ORH » Topics » Recent Accounting Pronouncements

These excerpts taken from the ORH 10-K filed Feb 28, 2008.
Recent Accounting Pronouncements
 
On January 1, 2007, we adopted Statement of Financial Accounting Standard (“SFAS”) 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of SFAS 133 and 140.” SFAS 155 applies to certain “hybrid financial instruments,” which are instruments that contain embedded derivatives. The standard established a requirement to evaluate beneficial interests in securitized financial assets to determine if the interests represent freestanding derivatives, or are hybrid financial instruments containing embedded derivatives requiring bifurcation. SFAS 155 permits an election for fair value measurement of any hybrid financial instrument containing an embedded derivative that otherwise would have required bifurcation under SFAS 133, including financial instruments previously recorded by us under SFAS 133. As a result of the adoption of SFAS 155 on January 1, 2007, we no longer bifurcate the embedded derivatives included in certain fixed income securities, and, beginning on January 1, 2007, changes in the fair value of the hybrid financial instruments are recorded as realized investment gains and losses in our consolidated statements of operations. Prior to the adoption of SFAS 155, changes in the fair value of the host instrument were recorded as unrealized investment gains and losses, a component of shareholders’ equity, while changes in the fair value of the embedded derivative were recorded as realized investment gains and losses. Upon adoption, we recorded a cumulative adjustment of $16.5 million to reclassify unrealized investment gains, net of tax, including foreign currency effects, to retained earnings as of January 1, 2007.
 
On January 1, 2007, we adopted the Financial Accounting Standards Board’s (“FASB”) Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The adoption of FIN 48 did not have a material impact on our results of operations or financial position.
 
We elect to recognize accrued interest and penalties associated with uncertain tax positions as part of the income tax provision. As of December 31, 2007, we have not recorded any interest or penalties. We file income tax returns with various federal, state, and foreign jurisdictions. Our U.S. federal income tax returns for 1999 through 2006 remain open for examination and the Internal Revenue Service is currently examining our 2003 and 2004 returns. Income tax returns filed with various state and foreign jurisdictions remain open to examination.
 
In September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of SFAS 87, 88, 106, and 132(R).” SFAS 158 requires us, as of December 31, 2006, to recognize the overfunded or underfunded status of a defined benefit postretirement plan, including pension plans, as an asset or liability in our balance sheet, and to recognize changes in that funded status, in the year in which the changes occur, through comprehensive income. We adopted the recognition provisions of SFAS 158. As a result of the adoption, as of December 31, 2006, we recorded a one-time charge of $15.7 million to increase other liabilities, a $5.5 million deferred tax asset and a $10.2 million decrease to accumulated other comprehensive income on our balance sheet. In addition, SFAS 158 requires that, as of December 31, 2008,


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employers measure plan assets and liabilities as of the date of their financial statements. SFAS 158 does not require retrospective application.
 
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” to define existing fair value measurements, create a framework for measuring fair value, and expand disclosures about fair value measurements. SFAS 157 will be effective for us beginning in the first quarter of 2008. The impact of the adoption of SFAS 157 is not expected to have a material effect on our consolidated financial statements.
 
In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115,” which provides a fair value option (“FVO”) to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. SFAS 159 will be effective for us beginning in the first quarter of 2008. We will elect the FVO for an investment, currently recorded under the equity method of accounting. On January 1, 2008, we will discontinue applying the equity method of accounting for this investment and in accordance with SFAS 159, will carry the investment at fair value with changes in fair value recognized as realized gains or losses in the consolidated statement of operations. Upon electing the FVO for this investment, we will record a cumulative adjustment of $1.5 million to reclassify foreign currency unrealized gains, net of tax, to retained earnings as of January 1, 2008.
 
