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This excerpt taken from the LLY 10-K filed Feb 22, 2010. Note 2: Implementation
of New Financial Accounting Pronouncements
The Financial Accounting Standards Board (FASB) Statement on
Business Combinations was effective for us for business
combinations with the acquisition date on or after
January 1, 2009. This Statement, with its amendment,
changes the way in which the acquisition method is to be applied
in a business combination. The primary revisions require an
acquirer in a business combination to measure assets acquired,
liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, at their fair values as of
that date, with limited exceptions specified in the Statement.
This Statement also requires the acquirer in a business
combination achieved in stages to recognize the identifiable
assets and liabilities, as well as the noncontrolling interest
in the acquiree, at the full amounts of their fair values (or
other amounts determined in accordance with the Statement).
Assets acquired and liabilities assumed arising from
contingencies are to be measured at fair value if it can be
determined during the measurement period. If fair value cannot
be determined, the asset or liability should be recognized at
the acquisition date if it is probable that an asset existed or
a liability had been incurred and the amount can be reasonably
estimated. This Statement significantly amends other
authoritative guidance on Business
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Combinations as well, and now requires the capitalization of
research and development assets acquired in a business
combination at their acquisition-date fair values, separately
from goodwill. The accounting for income taxes was also amended
by this Statement to require the acquirer to recognize changes
in the amount of its deferred tax benefits that are recognizable
because of a business combination either in income from
continuing operations in the period of the combination or
directly in contributed capital, depending on the circumstances.
We adopted the provisions of the FASB Statement on
Consolidations relating to the accounting for noncontrolling
interests on January 1, 2009. This Statement amends
previous authoritative guidance, by requiring companies to
report a noncontrolling interest in a subsidiary as equity in
its consolidated financial statements. Disclosure of the amounts
of consolidated net income attributable to the parent and the
noncontrolling interest will be required. This Statement also
clarifies that transactions that result in a change in a
parent’s ownership interest in a subsidiary that do not
result in deconsolidation will be treated as equity
transactions, while a gain or loss will be recognized by the
parent when a subsidiary is deconsolidated. We now classify our
noncontrolling interest in a subsidiary as part of
shareholders’ equity in our consolidated statements of
financial position at December 31, 2009 and reclassified
the December 31, 2008 balances accordingly. The net income
attributed to the noncontrolling interest in a subsidiary for
2009 and 2008 is not material and is included in
other-net,
expense (income).
We adopted the provisions of the FASB Statement on disclosures
relating to Derivatives and Hedging on January 1, 2009.
This Statement requires entities to provide enhanced disclosures
about how and why an entity uses derivative instruments, how
derivative instruments and related hedged items are accounted
for, and how derivative instruments and related hedged items
affect an entity’s financial position, results of
operations, and cash flows. These disclosures are included in
Note 6.
We adopted the provisions of the Emerging Issues Task Force
(EITF) guidance related to Collaborative Arrangements on
January 1, 2009. This guidance defines collaborative
arrangements and establishes reporting requirements for
transactions between participants in a collaborative arrangement
and between participants in the arrangement and third parties.
This guidance has been applied retrospectively to all prior
periods presented for significant collaborative arrangements
existing as of the effective date by classifying revenues into
two separate components: net product sales and collaboration and
other revenue. See Note 4 for additional information.
We adopted the provisions of the FASB Staff Position (FSP)
relating to Investments on January 1, 2009. This FSP amends
the
other-than-temporary
recognition guidance for debt securities and requires additional
interim and annual disclosures of
other-than-temporary
impairments on debt and equity securities. Pursuant to the new
guidance, an
other-than-temporary
impairment has occurred if a company does not expect to recover
the entire amortized cost basis of the security. In this
situation, if the company does not intend to sell the impaired
security, and it is not more likely than not it will be required
to sell the security before the recovery of its amortized cost
basis, the amount of the
other-than-temporary
impairment recognized in earnings is limited to the portion
attributed to the credit loss. The remaining portion of the
other-than-temporary
impairment is then recorded in other comprehensive income
(loss). This FSP has been applied to existing and new securities
as of January 1, 2009. The applicable disclosures are
included in Note 6. The implementation of this FSP was not
material to our consolidated financial position or results of
operations and there was no cumulative effect adjustment.
We adopted the provisions of a FSP relating to Fair Value
Measurements and Disclosures, as of March 31, 2009. This
FSP provides additional guidance on estimating fair value when
the volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity.
The FSP also provides additional guidance on circumstances that
may indicate that a transaction is not orderly and requires
additional disclosures. The implementation of this FSP had no
effect on our consolidated financial position or results of
operations.
We adopted the provisions of a FSP on Financial Instruments, as
of March 31, 2009. This FSP required disclosures about fair
value of all financial instruments for interim reporting
periods. The implementation of this FSP had no effect on our
consolidated financial position or results of operations.
We adopted the provisions of a FSP on
Compensation—Retirement Benefits, as of December 31,
2009. This FSP required disclosures about plan assets of a
defined benefit pension or other postretirement plan. The
applicable disclosures are included in Note 13. The
implementation of this FSP had no effect on our consolidated
financial position or results of operations.
During 2009, we adopted the provisions of the FASB Statement on
Subsequent Events. This Statement provides authoritative
accounting literature and disclosure requirements for material
events occurring subsequent to the balance sheet date and prior
to the issuance of the financial statements. The implementation
of this Statement had no effect on our consolidated financial
position or results of operations.
47
In 2009, the FASB issued a Statement on Transfers and Servicing,
an amendment of previous authoritative guidance. The most
significant amendments resulting from this Statement consist of
the removal of the concept of a qualifying special-purpose
entity (SPE) from previous authoritative guidance, and the
elimination of the exception for qualifying SPEs from the
Consolidation guidance regarding variable interest entities.
This Statement is effective for us January 1, 2010 and is
not expected to be material to our consolidated financial
position or results of operations.
In 2009, the FASB issued a Statement which amends the previous
Consolidations guidance regarding variable interest entities and
addresses the effects of eliminating the qualifying SPE concept
from the guidance on Transfers and Servicing. This Statement
responds to concerns about the application of certain key
provisions of the previous guidance on Consolidations regarding
variable interest entities, including concerns over the
transparency of enterprises’ involvement with variable
interest entities. This Statement is effective for us
January 1, 2010 and is not expected to be material to our
consolidated financial position or results of operations.
In 2009, the FASB ratified EITF guidance related to Revenue
Recognition that amends the previous guidance on arrangements
with multiple deliverables. This guidance provides principles
and application guidance on whether multiple deliverables exist,
how the arrangements should be separated, and how the
consideration should be allocated. It also clarifies the method
to allocate revenue in an arrangement using the estimated
selling price. This guidance is effective for us January 1,
2011 and is not expected to be material to our consolidated
financial position or results of operations.
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