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<strong>Harman</strong> International Industries, Incorporated and Subsidiaries<br />
(Dollars in thousands, except per-share data and unless otherwise indicated)<br />
Business Combinations and Noncontrolling Interests: In December 2007, the FASB issued Statement<br />
No. 141R, Business Combinations (“SFAS 141R”), which requires the acquired entity to recognize the full fair<br />
value of assets acquired, liabilities assumed and any noncontrolling interests in the transaction (whether a full or<br />
partial acquisition) at the acquisition date fair value with limited exceptions. SFAS 141R will change the<br />
accounting treatment for certain specific items and include a substantial number of new disclosure<br />
requirements. These changes include: (a) the “acquirer” recording all assets and liabilities of the acquired<br />
business, including goodwill, generally at their fair values, (b) recording contingent consideration arrangements<br />
at fair value on the date of acquisition, with changes in fair value recognized in earnings until settled, and<br />
(c) expensing acquisition-related transaction and restructuring costs rather than treated as part of the cost of the<br />
acquisition and included in the amount recorded for assets acquired. SFAS 141R applies prospectively to<br />
business combinations for which the acquisition date is on or after the first annual reporting period beginning on<br />
or after December 15, 2008. SFAS 141R will apply to any acquisitions consummated by us on or after July 1,<br />
2009. The impact of FAS No. 141(R) on our consolidated financial statements will depend upon the nature, terms<br />
and size of the acquisitions we consummate after the effective date.<br />
In 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—<br />
an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”). SFAS 160 requires reporting entities to<br />
present noncontrolling (minority) interests as equity (as opposed to as a liability) and provides guidance on the<br />
accounting for transactions between an entity and noncontrolling interests. SFAS 160 applies prospectively for us<br />
as of July 1, 2009, except for the presentation and disclosure requirements which will be applied retrospectively<br />
for all periods presented. We do not expect the adoption of SFAS 160 to have a material impact on our<br />
consolidated financial statements.<br />
Fair Value: In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume<br />
and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That<br />
Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in<br />
accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly<br />
decreased when compared with normal market activity for the asset or liability. The new approach is designed to<br />
address whether a market is inactive, and if so whether a market should be considered distressed. The objective<br />
of the FSP FAS 157-4 is to remain consistent with the principles of SFAS 157, yet provide additional guidance<br />
on how fair value measurements might be determined in an inactive market. FSP 157-4 also requires additional<br />
disclosures relating to an entity’s valuation techniques and its major categories of investments in debt and equity<br />
securities. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. Early<br />
adoption is permitted. FSP FAS 157-4 is effective for us beginning July 1, 2009. We do not expect the adoption<br />
of FSP FAS 157-4 to have a material impact on our consolidated financial statements.<br />
In April 2009, the FASB issued FSP FAS <strong>10</strong>7-1 and APB 28-1, “Interim Disclosures about Fair Value of<br />
Financial Instruments” (“FSP FAS <strong>10</strong>7-1 & APB 28-1”). FSP FAS <strong>10</strong>7-1 & APB 28-1 amends SFAS <strong>10</strong>7,<br />
“Disclosures about Fair Value of Financial Instruments” by requiring disclosures about fair value of financial<br />
instruments for interim reporting periods of publicly-held companies, as well as in annual financial<br />
statements. FSP FAS <strong>10</strong>7-1 & APB 28-1 also amends APB No. 28, “Interim Financial Reporting”, by requiring<br />
these disclosures in summarized financial information at interim reporting periods. This FSP is effective for<br />
interim reporting periods ending after June 15, 2009. Early adoption is permitted. FSP FAS <strong>10</strong>7-1 & APB 28-1 is<br />
effective for us beginning July 1, 2009. We do not expect the adoption of FSP FAS <strong>10</strong>7-1 & APB 28-1 to have a<br />
material impact on our consolidated financial statements.<br />
Convertible Debt: In May 2008, the FASB issued FSP APB 14-1, “Accounting for Convertible Debt<br />
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB<br />
14-1”). FSP APB 14-1 requires the issuer of convertible debt instruments with cash settlement features to<br />
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