This excerpt taken from the CVS 10-K filed Feb 27, 2007.
New Accounting Pronouncements ~ The Company adopted, SFAS No. 123(R), Share-Based Payment, effective January 1, 2006. This statement established standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. The statement focused primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The adoption of this statement resulted in a $42.7 million reduction in net earnings for 2006. Please see Note 7 to the Companys consolidated financial statements for additional information regarding stock-based compensation.
The Company adopted FASB Staff Position (FSP) No. FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period, effective January 1, 2006. The FSP addresses the accounting for rental costs associated with operating leases that are incurred during a construction period and requires rental costs associated with ground or building operating leases that are incurred during a construction period to be recognized as rental expense over the life of the lease. The adoption of this statement did not have a material impact on the Companys consolidated results of operations, financial position or cash flows.
The Company adopted the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, effective November 15, 2006. SAB No. 108 requires misstatements to be quantified based on their impact on each of the financial statements and related disclosures. The adoption of this statement resulted in a $24.7 million increase in net earnings for 2006.
The Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R), effective December 15, 2006. SFAS No. 158 requires an employer to recognize in its statement of financial position an asset for a plans overfunded status or a liability for a plans underfunded status, measure a plans assets and its obligations that determine its funded status as of the end of the employers fiscal year, and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income and in a separate component of shareholders equity. The adoption of this statement did not have a material impact on the Companys consolidated results of operations, financial position or cash flows.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109. FIN No. 48 clarifies the accounting and disclosure for uncertain tax positions, which relate to the uncertainty about how certain tax positions taken or expected to be taken on a tax return should be reflected in the financial statements before they are finally resolved with the taxing authorities. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. Although the Company is still analyzing the impact of FIN No. 48, it does not believe the adoption will have a material impact on its consolidated results of operations and financial position.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures regarding fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact that SFAS No. 157 may have on its consolidated results of operations and financial position.