Notes to CoNsolidated FiNaNCial statemeNts Note 1 – Significant Accounting Policies (continued) REcENT accOuNTING PRONOuNcEMENTs: In September 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-08, “Intangibles–Goodwill and Other (Topic  350): Testing Goodwill for Impairment,” which includes new accounting guidance for the periodic testing of goodwill for impairment.  This guidance allows companies to assess qualitative factors to determine if goodwill might be impaired and whether it is necessary  to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for  the Company beginning after December 31, 2011, with early adoption permitted. Effective October 1, 2011, the Company adopted  this accounting guidance. The adoption of the new accounting guidance related to goodwill impairment testing had no impact on the  Company’s results of operations and financial condition. In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,”  which includes new accounting rules related to the presentation of comprehensive income. The new accounting rules require that  entities present a statement of other comprehensive income within the consolidated financial statements in one of two manners: a  single statement approach or a two-statement approach. The single statement approach consists of a single statement presenting the  components of net income and total net income, the components of other comprehensive income and a total for other comprehensive  income. The two-statement approach allows for the components of net income and total net income to be presented in a financial  statement, immediately followed by another financial statement presenting the components of other comprehensive income and  a total for comprehensive income. The new accounting rules are effective, on a retrospective basis, for fiscal years beginning after  December 15, 2011. The adoption of the new accounting rules related to the presentation of other comprehensive income is not  expected to have a material impact on the Company’s results of operations and financial condition, but it will affect how the Company  reports other comprehensive income. Management has evaluated the two methods of presentation for comprehensive income and will  apply the two-statement approach effective January 1, 2012. In May 2011, the FASB issued new accounting guidance updating ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments  to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The new accounting rules do not  extend the use of fair value accounting; they only provide additional guidance on the application and disclosure of fair value accounting  where its use is currently permitted. The new accounting rules also expand the required disclosures about fair value measurement. The  provisions for the new accounting rules are effective, on a prospective basis, for interim and fiscal periods beginning after December 15,  2011. The adoption of the new accounting rules for fair value measurements is not expected to have a material impact on the Company’s  results of operations and financial condition. Use of Estimates:  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires  management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying  notes. These estimates and assumptions are reviewed and updated regularly to reflect recent experience. Reclassifications:  Certain amounts reported in the 2010 and 2009 Consolidated Financial Statements have been reclassified to  conform to the 2011 presentation. Such amounts include reclassifications of segment earnings and the reclassifications of certain  accruals between short-term and long-term liabilities. On October 3, 2011, the Company completed the acquisition of Drives LLC (Drives), a leading manufacturer of highly engineered  drive-chains, roller-chains and conveyor augers for agricultural and industrial markets, for $93.1 million in cash. Based in Fulton, Illinois  and employing approximately 430 people, Drives had trailing 12-month sales of approximately $100 million through September 2011.  The results of the operations of Drives were included in the Company’s Consolidated Statements of Income for the period subsequent  to the effective date of the acquisition and were reported in the Mobile Industries and Process Industries segments. On July 1, 2011, the Company completed the acquisition of substantially all assets of Philadelphia Gear, a leading provider of high- performance gear drives and components with a strong focus on value-added aftermarket capabilities in the industrial and military  marine sectors, for $199.0 million in cash. Based in King of Prussia, Pennsylvania and employing approximately 220 people, Philadelphia  Gear had trailing 12-month sales through June 2011 of approximately $100 million. The results of the operations of Philadelphia Gear  were included in the Company’s Consolidated Statements of Income for the period subsequent to the effective date of the acquisition  and were reported in the Process Industries segment. NOTE 2 – ACquIsITIONs ANd dIvEsTITurEs acquIsITIONs THE TIMKEN COMPANY 50