement will not have a material impact on our financial statements.
In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157 for us to July 1, 2009, for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We believe the adoption of the delayed items of SFAS No. 157 will not have a material impact on our financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which replaces SFAS No. 141. The statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. In April 2009, the FASB issued FSP FAS 141(R)-1 which amends SFAS No. 141(R) by establishing a model to account for certain pre-acquisition contingencies. Under the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5. SFAS No. 141(R) and FSP FAS 141(R)-1 are effective for us beginning July 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141(R) and FSP FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in net income. SFAS No. 160 is effective for us beginning July 1, 2009, and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. We believe the adoption of SFAS No. 160 will not have a material impact on our financial statements.
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