Verizon Wireless 2010 Annual Report Download - page 52

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The cumulative effect of the change on Reinvested earnings as of January 1, 2008 was a decrease of approximately $3.0 billion, with the corresponding
adjustment to Accumulated other comprehensive loss. The significant effects of the change in accounting for benefit plans on our consolidated state-
ments of income and consolidated balance sheet for the periods presented were as follows:
(dollars in millions, except per share amounts)
Years ended December 31, 2010 2009 2008
Recognized
Under
Previous
Method
Recognized
Under
New
Method
Previously
Reported Adjusted
Previously
Reported Adjusted
Income Statement Information:
Cost of services and sales $ 45,127 $ 44,149 $ 44,299 $ 44,579 $ 39,007 $ 38,615
Selling, general and administrative expense 31,298 31,366 32,950 30,717 26,898 41,517
Depreciation and amortization expense 16,400 16,405 16,532 16,534 14,565 14,610
Income before (provision) benefit for income taxes 11,780 12,684 11,568 13,520 15,914 1,643
(Provision) benefit for income taxes (2,094) (2,467) (1,210) (1,919) (3,331) 2,319
Net income 9,686 10,217 10,358 11,601 12,583 3,962
Net income (loss) attributable to Verizon 2,018 2,549 3,651 4,894 6,428 (2,193)
Basic Earnings (Loss) Per Common Share:
Net income (loss) attributable to Verizon 0.71 0.90 1.29 1.72 2.26 (0.77)
Diluted Earnings (Loss) Per Common Share:
Net income (loss) attributable to Verizon 0.71 0.90 1.29 1.72 2.26 (0.77)
At December 31, 2010 2009
Recognized
Under
Previous
Method
Recognized
Under
New
Method
Previously
Reported Adjusted
Balance Sheet Information:
Reinvested earnings $ 14,168 $ 4,368 $ 17,592 $ 7,260
Accumulated other comprehensive income (loss) (8,443) 1,049 (11,479) (1,372)
Notes to Consolidated Financial Statements continued
Derivative Instruments
We have entered into derivative transactions primarily to manage our
exposure to fluctuations in foreign currency exchange rates, interest rates,
equity and commodity prices. We employ risk management strategies,
which may include the use of a variety of derivatives including cross cur-
rency swaps, foreign currency and prepaid forwards and collars, interest
rate and commodity swap agreements and interest rate locks. We do not
hold derivatives for trading purposes.
We measure all derivatives, including derivatives embedded in other
financial instruments, at fair value and recognize them as either assets or
liabilities on our consolidated balance sheets. Our derivative instruments
are valued primarily using models based on readily observable market
parameters for all substantial terms of our derivative contracts and thus
are classified as Level 2. Changes in the fair values of derivative instru-
ments not qualifying as hedges or any ineffective portion of hedges are
recognized in earnings in the current period. Changes in the fair values
of derivative instruments used effectively as fair value hedges are recog-
nized in earnings, along with changes in the fair value of the hedged item.
Changes in the fair value of the effective portions of cash flow hedges are
reported in other comprehensive income (loss) and recognized in earn-
ings when the hedged item is recognized in earnings.
Recently Adopted Accounting Standards
The adoption of the following accounting standards and updates during
2010 did not result in a significant impact to our consolidated financial
statements:
In January 2010, we adopted the accounting standard regarding
consolidation accounting for variable interest entities. This standard
requires an enterprise to perform an analysis to determine whether
the entity’s variable interest or interests give it a controlling interest in a
variable interest entity.
In January 2010, we adopted the accounting standard update regarding
fair value measurements and disclosures, which requires additional dis-
closures regarding assets and liabilities measured at fair value.
In December 2010, we adopted the accounting standard update
regarding disclosures for finance receivables and allowances for credit
losses. This standard update requires that entities disclose information at
more disaggregated levels than previously required.
Recent Accounting Standards
On January 1, 2011, we prospectively adopted the accounting stan-
dard update regarding revenue recognition for multiple deliverable
arrangements. This method allows a vendor to allocate revenue in an
arrangement using its best estimate of selling price if neither vendor spe-
cific objective evidence nor third party evidence of selling price exists.
Accordingly, the residual method of revenue allocation is no longer per-
missible. The adoption of this standard update is not expected to have a
significant impact on our consolidated financial statements.
On January 1, 2011, we prospectively adopted the accounting standard
update regarding revenue recognition for arrangements that include
software elements. This update requires tangible products that contain
software and non-software elements that work together to deliver the
products’ essential functionality to be evaluated under the accounting
standard regarding multiple deliverable arrangements. The adoption of
this standard update is not expected to have a significant impact on our
consolidated financial statements.