NWPX » Topics » Initial Adoption of Staff Accounting Bulletin No. 108

This excerpt taken from the NWPX 10-K filed Mar 13, 2009.

Initial Adoption of Staff Accounting Bulletin No. 108

In September 2006, the SEC staff released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 established an approach that requires quantification of financial statement misstatements based on the effect of the misstatements on each of the Company’s financial statements and the related financial statement disclosures.

 

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SAB 108 permitted public companies to initially apply its provisions either by (i) restating prior financial statements as if the “dual approach” had always been used or (ii) recording the cumulative effect of initially applying the “dual approach” as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. The Company elected to record the effects of applying SAB 108 using the cumulative effect transition method. The following table summarizes the effects of applying the guidance in SAB 108 through January 1, 2006 (in thousands). Amounts shown reflect increases (decreases) in the related account balances:

 

     Adjustment
at January 1,
2006
    Origination Period of Misstatement  
     Year ended December 31,     2003 and
Prior
 
         2005             2004        

Accrued liabilities

   $ 3,008     $ 598     $ 326     $ 2,084  

Inventories

     (1,842 )     116       (79 )     (1,879 )

Property and equipment, net

     (721 )     (721 )     —         —    
                                
     (5,571 )     (1,203 )     (405 )     (3,963 )

Deferred income taxes

     1,906       185       156       1,565  

Refundable income taxes

     278       278       —         —    
                                

Increase (decrease) in net income

     —       $ (740 )   $ (249 )   $ (2,398 )
                                

Decrease to retained earnings

   $ (3,387 )      
              

The Company previously quantified these errors under the roll-over method and concluded they were immaterial, individually and in the aggregate. With respect to accrued liabilities, the Company adjusted the workers’ compensation accrual to more closely align with estimates provided by an actuary in each of the periods prior to January 1, 2006, and adjusted property tax expense by $272,000 in 2005. With respect to inventory, the Company adjusted amounts that had previously been capitalized as inventoriable. With respect to property and equipment, net, the Company expensed internal costs of constructing assets used in the manufacturing process that had previously been capitalized in error. Because of the errors described above, deferred and refundable income taxes required adjustment by $2.2 million related to years prior to 2006. To record the initial application of SAB 108, the Company recorded a $3.4 million adjustment to decrease retained earnings at January 1, 2006.

This excerpt taken from the NWPX 10-K filed Mar 17, 2008.

Initial Adoption of Staff Accounting Bulletin No. 108

In September 2006, the SEC staff released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 established an approach that requires quantification of financial statement misstatements based on the effect of the misstatements on each of the Company’s financial statements and the related financial statement disclosures.

SAB 108 permitted public companies to initially apply its provisions either by (i) restating prior financial statements as if the “dual approach” had always been used or (ii) recording the cumulative effect of initially applying the “dual approach” as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. The Company elected to record the effects of applying SAB 108 using the cumulative effect transition method. The following table summarizes the effects of applying the guidance in SAB 108 through January 1, 2006 (in thousands). Amounts shown reflect increases (decreases) in the related account balances:

 

     Adjustment
at January 1,
2006
    Origination Period of Misstatement  
     Year ended December 31,     2003 and
Prior
 
         2005             2004        

Accrued liabilities

   $ 3,008     $ 598     $ 326     $ 2,084  

Inventories

     (1,842 )     116       (79 )     (1,879 )

Property and equipment, net

     (721 )     (721 )     —         —    
                                
     (5,571 )     (1,203 )     (405 )     (3,963 )

Deferred income taxes

     1,906       185       156       1,565  

Refundable income taxes

     278       278       —         —    
                                

Increase (decrease) in net income

     —       $ (740 )   $ (249 )   $ (2,398 )
                                

Decrease to retained earnings

   $ (3,387 )      
              

The Company previously quantified these errors under the roll-over method and concluded they were immaterial, individually and in the aggregate. With respect to accrued liabilities, the Company adjusted the workers’ compensation accrual to more closely align with estimates provided by an actuary in each of the periods prior to January 1, 2006, and adjusted property tax expense by $272,000 in 2005. With respect to inventory, the Company adjusted amounts that had previously been capitalized as inventoriable. With respect to property and equipment, net, the Company expensed internal costs of constructing assets used in the manufacturing process that had previously been capitalized in error. Because of the errors described above, deferred and refundable income taxes required adjustment by $2.2 million related to years prior to 2006. To record the initial application of SAB 108, the Company recorded a $3.4 million adjustment to decrease retained earnings at January 1, 2006.

EXCERPTS ON THIS PAGE:

10-K
Mar 13, 2009
10-K
Mar 17, 2008

RELATED TOPICS for NWPX:

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