In June 2007, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 07-1 (“SOP 07-1”), “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investments Companies,” to assist entities in determining if the guidance of the AICPA Audit and Accounting Guide for Investment Companies should be followed and whether the industry accounting should be utilized by parent companies and other investees that exercise significant influence over the investment company. SOP 07-1 requires extensive disclosures, if the entity falls under the definition of an investment company, or the entity is a parent or equity method investor that owns an investment that falls within the scope of investment company accounting. We anticipate that the adoption of SOP 07-1 will not have a material effect on our consolidated financial position or results of operations. SOP 07-1 will require us to make additional disclosures regarding certain investments. On October 17, 2007, the effective date of SOP 07-1 was indefinitely deferred, as it will be further reviewed by the FASB.
 
In December 2007, the FASB issued SFAS 141(R), “Business Combinations,” to replace SFAS 141, “Business Combinations.” While several items from SFAS 141 were retained, including the acquisition method of accounting and the recognition of intangible assets separately from goodwill, SFAS 141(R) broadens its scope and establishes a definition of the acquirer and the acquisition date. SFAS 141(R) should be applied on a prospective basis in the first annual reporting period beginning on or after December 15, 2008. Earlier application is prohibited.
 
In December 2007, the FASB issued SFAS 160, “Non-controlling Interests in Consolidated Financial Statements,” which amends Accounting Research Bulletin 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies the definition of a non-controlling interest and the proper accounting for that entity. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. We are evaluating the impact of the adoption of SFAS 160, if any, on our consolidated financial statements.
 
Recent
Accounting Pronouncements



 



On January 1, 2007, we adopted Statement of Financial
Accounting Standard (“SFAS”) 155, “Accounting for
Certain Hybrid Financial Instruments — an amendment of
SFAS 133 and 140.” SFAS 155 applies to certain
“hybrid financial instruments,” which are instruments
that contain embedded derivatives. The standard established a
requirement to evaluate beneficial interests in securitized
financial assets to determine if the interests represent
freestanding derivatives, or are hybrid financial instruments
containing embedded derivatives requiring bifurcation.
SFAS 155 permits an election for fair value measurement of
any hybrid financial instrument containing an embedded
derivative that otherwise would have required bifurcation under
SFAS 133, including financial instruments previously
recorded by us under SFAS 133. As a result of the adoption
of SFAS 155 on January 1, 2007, we no longer bifurcate
the embedded derivatives included in certain fixed income
securities, and, beginning on January 1, 2007, changes in
the fair value of the hybrid financial instruments are recorded
as realized investment gains and losses in our consolidated
statements of operations. Prior to the adoption of
SFAS 155, changes in the fair value of the host instrument
were recorded as unrealized investment gains and losses, a
component of shareholders’ equity, while changes in the
fair value of the embedded derivative were recorded as realized
investment gains and losses. Upon adoption, we recorded a
cumulative adjustment of $16.5 million to reclassify
unrealized investment gains, net of tax, including foreign
currency effects, to retained earnings as of January 1,
2007.


 



On January 1, 2007, we adopted the Financial Accounting
Standards Board’s (“FASB”) Interpretation 48
(“FIN 48”), “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement
No. 109.” The interpretation clarifies the accounting
for uncertainty in income taxes recognized in a company’s
financial statements in accordance with SFAS 109,
“Accounting for Income Taxes.” Specifically, the
pronouncement prescribes a recognition threshold and a
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. The interpretation also provides guidance on
the classification, interest and penalties, accounting for
interim periods, disclosure and transition of uncertain tax
positions. The adoption of FIN 48 did not have a material
impact on our results of operations or financial position.


 



We elect to recognize accrued interest and penalties associated
with uncertain tax positions as part of the income tax
provision. As of December 31, 2007, we have not recorded
any interest or penalties. We file income tax returns with
various federal, state, and foreign jurisdictions. Our
U.S. federal income tax returns for 1999 through 2006
remain open for examination and the Internal Revenue Service is
currently examining our 2003 and 2004 returns. Income tax
returns filed with various state and foreign jurisdictions
remain open to examination.


