UFS » Topics » OTHER THAN TEMPORARY IMPAIRMENT

These excerpts taken from the UFS 10-Q filed May 8, 2009.

OTHER THAN TEMPORARY IMPAIRMENT

In April 2009, the FASB issued Staff Position (“FSP”) No. 115-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. Under this FSP, the primary change to the other-than-temporary impairments (“OTTI”) model for debt securities is the change in focus from an entity’s intent and ability to hold a security until recovery. Instead, an OTTI is triggered if (1) an entity has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery, or (3) it does not expect to recover the entire amortized cost basis of the security. In addition, the FSP changes the presentation of an OTTI in the income statement if the only reason for recognition is a credit loss (i.e., the entity does not expect to recover its entire amortized cost basis). That is, if the entity has the intent to sell the security or it is more likely than not that it will be required to sell the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings. However, if the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security, but the security has suffered a credit loss, the impairment charge will be separated into the credit loss component, which is recorded in earnings, and the remainder of the impairment charge, which is recorded in other comprehensive income (OCI).

 

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Table of Contents

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

 

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Finally, the FSP amends the disclosure provisions of Statement 115 “Accounting for Certain Investments in Debt and Equity Securities” for both debt and equity securities. The FSP requires disclosures in interim and annual periods for major security types identified on the basis of how an entity manages, monitors, and measures its securities and the nature and risks of the security.

This FSP is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. The Company is currently assessing the impact of adopting the requirements of this FSP in the second quarter of 2009.

 

11


Table of Contents

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

 

Other Than Temporary Impairment

In April 2009, the FASB issued Staff Position (“FSP”) No. 115-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” Under this FSP, the primary change to the other-than-temporary impairments (“OTTI”) model for debt securities is the change in focus from an entity’s intent and ability to hold a security until recovery. Instead, an OTTI is triggered if (1) an entity has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery, or (3) it does not expect to recover the entire amortized cost basis of the security. In addition, the FSP changes the presentation of an OTTI in the income statement if the only reason for recognition is a credit loss (i.e., the entity does not expect to recover its entire amortized cost basis). That is, if the entity has the intent to sell the security or it is more likely than not that it will be required to sell the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings. However, if the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security, but the security has suffered a credit loss, the impairment charge will be separated into the credit loss component, which is recorded in earnings, and the remainder of the impairment charge, which is recorded in other comprehensive income (“OCI”).

Finally, the FSP amends the disclosure provisions of Statement 115 “Accounting for Certain Investments in Debt and Equity Securities” for both debt and equity securities. The FSP requires disclosures in interim and annual periods for major security types identified on the basis of how an entity manages, monitors, and measures its securities and the nature and risks of the security.

This FSP is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. We are currently assessing the impact of adopting the requirements of this FSP in the second quarter of 2009.

EXCERPTS ON THIS PAGE:

10-Q (2 sections)
May 8, 2009
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