Abercrombie & Fitch 2013 Annual Report Download - page 44

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44
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 February 2, 2013. 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 February
2, 2013 would increase the SERP accrual by approximately
$1.8 million. A 50 basis point increase in the discount rate as
of February 2, 2013 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 the final
resolution of these matters will not have a material adverse
effect on the Company’s financial condition, results of
operations or cash flows.
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