1.0.0.3falseSignificant Accounting Policiesfalse1$falsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli020us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationstringNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalse1falsefalse00falsefalseNo definition available.false31us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationstringNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<b><font style="font-family: Arial, Helvetica">Note 1. </font></b>
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<b><font style="font-family: Arial, Helvetica">Significant
Accounting Policies</font></b>
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<b><i>Basis of Presentation.  </i></b>The consolidated
financial statements reflect the accounts of Goodrich
Corporation and its majority-owned subsidiaries (“the
Company” or “Goodrich”). Investments in 20 to
50 percent-owned affiliates are accounted for using the
equity method. Equity in earnings (losses) from these businesses
is included in other income (expense) — net.
Intercompany accounts and transactions are eliminated.
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A<i>s </i>discu<i>s</i>sed in Note 6, “Discontinued
Operations”, G<i>o</i>odri<i>c</i>h Aviation Technical
Services, Inc. (ATS) has been accounted for as a discontinued
operation. Unless otherwise noted, disclosures herein pertain to
the Company’s continuing operations.
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<b><i>Cash Equivalents.</i></b>  Cash equivalents
consist of highly liquid investments with a maturity of three
months or less at the time of purchase.
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<b><i>Allowance for Doubtful Accounts.  </i></b>The
Company evaluates the collectibility of trade receivables based
on a combination of factors. The Company regularly analyzes
significant customer accounts and, when the Company becomes
aware of a specific customer’s inability to meet its
financial obligations to the Company, which may occur in the
case of bankruptcy filings or deterioration in the
customer’s operating results or financial position, the
Company records a specific reserve for bad debt to reduce the
related receivable to the amount the Company reasonably believes
is collectible. The Company also records reserves for bad debts
for all other customers based on a variety of factors including
the length of time the receivables are past due, the financial
health of the customer, macroeconomic considerations and
historical experience. If circumstances related to specific
customers change, the Company’s estimates of the
recoverability of receivables could be further adjusted. See
Note 16, “Supplemental Balance Sheet Information”.
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<b><i>Inventories.</i></b>  Inventories are stated at
the lower of cost or market. Certain U.S. inventories are
valued by the
<font style="white-space: nowrap">last-in,</font>
first-out (LIFO) cost method. Inventories not valued by the LIFO
method are valued principally by the average cost method. See
Note 10, “Inventories”.
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Inventoried costs on long-term contracts include certain
pre-production costs, consisting primarily of tooling and
engineering design and production costs, including applicable
overhead. The costs attributed to units delivered under
long-term commercial contracts are based on the estimated
average cost of all units expected to be produced and are
determined under the learning curve concept, which anticipates a
predictable decrease in unit costs as tasks and production
techniques become more efficient through repetition. This
usually results in an increase in inventory (referred to as
“excess-over average”) during the early years of a
contract. If in-process inventory plus estimated costs to
complete a specific contract exceed the anticipated remaining
sales value of such contract, the excess is charged to cost of
sales in the period identified.
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In accordance with industry practice, costs in inventory include
amounts relating to contracts with long production cycles, some
of which are not expected to be realized within one year.
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<b><i>Long-Lived Assets.</i></b>  Property, plant and
equipment, including amounts recorded under capital leases, are
recorded at cost. Depreciation and amortization is computed
principally using the straight-line method over the following
estimated useful lives: buildings and improvements, 15 to
40 years; machinery and equipment, 5 to 15 years; and
internal use software, 2 to 10 years. In the case of
capitalized lease assets, amortization is recognized over the
lease term if shorter. Repairs and maintenance costs are
expensed as incurred. See Note 16, “Supplemental
Balance Sheet Information”.
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<b><i>Goodwill.  </i></b>Goodwill represents the
excess of the purchase price over the fair value of the net
assets of acquired businesses. Intangible assets deemed to have
indefinite lives and goodwill are not subject to amortization,
but are reviewed for impairment annually, or more frequently, if
indicators of potential impairment exist. See Note 11,
“Goodwill and Identifiable Intangible Assets”.
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<b><i>Identifiable Intangible
Assets.  </i></b>Identifiable intangible assets are
recorded at cost or, when acquired as part of a business
combination, at estimated fair value. These assets include
patents and other technology agreements, sourcing contracts,
trademarks, licenses, customer relationships and non-compete
agreements. Identifiable intangible assets are generally
amortized over their useful life using undiscounted cash flows,
a method that reflects the pattern in which the economic
benefits of the intangible assets are consumed, or the
straight-line method.
