Interim Basis of Presentation and Accounting Policies

9 Months Ended

Jun. 30, 2011

Interim Basis of Presentation and Accounting Policies [Abstract]

INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

1.	INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES
	Interim Basis of Presentation. The accompanying condensed consolidated financial statements of American Pacific Corporation and its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) are unaudited, but in the opinion of management, include all adjustments, which are of a normal recurring nature, necessary to a fair statement of the results for the interim periods presented. These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2010. The operating results for the three-month and nine-month periods ended June 30, 2011 and cash flows for the nine-month period ended June 30, 2011 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods.
	Accounting Policies and Principles of Consolidation. A description of our significant accounting policies is included in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2010. Our consolidated financial statements include the accounts of American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have been eliminated.
	Fair Value Disclosure of Financial Instruments. The current authoritative guidance on fair value clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
	Level 1 — Quoted prices for identical instruments in active markets.
	Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
	Level 3 — Significant inputs to the valuation model are unobservable.
	We estimate the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. We estimate the fair value of our fixed-rate long-term debt as of June 30, 2011 to be approximately $104,738 based on level 2 data which was the trade date closest to June 30, 2011, which was March 23, 2011. We estimated the fair value of our fixed-rate long-term debt as of September 30, 2010 to be approximately $103,688 based on the trade date closest to that date, which was October 13, 2010.

Depreciation and Amortization Expense. Depreciation and amortization expense is classified as follows in our statements of operations:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Classified as cost of revenues
Depreciation	$	3,341	$	3,101	$	9,887	$	9,934
Classified as operating expenses
Depreciation		140		194		431		487
Amortization		188		509		762		1,559
Total	$	3,669	$	3,804	$	11,080	$	11,980

Bill and Hold Transactions. Some of our perchlorate and fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” arrangements). The sales value of inventory, subject to Bill and Hold arrangements, at our facilities was $20,451 and $19,606 as of June 30, 2011 and September 30, 2010, respectively.

Recently Issued or Adopted Accounting Standards. In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-17, which provides guidance on defining a milestone under Topic 605 and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and nonsubstantive milestones that should be evaluated individually. This standard became effective for us beginning on October 1, 2010. The adoption of this standard did not have a material impact on our results of operations, financial position or cash flows.

In December 2010, the FASB issued ASU No. 2010-28 that affects entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. The amendments in the ASU modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This standard is effective for us beginning on October 1, 2011. The adoption of this standard is not expected to have a material impact on our results of operations, financial position or cash flows.

In June 2011, the FASB issued ASU No. 2011-05 which amends Topic 220, Comprehensive Income. The amendment allows an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This standard is effective for us beginning on October 1, 2012. The adoption of this standard is not expected to have a material impact on our results of operations, financial position or cash flows.