Accounting Changes and Error Corrections

3 Months Ended

Jun. 30, 2011

Accounting Changes and Error Corrections

Accounting Changes and Error Corrections [Text Block]

Recently adopted Accounting Guidance

In October 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on revenue recognition, which was effective for us beginning January 1, 2011.  Under the new guidance, arrangements that include tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance.  Software-enabled products will now be subject to other relevant revenue recognition guidance.  Additionally, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition.  Adoption of this new guidance has not had a material impact on our financial statements.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosure on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of fair value measurements hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which was effective for us beginning January 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

In June 2010, the FASB issued authoritative guidance on milestone method of revenue recognition, which was effective for us beginning January 1, 2011. Under the new guidance, it clarifies when revenue can be recognized when a milestone is achieved if the milestone meets all criteria to be considered substantive.  A milestone does not include events for which the occurrence is either contingent solely upon the passage of time or the result of a counter-party’s performance.

For a milestone to be substantive it must meet the following criteria: 

1. The consideration being earned should be commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the item delivered as a result of the vendor’s performance,

2.  Should be related solely to past performance,

`               3.  Be reasonable relative to all deliverables and payment terms in the arrangement, and

4.  Should be considered in its entirety and cannot be bifurcated.

The decision to use the milestone method is a policy election and any of the other revenue recognition methods could be applied. The new guidance includes disclosures on how the milestone method should be reported within each reporting period.  Adoption of this new guidance has not had a material impact on our financial statements.

In December 2010, the FASB issued authoritative guidance which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts, which was effective for us beginning on January 1, 2011. Early adoption was not permitted. Under the new guidance reporting units with zero or negative carrying amounts will be required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with the existing guidance and examples in the FASB guidance document, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Adoption of this new guidance has not had a material impact on our financial statements.