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Impairments of identifiable intangible assets are recognized
when events or changes in circumstances indicate that the
carrying amount of the asset, or related groups of assets, may
not be recoverable and the Company’s estimate of
undiscounted cash flows over the assets’ remaining useful
lives is less than the carrying value of the assets. Measurement
of the amount of impairment may be based upon an appraisal,
market values of similar assets or estimated discounted future
cash flows resulting from the use and ultimate disposition of
the asset. See Note 11, “Goodwill and Identifiable
Intangible Assets”.
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<b><i>Revenue and Income Recognition.  </i></b>For
revenues not recognized under the contract method of accounting
or separately priced extended warranty or product maintenance
contracts, the Company recognizes revenues from the sale of
products at the point of passage of title, which is generally at
the time of shipment. Revenues earned from providing maintenance
service are recognized when the service is complete.
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The Company has entered into long-term product maintenance
arrangements to provide specific products and services to
customers for a specified amount per flight hour, brake landing
<font style="white-space: nowrap">and/or</font>
aircraft landings. Revenue is recognized for these arrangements
as the service is performed and the costs are incurred. The
Company has sufficient historical evidence that indicates that
the costs of performing the service under the contract are
incurred on other than a straight-line basis.
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For revenues recognized under the contract method of accounting,
the Company recognizes sales and profits on each contract in
accordance with the percentage-of-completion method, generally
using units-of-delivery as the basis to measure progress towards
completing the contract and recognizing revenue and profit. This
method requires estimates that involve various assumptions and
projections relative to the outcome of future events, including
the quantity and timing of product deliveries. Projected
revenues over the contract period may include estimates of
recoveries asserted against the customer for delays, changes in
specifications and designs or other unanticipated costs. Amounts
related to contract claims or change orders are included in
projected revenues when they can be reliably estimated and
realization is considered probable. The contract method of
accounting also involves the use of various estimating
techniques to project costs at completion. Estimates include
assumptions relative to future labor performance and rates, and
projections relative to material and overhead costs. These
assumptions involve various levels of expected performance
improvements.
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The Company re-evaluates its contract estimates periodically and
reflects changes in estimates in the current period using the
cumulative
<font style="white-space: nowrap">catch-up</font>
method. A significant portion of the Company’s sales in its
aerostructures business in the Nacelles and Interior Systems
segment are long-term,
<font style="white-space: nowrap">fixed-priced</font>
contracts, many of which contain escalation clauses, requiring
delivery of products over several years and frequently providing
the buyer with option pricing on follow-on orders.
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Included in Accounts Receivable at December 31, 2009 and
2008, were receivable amounts under contracts in progress of
$190.8 million and $164.7 million, respectively, that
represent amounts earned but not billable. These amounts become
billable according to their contract terms, which
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usually consider the passage of time, achievement of milestones
or completion of the project. Of the $190.8 million at
December 31, 2009, $104.1 million is expected to be
collected after December 31, 2010.
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The Company had no receivable balances that had been billed but
not paid by customers under retainage provisions in contracts.
The Company also did not have any receivable balances, billed or
unbilled, that represented claims or other disagreements with
customers subject to uncertainty concerning their determination
or ultimate realization.
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The Company’s aerostructures business is party to a
long-term supply arrangement whereby it receives cash payments
for its performance over a period that extends beyond the
Company’s performance period of the contract. The contract
is accounted for using the percentage of completion method of
contract accounting. Unbilled receivables include revenue
recognized that will be realized from cash payments to be
received beyond the period of performance. In estimating its
revenues to be received under the contract, cash receipts that
are expected to be received beyond the performance period are
included at their present value as of the end of the performance
period.
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<b><i>Income Taxes.</i></b>  Income tax expense for
federal, foreign, state and local income taxes are calculated on
reported financial reporting pre-tax income based on current tax
law and include the cumulative effect of any changes in tax
rates from those used previously in determining deferred tax
assets and liabilities. Deferred taxes and liabilities are based
on differences between financial reporting and tax bases of
assets and liabilities and are measured using enacted tax laws
and rates. A valuation allowance is provided on deferred tax
assets if it is determined that it is more likely than not that
the asset will not be realized. The Company records interest
(net of any applicable tax benefit) on potential tax
contingencies as a component of its tax expense. See
Note 15, “Income Taxes”.
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The Company establishes reserves for uncertain tax positions in
accordance with the Income Taxes subtopic of the Financial
Accounting Standards Board Accounting Standards Codification.
The subtopic prescribes the minimum recognition threshold a tax
position is required to meet before being recognized in the
financial statements. Additionally, the subtopic provides
guidance on derecognition, measurement, classification, interest
and penalties, and transition of uncertain tax positions.
