Humana 2008 Annual Report Download - page 87

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
adjusting earnings in periods subsequent to the acquisition for changes in deferred tax asset valuation allowances
and income tax uncertainties as well as changes in the fair value of acquired contingent liabilities. SFAS 141R
also includes a substantial number of new disclosure requirements. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after January 1, 2009 with early adoption prohibited.
Accordingly, we are required to record and disclose business combinations in accordance with existing GAAP
until January 1, 2009. The effect of these new requirements on our financial position and results of operations
will depend on the volume and terms of acquisitions in 2009 and beyond, but will likely increase the amount and
change the timing of recognizing expenses related to acquisition activities.
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements—An Amendment of ARB No. 5, or SFAS 160.SFAS 160 establishes new accounting and
reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
Specifically, SFAS 160 requires the recognition of a noncontrolling interest (minority interest) as equity and
separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS 160 was effective for fiscal
years, and interim periods within those fiscal years, beginning January 1, 2009. Like SFAS 141R discussed
above, earlier adoption was prohibited. The adoption of SFAS 160 did not have a material impact on our
financial position or results of operations.
In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activities, or SFAS 161. SFAS 161 requires expanded disclosures regarding the location and amounts of
derivative instruments in an entity’s financial statements, how derivative instruments and related hedged items
are accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities, and how
derivative instruments and related hedged items affect an entity’s financial position, operating results and cash
flows. SFAS 161 was effective on January 1, 2009. Since SFAS 161 affects only disclosures, it did not impact
our financial position or results of operations upon adoption.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities, or FSP EITF 03-6-1. FSP EITF
03-6-1 clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends
before vesting should be considered participating securities. As participating securities, these instruments should
be included in the calculation of basic EPS. The adoption of FSP EITF 03-6-1 on January 1, 2009 did not have a
material impact on our results of operations.
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active, or FSP FAS 157-3. FSP FAS 157-3 clarifies the
application of FASB Statement No. 157, Fair Value Measurements, or SFAS 157, in a market that is not active
and amends SFAS 157 by adding an illustrative example of key considerations used in determining the fair value
of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon
issuance and did not have a material impact on our financial position or results of operations.
3. ACQUISITIONS
On October 31, 2008 we acquired PHP Companies, Inc. (d/b/a Cariten Healthcare), or Cariten, for cash
consideration of approximately $256.1 million. The Cariten acquisition increased our commercial fully-insured
and ASO presence as well as our Medicare HMO presence in eastern Tennessee. The total consideration paid
exceeded our estimated fair value of the net tangible assets acquired by approximately $113.5 million of which
we allocated $79.4 million to other intangible assets and $34.1 million to goodwill. The other intangible assets,
which primarily consist of customer contracts, have a weighted-average useful life of 9.7 years. The acquired
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