Walgreens 2008 Annual Report Download - page 24

Off-Balance Sheet Arrangements
Letters of credit are issued to support purchase obligations and commitments
(as reflected on the Contractual Obligations and Commitments table) as follows
(In millions):
Insurance $ 271
Inventory obligations 110
Real estate development 14
Other 8
Total $ 403
We have no off-balance sheet arrangements other than those disclosed on the
Contractual Obligations and Commitments table and a credit agreement guaranty
on behalf of SureScripts, LLC. This agreement is described more fully in Note 7
in the Notes to Consolidated Financial Statements.
Both on-balance sheet and off-balance sheet financing are considered when
targeting debt to equity ratios to balance the interests of equity and debt
(including real estate) investors. This balance allows us to lower our cost of
capital while maintaining a prudent level of financial risk.
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements.” This statement, and the related
pronouncements, defines and provides guidance when applying fair value
measurements to accounting pronouncements that require or permit such
measurements. This statement, which will be effective first quarter of fiscal
2009, is not expected to have a material impact on our consolidated financial
position or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” This statement gives entities the
option to carry most financial assets and liabilities at fair value, with changes
in fair value recorded in earnings. We do not intend to adopt this voluntary
statement, which would be effective first quarter of fiscal 2009.
In June 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on
Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-
Based Payment Awards.” EITF 06-11 states that an entity should recognize a
realized tax benefit associated with dividends on certain nonvested equity shares
and options as an increase in additional paid-in capital. The benefit should be
included in the pool of excess tax benefits available to absorb potential future
tax liabilities. This issue should be applied prospectively for share-based awards
declared beginning in fiscal 2009. This statement is not expected to have a
material impact on our consolidated financial position or results of operations.
Management’s Discussion and Analysis of Results of Operations
and Financial Condition (continued)
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.”
This statement establishes principles and requirements for how the acquirer
recognizes and measures identifiable assets acquired, liabilities assumed and
any noncontrolling interest in a business combination. In addition, the statement
provides a revised definition of a business, shifts from the purchase method to the
acquisition method, expenses acquisition-related transaction costs, recognizes
contingent consideration and contingent assets and liabilities at fair value and
capitalizes acquired in-process research and development. This statement, which
will be effective for the first quarter of fiscal 2010, will be applied prospectively
to business combinations.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements – an amendment of Accounting Research
Bulletin No. 51.” The objective of this statement is to improve the relevance,
comparability, and transparency of the financial information that a reporting entity
provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. The statement significantly changes the accounting
for transactions with minority interest holders. This statement, which will be
effective for the first quarter of fiscal 2010, is not expected to have a material
impact on our consolidated financial position or results of operations.
Cautionary Note Regarding Forward-Looking Statements
Certain statements and projections of future results made in this report constitute
forward-looking information that is based on current market, competitive and
regulatory expectations that involve risks and uncertainties. Please see Walgreen
Co.’s Form 10-K for the period ended August 31, 2008, for a discussion of
important factors as they relate to forward-looking statements. Actual results
could differ materially.
Page 22 2008 Walgreens Annual Report