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<b><i>Rotable Assets.  </i></b>Rotable assets are
components, which are held for the purpose of exchanging with a
customer for used components in conjunction with an overhaul
service transaction. Rotable assets are recorded as other assets
and depreciated over their estimated economic useful life.
Because rotable assets are generally overhauled during each
cycle, the overhaul cost is charged to cost of sales in the
period of the overhaul. See Note 16, “Supplemental
Balance Sheet Information”.
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<b><i>Participation Payments.  </i></b>Certain
businesses make cash payments under long-term contractual
arrangements to original equipment manufacturers (OEM) or system
contractors in return for a secured position on an aircraft
program. Participation payments are capitalized as other assets
when a contractual liability has been incurred, and are
amortized as a reduction to sales, as appropriate. Participation
payments are amortized over the estimated number of production
units to be shipped over the program’s production life
which reflects the pattern in which the economic benefits of the
participation payments are consumed. The carrying amount of
participation payments is evaluated for recovery at least
annually or when other indicators of impairment occur such as a
change in the estimated number of units or the economics of the
program. If such estimates change, amortization expense is
adjusted
<font style="white-space: nowrap">and/or</font> an
impairment charge is recorded, as appropriate, for the effect of
the revised estimates. No such impairment charges were recorded
in 2009, 2008 or 2007. See Note 16, “Supplemental
Balance Sheet Information”.
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<b><i>Sales Incentives.  </i></b>The Company offers
sales incentives to certain airline customers in connection with
sales contracts. These incentives may consist of up-front cash
payments, merchandise credits
<font style="white-space: nowrap">and/or</font> free
products. The cost of these incentives is recognized as an
expense in the period incurred unless recovery of these costs is
specifically guaranteed by the customer in the contract. If the
contract contains such a guarantee, then the cost of the sales
incentive is capitalized as other assets and amortized to cost
of sales, or as a reduction to sales, as appropriate, using the
straight-line method over the remaining contract term. The
carrying amount of sales incentives is evaluated for recovery
when indicators of potential impairment exist. The carrying
value of sales incentives is also compared annually to the
amount recoverable under the terms of the guarantee in the
customer contract. If the amount of the carrying value of the
sales incentives exceeds the amount recoverable in the contract,
the carrying value is reduced. No such charges were recorded in
2009, 2008 or 2007. See Note 16, “Supplemental Balance
Sheet Information”.
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<b><i>Flight Certification Costs.  </i></b>When a
supply arrangement is secured, certain businesses may agree to
supply hardware to an OEM to be used in flight certification
testing
<font style="white-space: nowrap">and/or</font> make
cash payments to reimburse an OEM for costs incurred in testing
the hardware. The flight certification testing is necessary to
certify aircraft systems/components for the aircraft’s
airworthiness and allows the aircraft to be flown and thus sold
in the country certifying the aircraft. Flight certification
costs are capitalized in other assets and are amortized to cost
of sales, or as a reduction to sales, as appropriate, over the
projected number of aircraft to be manufactured. The carrying
amount of flight certification costs is evaluated for recovery
when indicators of impairment exist. The carrying value of the
asset and amortization expense is adjusted when the estimated
number of units to be manufactured changes. No impairment
charges were recorded in 2009, 2008 or 2007. See Note 16,
“Supplemental Balance Sheet Information”.
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<b><i>Entry Fees.  </i></b>The aerostructures business
in the Company’s Nacelles and Interior Systems segment made
cash payments to an OEM under a long-term contractual
arrangement related to a new engine program. The payments are
referred to as entry fees and entitle the Company to a
controlled access supply contract and a percentage of total
program revenue generated by the OEM. Entry fees are capitalized
in other assets and are amortized over units of delivery as a
reduction to sales. The carrying amount of entry fees is
evaluated for recovery at least annually or when other
significant assumptions or economic conditions change. Recovery
of entry fees is assessed based on the expected cash flow from
the program over the remaining program life as compared to the
recorded amount of entry fees. If the carrying value of the
entry fees exceeds the cash flow to be generated from the
program, a charge would be recorded to reduce the entry fees to
their recoverable amounts. No such impairment charges were
recorded in 2009, 2008 or 2007. See Note 16,
“Supplemental Balance Sheet Information”.
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<b><i>Shipping and Handling.  </i></b>Shipping and
handling costs are recorded in cost of sales.