 



In September 2006, the FASB issued SFAS 158,
“Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans — an amendment of
SFAS 87, 88, 106, and 132(R).” SFAS 158 requires
us, as of December 31, 2006, to recognize the overfunded or
underfunded status of a defined benefit postretirement plan,
including pension plans, as an asset or liability in our balance
sheet, and to recognize changes in that funded status, in the
year in which the changes occur, through comprehensive income.
We adopted the recognition provisions of SFAS 158. As a
result of the adoption, as of December 31, 2006, we
recorded a one-time charge of $15.7 million to increase
other liabilities, a $5.5 million deferred tax asset and a
$10.2 million decrease to accumulated other comprehensive
income on our balance sheet. In addition, SFAS 158 requires
that, as of December 31, 2008,





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employers measure plan assets and liabilities as of the date of
their financial statements. SFAS 158 does not require
retrospective application.


 



In September 2006, the FASB issued SFAS 157, “Fair
Value Measurements,” to define existing fair value
measurements, create a framework for measuring fair value, and
expand disclosures about fair value measurements. SFAS 157
will be effective for us beginning in the first quarter of 2008.
The impact of the adoption of SFAS 157 is not expected to
have a material effect on our consolidated financial statements.


 



In February 2007, the FASB issued SFAS 159, “The Fair
Value Option for Financial Assets and Financial
Liabilities — Including an Amendment of FASB Statement
No. 115,” which provides a fair value option
(“FVO”) to measure many financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument
basis. SFAS 159 will be effective for us beginning in the
first quarter of 2008. We will elect the FVO for an investment,
currently recorded under the equity method of accounting. On
January 1, 2008, we will discontinue applying the equity
method of accounting for this investment and in accordance with
SFAS 159, will carry the investment at fair value with
changes in fair value recognized as realized gains or losses in
the consolidated statement of operations. Upon electing the FVO
for this investment, we will record a cumulative adjustment of
$1.5 million to reclassify foreign currency unrealized
gains, net of tax, to retained earnings as of January 1,
2008.


 



In June 2007, the American Institute of Certified Public
Accountants (“AICPA”) issued Statement of Position
07-1
(“SOP 07-1”),
“Clarification of the Scope of the Audit and Accounting
Guide Investment Companies and Accounting by Parent Companies
and Equity Method Investors for Investments in Investments
Companies,” to assist entities in determining if the
guidance of the AICPA Audit and Accounting Guide for Investment
Companies should be followed and whether the industry accounting
should be utilized by parent companies and other investees that
exercise significant influence over the investment company.
SOP 07-1
requires extensive disclosures, if the entity falls under the
definition of an investment company, or the entity is a parent
or equity method investor that owns an investment that falls
within the scope of investment company accounting. We anticipate
that the adoption of
SOP 07-1
will not have a material effect on our consolidated financial
position or results of operations.
SOP 07-1
will require us to make additional disclosures regarding certain
investments. On October 17, 2007, the effective date of
SOP 07-1
was indefinitely deferred, as it will be further reviewed by the
FASB.


 



In December 2007, the FASB issued SFAS 141(R),
“Business Combinations,” to replace SFAS 141,
“Business Combinations.” While several items from
SFAS 141 were retained, including the acquisition method of
accounting and the recognition of intangible assets separately
from goodwill, SFAS 141(R) broadens its scope and
establishes a definition of the acquirer and the acquisition
date. SFAS 141(R) should be applied on a prospective basis
in the first annual reporting period beginning on or after
December 15, 2008. Earlier application is prohibited.


 



In December 2007, the FASB issued SFAS 160,
“Non-controlling Interests in Consolidated Financial
Statements,” which amends Accounting Research
Bulletin 51, “Consolidated Financial Statements,”
to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 clarifies the
definition of a non-controlling interest and the proper
accounting for that entity. SFAS 160 is effective for
fiscal years beginning on or after December 15, 2008.
Earlier adoption is prohibited. We are evaluating the impact of
the adoption of SFAS 160, if any, on our consolidated
financial statements.


 




EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 28, 2008
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