ADT 2005 Annual Report Download - page 199

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and Contingencies (Continued)
During 2005, the Company undertook a detailed study of its pending asbestos claims and also
developed an estimate of asbestos claims that were incurred but not reported, as well as related
insurance and indemnification recoveries. The impact of this study was not material to the Company’s
financial position, results of operations or cash flows. The Company’s estimate of the liability for
pending and future claims is based on claim experience over the past five years and covers claims
expected to be filed through the year 2012. The Company believes that it has adequate amounts
recorded related to these matters. While it is not possible at this time to determine with certainty the
ultimate outcome of these asbestos-related proceedings, the Company believes that the final outcome
of all known and anticipated future claims, after taking into account its substantial indemnification
rights and insurance coverage, will not have a material adverse effect on the Company’s financial
position, results of operations or cash flows.
Income Taxes
The Company and its subsidiaries’ income tax returns are periodically examined by various
regulatory tax authorities. In connection with such examinations, tax authorities, including the United
States Internal Revenue Service, have raised issues and proposed tax deficiencies. The Company is
reviewing the issues raised by the tax authorities and is contesting certain of the proposed tax
deficiencies. Amounts related to these tax deficiencies and other tax contingencies that management
has assessed as probable and estimable have been recorded through the income tax provision, equity or
goodwill, as appropriate.
Compliance Matters
In 2003 an allegation was brought to our attention that during the period from 1999 through 2003
certain improper payments were made by a non-U.S. subsidiary of Tyco. With the assistance of outside
counsel, we conducted an internal investigation into this allegation to determine whether certain
payments were correctly recorded in the books and records of the subsidiary. We have taken remedial
steps and have reported the results of our investigation to the U.S. Department of Justice (‘‘DOJ’’) and
the SEC and are cooperating with their inquiries.
On March 29, 2005 and on August 9, 2005, Tyco reported to the DOJ and the SEC the
investigative steps and remedial measures that it has taken in response to a number of recent
allegations of improper payments. Tyco also informed the DOJ and the SEC that it has retained
outside counsel to perform a company-wide baseline review of its policies, controls and practices with
respect to compliance with the Foreign Corrupt Practices Act, that it would continue to make periodic
progress reports to them and that it would present its factual findings upon conclusion of the baseline
review. Tyco has agreed to make additional progress reports and to present its factual findings upon
conclusion of the baseline review.
At this time, Tyco cannot predict the outcome of these matters reported to regulatory and law
enforcement authorities and therefore cannot estimate the range of potential loss or extent of risk, if
any, that may result from an adverse resolution of any or all of these matters.
Other Matters
The Company is a defendant in a number of other pending legal proceedings incidental to present
and former operations, acquisitions and dispositions. The Company does not expect the outcome of
2005 Financials 123