SCI » Topics » Fair Value Measurements

These excerpts taken from the SCI 10-K filed Mar 2, 2009.
Fair Value Measurements
 
As discussed above, we measure the available-for-sale securities held by our funeral and cemetery merchandise and service and cemetery perpetual care trusts at fair value on a recurring basis. Changes in unrealized gains and/or losses related to these securities are reflected in Other comprehensive income and are offset by changes in Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus as a result of those unrealized gains and/or losses; therefore, these gains and/or losses have no impact on our consolidated statement of operations. Certain of these securities have been classified in Level 3 of the SFAS 157 hierarchy due to significant management judgment required as a result of the absence of quoted market prices, inherent lack of liquidity, or the long-term nature of the securities. These securities represent 5.9% of our total $2.0 billion trust fund portfolio measured at fair value on a recurring basis as of December 31, 2008. For more information, see Notes 4, 5, and 6 in Part II, Item 8. Financial Statements and Supplementary Data.
 
Fair
Value Measurements



 



As discussed above, we measure the available-for-sale securities
held by our funeral and cemetery merchandise and service and
cemetery perpetual care trusts at fair value on a recurring
basis. Changes in unrealized gains
and/or
losses related to these securities are reflected in Other
comprehensive income
and are offset by changes in
Deferred preneed funeral and cemetery receipts held in trust
and Care trusts’ corpus as a result of those
unrealized gains
and/or
losses; therefore, these gains
and/or
losses have no impact on our consolidated statement of
operations. Certain of these securities have been classified in
Level 3 of the SFAS 157 hierarchy due to significant
management judgment required as a result of the absence of
quoted market prices, inherent lack of liquidity, or the
long-term nature of the securities. These securities represent
5.9% of our total $2.0 billion trust fund portfolio
measured at fair value on a recurring basis as of
December 31, 2008. For more information, see Notes 4,
5, and 6 in Part II, Item 8. Financial Statements
and Supplementary Data.


 




Fair Value Measurements
 
We measure the available-for-sale securities held by our funeral, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis. Changes in unrealized gains and/or losses related to these securities are reflected in Other comprehensive income and offset by the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus interest in those unrealized gains and/or losses. Certain of these securities have been classified in Level 3 of the SFAS No. 157 “Fair Value Measurements” (SFAS 157) hierarchy due to significant management judgment required as a result of the absence of quoted market prices, inherent lack of liquidity, or the long-term nature of the securities. These securities represent 5.9% of our total $2.0 billion trust fund portfolio measured at fair value on a recurring basis as of December 31, 2008. For more information see Notes 4, 5, and 6.
 
Fair Value Measurements
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, establishes a framework for measuring fair value, and expands disclosures about instruments measured at fair value. SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
 
  •  Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
 
  •  Level 2 — inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;
 
  •  Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
 
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1. “Application of FASB Statement No. 157 to FASB Statement 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (FSP 157-1) and FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, “Accounting for Leases” and its related accounting pronouncements that address leasing transactions. FSP 157-2 provides a one-year deferral of the effective date of SFAS 157 for non-financial assets and liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. In accordance with FSP 157-2, we adopted the provisions of SFAS 157 for our financial assets and liabilities that are measured on a recurring basis at fair value, effective January 1, 2008. These financial assets include the investments of our funeral, cemetery, and cemetery perpetual care trusts. For additional disclosures required by SFAS 157 for these assets, see Notes 4, 5, and 6.
 
As allowed by FSP 157-2, the provisions of SFAS 157 have not been applied to our non-financial assets and liabilities. The major categories of assets and liabilities that are subject to non-recurring fair value measurement, for which we have not yet applied the provisions of SFAS 157, are as follows: reporting units measured at fair value in


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Table of Contents

 
SERVICE CORPORATION INTERNATIONAL
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
the first step of a goodwill impairment test under SFAS 142; indefinite-lived intangible assets measured at fair value for impairment assessment under SFAS 142; non-financial assets measured at fair value for an impairment assessment under SFAS 144; and non-financial assets and liabilities initially measured at fair value in a business combination under SFAS 141.
 
In October 2008, the FASB issued FSP No. SFAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (FSP SFAS 157-3), which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP SFAS 157-3 is effective immediately, including prior periods for which financial statements have not been issued. We adopted FSP SFAS 157-3 effective with our financial statements for the quarter ended September 30, 2008. The adoption of FSP SFAS 157-3 had no impact on our consolidated results of operations, financial position, or cash flows.
 
