3M 2007 Annual Report Download - page 54

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similar types of assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 (January 1, 2008 for 3M) and interim periods within those fiscal years. At the
effective date, an entity may elect the fair value option for eligible items that exist at that date. The entity shall report
the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained
earnings. The Company has not elected the fair value option for eligible items that existed as of January 1, 2008.
In June 2007, the FASB’s Emerging Issues Task Force reached a consensus on EITF Issue No. 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”
that would require nonrefundable advance payments made by the Company for future R&D activities to be capitalized
and recognized as an expense as the goods or services are received by the Company. EITF Issue No. 07-3 is
effective for 3M with respect to new arrangements entered into beginning January 1, 2008. The Company is currently
evaluating the impacts and disclosures of this standard, but would not expect EITF Issue No. 07-3 to have a material
impact on 3M’s consolidated results of operations or financial condition.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” which changes how business
acquisitions are accounted. SFAS No. 141R requires the acquiring entity in a business combination to recognize all
(and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value
as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain
provisions of this standard will, among other things, impact the determination of acquisition-date fair value of
consideration paid in a business combination (including contingent consideration); exclude transaction costs from
acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring
costs, in-process research and development, indemnification assets, and tax benefits. For 3M, SFAS No. 141R is
effective for business combinations and adjustments to an acquired entity’s deferred tax asset and liability balances
occurring after December 31, 2008. The Company is currently evaluating the future impacts and disclosures of this
standard.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,
an amendment of ARB No. 51,” which establishes new standards governing the accounting for and reporting of
noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries.
Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests)
be treated as a separate component of equity, not as a liability; that increases and decrease in the parent’s ownership
interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or
losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation
might result in a deficit balance. This standard also requires changes to certain presentation and disclosure
requirements. For 3M, SFAS No. 160 is effective beginning January 1, 2009. The provisions of the standard are to be
applied to all NCIs prospectively, except for the presentation and disclosure requirements, which are to be to applied
retrospectively to all periods presented. The Company is currently evaluating the future impacts and disclosures of
this standard.
In December 2007, the FASB ratified the Emerging Issues Task Force consensus on EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” that discusses how parties to a collaborative arrangement (which does
not establish a legal entity within such arrangement) should account for various activities. The consensus indicates
that costs incurred and revenues generated from transactions with third parties (i.e. parties outside of the collaborative
arrangement) should be reported by the collaborators on the respective line items in their income statements pursuant
to EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent.” Additionally, the
consensus provides that income statement characterization of payments between the participants in a collaborative
arrangement should be based upon existing authoritative pronouncements; analogy to such pronouncements if not
within their scope; or a reasonable, rational, and consistently applied accounting policy election. EITF Issue No. 07-1
is effective for 3M beginning January 1, 2009 and is to be applied retrospectively to all periods presented for
collaborative arrangements existing as of the date of adoption. The Company is currently evaluating the impacts and
disclosures of this standard, but would not expect EITF Issue No. 07-1 to have a material impact on 3M’s consolidated
results of operations or financial condition.
NOTE 2. Acquisitions and Divestitures
Divestitures:
In January 2007, 3M completed the sale of its global branded pharmaceuticals business in Europe to Meda AB. 3M
received proceeds of $817 million for this transaction and recognized, net of assets sold, a pre-tax gain of $781 million
(recorded in the Health Care segment) in 2007.
In December 2006, 3M completed the sale of its global branded pharmaceuticals business in the United States,
Canada, and Latin America region and the Asia Pacific region, including Australia and South Africa. 3M received