LabCorp 2008 Annual Report Download - page 56

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America
54 Laboratory Corporation of America® Holdings 2008
expense. APB 14-1 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Retrospective application to
all periods presented is required except for instruments that were not outstanding during any of
the periods that will be presented in the annual financial statements for the period of adoption
but were outstanding during an earlier period. APB 14-1 impacts the Company’s zero-coupon
subordinated notes, and will require that additional interest expense essentially equivalent to
the portion of issuance proceeds retroactively allocated to the instrument’s equity component
be recognized over the period from the zero-coupon subordinated notes’ issuance in 2001 through
September 2004 (the first date holders of these notes had the ability to put them back to the
Company). The Company has evaluated the impact of APB 14-1 and anticipates that its retro-
spective application will have no impact on results of operations for periods following 2004, but
will result in an increase in opening additional paid-in capital and a corresponding decrease in
opening retained earnings, net of deferred tax impacts, on post-2004 consolidated balance sheets.
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” (“FSP 157-3”).
FSP 157-3 clarified the application of SFAS No. 157 in an inactive market. It demonstrated how
the fair value of a financial asset is determined when the market for that financial asset is
inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial
statements had not been issued. The implementation of this standard did not have a material
impact on our consolidated financial position and results of operations.
In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1
applies to an employer that is subject to the disclosure requirements of SFAS No. 132(R). The
objectives of the disclosures about plan assets in an employers’ defined benefit pension or
other postretirement plan are to provide users of financial statements with an understanding
of: (1) how investment allocation decisions are made, including the factors that are pertinent
to an understanding of investment policies and strategies, (2) the major categories of plan
assets, (3) the inputs and valuation techniques used to measure the fair value of plan assets,
(4) the effect of fair value measurements using significant unobservable inputs (Level 3) on
changes in plan assets for the period, and (5) significant concentrations of risk within plan
assets. An employer should consider those overall objectives in providing detailed disclosures
about plan assets. FSP 132(R)-1 is effective for years ending after December 15, 2009. Early
application is permitted. Upon initial application, the provisions of FSP 132(R)-1 are not required
for earlier periods that are presented for comparative periods. The Company is currently evaluating
the impact the adoption of FSP 132(R)-1 could have on its consolidated financial statements.
21) Fair Value Measurements
The Company’s population of financial assets and liabilities subject to fair value measurements
are as follows:
Fair Value Fair Value Measurements at
as of December 31, 2008
December 31, Using Fair Value Hierarchy
2008 Level 1 Level 2 Level 3
Minority interest put $ 121.3 $ – $ 121.3 $ –
Derivatives
Embedded derivatives related to the
zero-coupon subordinated notes $ – $ – $ – $ –
Interest rate swap 13.5 – 13.5 –
Total fair value of derivatives $ 13.5 $ – $ 13.5 $ –
The minority interest put is valued at its contractually determined value, which approximates
fair value. The fair values for the embedded derivatives and interest rate swap are based on
observable inputs or quoted market prices from various banks for similar instruments.