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<b><i>Financial Instruments.  </i></b>The
Company’s financial instruments include cash and cash
equivalents, accounts and notes receivable, foreign currency
forward contracts, accounts payable and debt. Because of their
short maturity, the carrying amount of cash and cash
equivalents, accounts and notes receivable, accounts payable and
short-term bank debt approximates fair value. Fair value of
long-term debt is based on quoted market prices or rates
available to the Company for debt with similar terms and
maturities.
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Derivative financial instruments are carried on the consolidated
balance sheet at fair value. The fair value of derivatives and
other forward contracts is based on quoted market prices.
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<b><i>Share-Based Compensation.  </i></b>The Company
utilizes the fair value method of accounting to account for
share-based compensation awards. See Note 7,
“Share-Based Compensation”.
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<b><i>Pension and Postretirement
Benefits.  </i></b>The Company recognizes the funded
status of the Company’s pension plans and postretirement
benefits plans other than pension (OPEB) on its consolidated
balance sheet, with a corresponding adjustment to accumulated
other comprehensive income (loss), net of tax. The measurement
date used to determine the pension and OPEB obligations and
assets for all plans was December 31. Plan assets have been
valued at fair value. See Note 14, “Pensions and
Postretirement Benefits”.
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<b><i>Research and Development.  </i></b>The Company
performs research and development under company-funded programs
for commercial products and under contracts with others.
Research and development under contracts with others is
performed on both military and commercial products.
Company-funded research and development programs are expensed as
incurred and included in selling and administrative costs.
Customer funding of the Company’s research and development
efforts is recorded as an offset to research and development
expense. Total research and development expenditures from
continuing operations in 2009, 2008 and 2007 were approximately
$239 million, $284 million and $280 million,
respectively. These amounts are net of approximately
$101 million, $133 million and $124 million,
respectively, which were funded by customers.
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<b><i>Earnings Per Share.</i></b>  See Note 8,
“Earnings Per Share”.
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<b><i>Reclassifications.  </i></b>Certain amounts in
prior year financial statements have been reclassified to
conform to the current year presentation.
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<b><i>Use of Estimates.  </i></b>The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates. During 2009, 2008 and 2007, the Company
changed its estimates of revenues and costs on certain long-term
contracts, primarily in its aerostructures and aircraft wheels
and brakes businesses which increased income from continuing
operations before income taxes during 2009, 2008 and 2007 by
$45.1 million ($28.3 million after tax or $0.23 per
diluted share), $111.9 million ($70.1 million after
tax or $0.56 per diluted share) and $76.1 million
($48 million after tax or $0.38 per diluted share),
respectively.
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<b><i>Environmental Liabilities.  </i></b>The Company
establishes environmental liabilities when it is probable that
an obligation has been incurred and the Company has the ability
to reasonably estimate the liability. The Company capitalizes
environmental costs only if the costs are recoverable and
(1) the costs extend the life, increase the capacity, or
improve the safety or efficiency of property owned by the
Company as compared with the condition of that property when
originally constructed or acquired; (2) the costs mitigate
or prevent environmental contamination that has yet to occur and
that otherwise may result from future operations or activities
and the costs improve the property compared with its condition
when constructed or acquired; or (3) the costs are incurred
in preparing the property for sale. All other environmental
costs are expensed. See Note 17, “Contingencies”.
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<b><i>Toxic Tort.  </i></b>The Company establishes
toxic tort liabilities, including asbestos, when it is probable
that an obligation has been incurred and the Company has the
ability to reasonably estimate the liability. The Company
typically records a liability for toxic tort when legal actions
are in advanced stages (proximity to trial or settlement). The
Company expenses legal costs for toxic tort issues when
incurred. See Note 17, “Contingencies”.
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<b><i>Service and Product Warranties.  </i></b>The
Company provides service and warranty policies on certain of its
products. The Company accrues liabilities under service and
warranty policies based upon specific claims and a review of
historical warranty and service claim experience. Adjustments
are made to accruals as claim data and historical experience
change. In addition, the Company incurs discretionary costs to
service its products in connection with product performance
issues, which are expensed as incurred. See Note 16,
“Supplemental Balance Sheet Information”.
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<b><i>Deferred Settlement Credits.  </i></b>The
Company reached agreements with several of its insurance
carriers that are in run-off, insolvent or are undergoing
solvent schemes of arrangements to receive negotiated payments
in exchange for loss of insurance coverage for third party
claims against the Company. The portion of these negotiated
payments related to past costs was recognized in income. The
portion related to future claims is recorded as a deferred
settlement credit and reported within accrued expenses and other
non-current liabilities. The deferred settlement credits will be
recognized in income in the period the applicable insurance
would have been realized. See Note 17,
“Contingencies”.
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