Abercrombie & Fitch 2011 Annual Report Download - page 60

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Policy Effect if Actual Results Differ from Assumptions
Supplemental Executive Retirement Plan
Effective February 2, 2003, the Company established
a Chief Executive Officer Supplemental Executive
Retirement Plan to provide additional retirement
income to its Chairman and Chief Executive Officer.
Subject to service requirements, the CEO will receive
a monthly benefit equal to 50% of his final average
compensation (as defined in the SERP) for life. The
final average compensation used for the calculation is
based on actual compensation (base salary and actual
annual cash incentive compensation) averaged over
the last 36 consecutive full calendar months ending
before the CEO’s retirement.
The Company’s accrual for the SERP requires
management to make assumptions and judgments
related to the CEO’s final average compensation, life
expectancy and discount rate.
The Company does not expect material changes in
the near term to the underlying assumptions used
to determine the accrual for the SERP as of
January 28, 2012. However, changes in these
assumptions do occur, and, should those changes
be significant, the Company may be exposed to
gains or losses that could be material.
A 10% increase in final average compensation as
of January 28, 2012 would increase the SERP
accrual by approximately $1.5 million. A 50 basis
point increase in the discount rate as of January
28, 2012 would decrease the SERP accrual by an
immaterial amount.
Legal Contingencies
The Company is a defendant in lawsuits and other
adversarial proceedings arising in the ordinary course
of business. Legal costs incurred in connection with
the resolution of claims and lawsuits are expensed as
incurred, and the Company establishes reserves for
the outcome of litigation where it deems appropriate
to do so under applicable accounting rules.
Actual liabilities may exceed or be less than the
amounts reserved, and there can be no assurance
that final resolution of these matters will not have
a material adverse effect on the Company’s
financial condition, results of operations or cash
flows.
57