Medtronic 2010 Annual Report Download - page 62

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58 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
New Accounting Standards
In October 2009, the Financial Accounting Standards Board (FASB)
updated the revenue recognition accounting guidance relating to
the accounting for revenue arrangements that involve more than
one deliverable or unit of accounting. The updated guidance
requires companies to allocate arrangement considerations in
multiple deliverable arrangements in a manner that better reflects
the economics of the transaction by revising certain thresholds
for separation, and providing criteria for allocation of revenue
among deliverables. The updated guidance is effective for the
Company beginning in fiscal year 2012. The Company may elect
to adopt the provisions prospectively to new or materially modified
arrangements beginning on the effective date or retrospectively
for all periods presented. The Company is currently evaluating the
impact of adoption of this accounting guidance on its consolidated
financial statements.
In January 2010, the FASB updated the disclosure requirements
for fair value measurements. The updated guidance requires
companies to disclose separately the investments that transfer in
and out of Levels 1 and 2 and the reasons for those transfers.
Additionally, in the reconciliation for fair value measurements
using significant unobservable inputs (Level 3), companies should
present separately information about purchases, sales, issuances
and settlements. The updated guidance was effective for the
Company beginning in the fourth quarter of fiscal year 2010,
except for the disclosures about purchases, sales, issuances and
settlements in the Level 3 reconciliation, which are effective for
the Company beginning in the first quarter of fiscal year 2012.
The fiscal year 2010 adoption did not result in a material impact
to the Company’s financial statements. Refer to Note 7 for
additional information on Levels 1, 2 and 3.
2. Retrospective Adoption of Accounting
Pronouncements
In May 2008, the FASB issued new authoritative accounting
guidance for convertible debt. The new guidance requires the
proceeds from the issuance of applicable convertible debt
instruments to be allocated between a liability component (issued
at a discount) and an equity component. The resulting debt
discount is amortized over the period the convertible debt is
expected to be outstanding as additional non-cash interest
expense. The new guidance changes the accounting treatment
for the Company’s $2.200 billion of 1.500 percent and $2.200
billion of 1.625 percent Senior Convertible Notes due 2011 and
2013, respectively, which were issued in April 2006 (collectively,
the Senior Convertible Notes), and the $15 million remaining
balance of the Company’s 1.250 percent Contingent Convertible
Debentures, Series B due 2021 (the Debentures).
The effect of the adoption of the new convertible debt
authoritative guidance on the Senior Convertible Notes at April
2006 was a debt discount of $967 million and an increase of
$614 million, net of tax, to shareholders’ equity.
The resulting debt discount for the Company’s Debentures was
to be amortized over the period from the effective date, January
2005, through the first date holders of the Debentures had the
ability to put them back to the Company, September 2006.
Therefore, the retrospective adoption of the new convertible debt
authoritative guidance for the Debentures had no impact on
results of operations for periods following fiscal year 2007.
In addition, in June 2008 the FASB issued new authoritative
guidance for determining whether instruments granted in share-
based payment transactions, such as options, restricted stock
units and restricted stock awards, are participating securities. This
new guidance provides that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of earnings per share
pursuant to the two-class method. The Company adopted the
new guidance in the first quarter of fiscal year 2010 and was
required to retrospectively adjust all prior-period earnings per
share data. The resulting impact of the adoption of the new
guidance was to include 2.9 million, 4.1 million and 2.3 million of
unvested restricted stock awards in the basic weighted average
shares outstanding calculation for fiscal years 2010, 2009 and
2008, respectively.