2.2.0.7 false Summary of Significant Accounting Policies 0202 - Disclosure - Summary of Significant Accounting Policies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Summary of Significant Accounting Policies [Abstract] 0 id_SummaryOfSignificantAccountingPoliciesAbstract id false na duration Summary of Significant Accounting Policies. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Summary of Significant Accounting Policies. false 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Basis of Presentation and Principles of Consolidation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments that in the opinion of management are necessary for a fair presentation of the financial statements for the interim periods. The unaudited condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and in accordance with SEC rules, omit or condense certain information and footnote disclosures. Results for the interim periods are not necessarily indicative of results to be expected for any other interim period or for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K filed on February 26, 2010. The consolidated financial statements include the accounts of L-1 and its wholly-owned subsidiaries, after elimination of material inter-company transactions and balances. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Use of Estimates</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the allocation of the purchase price of the acquired businesses, assessing the impairment of goodwill, other intangible assets and property and equipment, revenue recognition, estimating the useful life of long-lived assets, inventory valuation allowance, provision for bad debts, income taxes, litigation and valuation of and accounting for financial instruments, including convertible notes, interest rate protection agreements, foreign currency contracts, warrants and stock options. Actual results could differ materially from those estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Revenue Recognition</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company derives its revenue from sales of solutions that include hardware components, consumables and software components and related maintenance, technical support, training and installation services integral to sales of hardware and software. The Company also derives revenues from sales of finger-print based background check enrollment services and government security and information technologies services. A customer, depending on its needs, may order solutions that include hardware, equipment, consumables, software products or services or combine these products and services to create a multiple element arrangement. The Company’s revenue recognition policies are described in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K filed on February 26, 2010. There have been no material changes to such policies. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Stock-Based Compensation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     L-1 uses the Black-Scholes valuation model to estimate the fair value of option awards. The following weighted average assumptions were utilized in the valuation of stock options in 2010 and 2009: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Six Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected common stock price volatility </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">55.4</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">58.4</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">56.4</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">57.8</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Risk free interest rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">2.9</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">3.7</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">3.5</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">4.0</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected life of options </div></td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">6.3 Years</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">6.3 Years</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">6.3 Years</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">6.3 Years</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Expected annual dividends </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The expected volatility rate is based on the historical volatility of the Company’s common stock. The expected life of options are calculated pursuant to the relevant guidance from Staff Accounting Bulletin No. 107. The Company estimates forfeitures based on historical rates. The risk free interest rate is based on the applicable treasury security whose term approximates the expected life of the options. The Company updates these assumptions on at least an annual basis and on an interim basis if significant changes to the assumptions are determined to be necessary. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Computation of Net Loss per Share</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Basic loss attributable to L-1’s shareholders per share is calculated by dividing net loss attributable to L-1’s shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss attributable to L-1’s shareholders per share is based upon the weighted average number of diluted shares outstanding during the period. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The weighted average number of shares of common stock outstanding during 2009, includes 1.1 million shares issuable pursuant to the Series A Convertible Preferred Stock before their conversion into common stock. Restricted share awards are included in the calculation of basic shares outstanding beginning on the date of vesting. The impact of approximately 0.2 million of common equivalent shares for the three and six month periods ended June 30, 2010 and the impact of 0.1 million for the six month period ended June 30, 2009, were not reflected in the net loss attributable to L-1’s shareholders per share as their effect would be anti-dilutive. There was no impact for the three month period ending June 30, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company calculates the effect of the Convertible Notes on diluted net loss attributable to L-1’s shareholders per share utilizing the “as if converted” method since the Company has the right to issue shares of common stock to settle the entire obligation upon conversion. For the three and six month periods ended June 30, 2010 and 2009, the effect was anti-dilutive. Accordingly, approximately 5.5 million shares of weighted average common stock issuable at conversion have been excluded from the determination of weighted average diluted shares outstanding. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In connection with the issuance of the Convertible Notes, the Company entered into a pre-paid forward contract with Bear Stearns (now JP Morgan Chase) for a payment of $69.8 million to purchase 3.5 million shares of the Company’s common stock at a price of $20.00 per share for delivery in 2012. The number of shares to be delivered under the contract is used to reduce weighted average basic and diluted shares outstanding for loss attributable to L-1’s shareholders per share purposes. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Adoption of New Accounting Standards</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective January 1, 2010, the Company adopted the following accounting standards: </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2009, the FASB issued the standard, <i>“Amendments to FASB Interpretation No. 46(R</i>)”. The standard changes the criteria to determine how an investee for a company is insufficiently capitalized or is not controlled through voting (or similar rights) and therefore should be consolidated. The adoption of this standard did not have a material impact on the financial statements for any of the periods presented. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In January 2010, the FASB issued the standard, <i>“Fair Value Measurements and Disclosures — Improving Disclosures about Fair Value Measurements”. </i>The adoption of this standard did not have a material impact on the financial statements for any of the periods presented. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Recently Issued Accounting Standards</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2009, the FASB issued the standard, <i>“Multiple Element Arrangements”, </i>which modifies accounting for multiple element arrangements by requiring that the separation of the arrangements be based on estimated selling prices based on entity specific assumptions rather than fair value, eliminating the residual method of allocation and requiring additional disclosures related to such arrangements. The standard is effective prospectively for arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company has not yet evaluated the impact the adoption of the standard will have on its consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Also in October 2009, the FASB issued the standard, <i>“Certain Revenue Arrangements That Include Software Elements”, </i>which amends software revenue recognition guidance to eliminate from its scope tangible products containing software components that function together to deliver the tangible product’s essential functionality and to provide guidance on how to allocate arrangement consideration to deliverables in an arrangement that contain both tangible products and software. The standard is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company has not yet evaluated the impact the adoption of the standard will have on its consolidated financial statements. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 1 2 false UnKnown UnKnown UnKnown false true