Fair
Value Measurements



 



We measure the available-for-sale securities held by our
funeral, cemetery merchandise and service, and cemetery
perpetual care trusts at fair value on a recurring basis.
Changes in unrealized gains
and/or
losses related to these securities are reflected in Other
comprehensive income
and offset by the Deferred preneed
funeral and cemetery receipts held in trust
and Care
trusts’ corpus interest
in those unrealized gains
and/or
losses. Certain of these securities have been classified in
Level 3 of the SFAS No. 157 “Fair Value
Measurements
” (SFAS 157) hierarchy due to
significant management judgment required as a result of the
absence of quoted market prices, inherent lack of liquidity, or
the long-term nature of the securities. These securities
represent 5.9% of our total $2.0 billion trust fund
portfolio measured at fair value on a recurring basis as of
December 31, 2008. For more information see Notes 4,
5, and 6.


 




Fair
Value Measurements



 



In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements” (SFAS 157).
SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date, establishes a framework for measuring fair
value, and expands disclosures about instruments measured at
fair value. SFAS 157 establishes a three-level valuation
hierarchy for disclosure of fair value measurements. The
valuation hierarchy is based upon the transparency of inputs to
the valuation of an asset or liability as of the measurement
date. The three levels are defined as follows:


 




































  • 

Level 1 — inputs to the valuation methodology are
quoted prices (unadjusted) for identical assets or liabilities
in active markets;
 
  • 

Level 2 — inputs to the valuation methodology
include quoted prices for similar assets or liabilities in
active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the
full term of the financial instrument;
 
  • 

Level 3 — inputs to the valuation methodology are
unobservable and significant to the fair value measurement.


 



An asset’s or liability’s categorization within the
valuation hierarchy is based upon the lowest level of input that
is significant to the fair value measurement.


 



In February 2008, the FASB issued FASB Staff Position (FSP)
FAS 157-1.
“Application of FASB Statement No. 157 to FASB
Statement 13 and Other Accounting Pronouncements that Address
Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13”
(FSP 157-1)
and FSP
No. FAS 157-2,
“Effective Date of FASB Statement No. 157”
(FSP 157-2).
FSP 157-1
amends SFAS 157 to exclude SFAS No. 13,
“Accounting for Leases” and its related accounting
pronouncements that address leasing transactions.
FSP 157-2
provides a one-year deferral of the effective date of
SFAS 157 for non-financial assets and liabilities, except
those that are recognized or disclosed in the financial
statements at fair value at least annually. In accordance with
FSP 157-2,
we adopted the provisions of SFAS 157 for our financial
assets and liabilities that are measured on a recurring basis at
fair value, effective January 1, 2008. These financial
assets include the investments of our funeral, cemetery, and
cemetery perpetual care trusts. For additional disclosures
required by SFAS 157 for these assets, see Notes 4, 5,
and 6.


 



As allowed by
FSP 157-2,
the provisions of SFAS 157 have not been applied to our
non-financial assets and liabilities. The major categories of
assets and liabilities that are subject to non-recurring fair
value measurement, for which we have not yet applied the
provisions of SFAS 157, are as follows: reporting units
measured at fair value in





61





Table of Contents





 




SERVICE
CORPORATION INTERNATIONAL




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



the first step of a goodwill impairment test under
SFAS 142; indefinite-lived intangible assets measured at
fair value for impairment assessment under SFAS 142;
non-financial assets measured at fair value for an impairment
assessment under SFAS 144; and non-financial assets and
liabilities initially measured at fair value in a business
combination under SFAS 141.


 



In October 2008, the FASB issued FSP
No. SFAS 157-3,
“Determining the Fair Value of a Financial Asset When
the Market for That Asset Is Not Active”
(FSP
SFAS 157-3),
which clarifies the application of SFAS 157 in a market
that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial
asset when the market for that financial asset is not active.
FSP
SFAS 157-3
is effective immediately, including prior periods for which
financial statements have not been issued. We adopted FSP
SFAS 157-3
effective with our financial statements for the quarter ended
September 30, 2008. The adoption of FSP
SFAS 157-3
had no impact on our consolidated results of operations,
financial position, or cash flows.


 




EXCERPTS ON THIS PAGE:

10-K (6 sections)
Mar 2, 2009
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