Kodak 2005 Annual Report Download - page 63

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A reconciliation of the beginning and ending aggregate carrying amount of all asset retirement obligations (including those recorded under SFAS
No. 143, FSP 143-1, and FIN 47) for the year ended December 31, 2005 follows:
(dollar amounts in millions)
Asset retirement obligations as of January 1 $ 7
Liabilities incurred in the current period (including the adoption of FIN 47) 66
Accretion expense 2
Asset retirement obligations as of December 31 $ 75
Reconciliations for the years ended December 31, 2004 and December 31, 2003 are not shown due to immateriality.
FASB Statement No. 123R
In December 2004, the FASB issued Statement No. 123R, “Share-Based Payment,” a revision to SFAS No. 123, “Accounting for Stock-Based
Compensation.” SFAS No. 123R eliminates the alternative to record compensation expense using the intrinsic value method of accounting under
Accounting Principles Board Opinion No. 25 (APB No. 25) that was provided in SFAS No. 123 as originally issued.
Under Opinion 25, issuing stock options to employees generally resulted in the recognition of no compensation cost if the options were granted with an
exercise price equal to their fair value at the date of grant. SFAS No. 123R requires companies to measure and record the cost of employee services
received in exchange for an award of equity instruments based on the fair value of the award at the date of grant (with limited exceptions). That cost
will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). No
compensation cost is recognized for equity instruments for which employees do not render the requisite service.
In April 2005, the Securities and Exchange Commission voted to change the effective date of SFAS No. 123R to fi scal years starting after
June 15, 2005; however, early application is encouraged. The Company adopted the modifi ed version of the prospective application of SFAS
No. 123R as of January 1, 2005 under which the Company is required to recognize compensation expense, over the applicable vesting period, based
on the fair value of (1) any unvested awards subject to SFAS No. 123R existing as of January 1, 2005, and (2) any new awards granted subsequent to
the adoption date. Refer to the “Stock-Based Compensation” section under Note 1, “Signifi cant Accounting Policies” for the effect of adoption on the
Company’s consolidated fi nancial statements.
FASB Statement No. 151
In December 2004, the FASB issued SFAS No. 151, “Inventory Costs” that amends the guidance in Accounting Research Bulletin No. 43, Chapter 4,
“Inventory Pricing,” (ARB No. 43) to clarify the accounting for abnormal idle facility expense, freight, handling costs and wasted material (spoilage).
In addition, this Statement requires that an allocation of fi xed production overhead to the costs of conversion be based on the normal capacity
of the production facilities. SFAS No. 151 is effective for inventory costs incurred for fi scal years beginning after June 15, 2005 (year ending
December 31, 2006 for the Company). The Company does not expect the implementation of SFAS No. 151 to have a material impact on its
fi nancial statements.
FASB Staff Position No. 109-2
In December 2004, FASB issued FSP No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004 (the “Act”).” The Act was signed into law in October of 2004. The Act creates a temporary incentive for U.S.
multinationals to repatriate foreign subsidiary earnings by providing an 85% dividends received deduction for certain dividends from controlled foreign
corporations. The deduction is subject to a number of limitations and requirements, including adoption of a specifi c domestic reinvestment plan for
the repatriated earnings. Accordingly, the FSP provides guidance on accounting for income taxes that relate to the accounting treatment for
unremitted earnings in a foreign investment (a consolidated subsidiary or corporate joint venture that is essentially permanent in nature). Further, the
FSP permits a company time beyond the fi nancial reporting period of enactment to evaluate the effect of the Act on its plan for reinvestment or
repatriation of foreign earnings for purposes of applying FASB Statement No. 109, “Accounting for Income Taxes.” Accordingly, an enterprise that has
not yet completed its evaluation of the repatriation provision for purposes of applying Statement 109 is required to disclose certain information, for
each period for which fi nancial statements covering periods affected by the Act are presented. Subsequently, the total effect on income tax expense
(or benefi t) for amounts that have been recognized under the repatriation provision must be provided in a company’s fi nancial statements for the
period in which it completes its evaluation of the repatriation provision. The provisions of FSP 109-2 were effective in the fourth quarter of 2004.