Avon 2008 Annual Report Download - page 83

The charges, net of adjustments, of initiatives approved to date by reportable business segment were as follows:
Latin
America
North
America
Central &
Eastern
Europe
Western
Europe,
Middle East
& Africa
Asia
Pacific China Corporate Total
2005 $ 3.5 $ 6.9 $ 1.0 $ 11.7 $18.2 $4.2 $ 6.1 $ 51.6
2006 34.6 61.8 6.9 45.1 22.2 2.1 29.5 202.2
2007 14.9 7.0 4.7 65.1 4.3 1.3 12.7 110.0
2008 1.9 (1.1) 1.7 19.0 .6 – (3.0) 19.1
Charges recorded to date $54.9 $74.6 $14.3 $140.9 $45.3 $7.6 $45.3 $382.9
Charges to be incurred on approved
initiatives 4.3 3.3 .1 1.8 10.3 – 2.1 21.9
Total expected charges $59.2 $77.9 $14.4 $142.7 $55.6 $7.6 $47.4 $404.8
As noted previously, we expect to record total costs to imple-
ment of approximately $530 and in the range of $300 to $400
before taxes for restructuring initiatives under the 2005 and
2009 programs, respectively, including restructuring charges and
other costs to implement. The amounts shown in the tables
above as charges recorded to date relate to initiatives that have
been approved and recorded in the financial statements as the
costs are probable and estimable. The amounts shown in the
tables above as total expected charges represent charges
recorded to date plus charges yet to be recorded for approved
initiatives as the relevant accounting criteria for recording have
not yet been met. In addition to the charges included in the
tables above, we will incur other costs to implement such as
consulting other professional services, and accelerated
depreciation.
NOTE 15. Contingencies
In December 2002, our Brazilian subsidiary received a series of
excise and income tax assessments from the Brazilian tax author-
ities asserting that the establishment in 1995 of separate manu-
facturing and distribution companies in that country was done
without a valid business purpose. The assessments assert tax
deficiencies during portions of the years 1997 and 1998 of
approximately $86.6 at the exchange rate on December 31,
2008, plus penalties and accruing interest totaling approximately
$162.0 at the exchange rate on December 31, 2008. In July
2003, a first-level appellate body rejected the basis for income
tax assessments representing approximately 76% of the total
assessment, or $189.1 (including interest). In March 2004, that
rejection was confirmed in a mandatory second-level appellate
review. The remaining assessments relating to excise taxes
(approximately $59.4) were not affected and are awaiting a
decision at the first administrative level. In December 2003, an
additional assessment was received in respect of excise taxes for
the balance of 1998, totaling approximately $120.2 at the
exchange rate on December 31, 2008, and asserting a different
theory of liability based on purported market sales data. In
January 2005, an unfavorable first administrative level decision
was received with respect to the appeal of that assessment and a
further appeal has been taken. In December 2004, an additional
assessment was received in respect of excise taxes for the period
from January 1999 to December 2001, totaling approximately
$267.3 at the exchange rate on December 31, 2008, and assert-
ing the same theory of liability as in the December 2003 assess-
ment. We appealed that assessment. In September 2005, an
unfavorable first administrative level decision was received with
respect to the appeal of the December 2004 assessment, and a
further appeal is being taken. The assessments issued in 2003
and 2004 are awaiting a decision at the second administrative
level. In the event that assessments are upheld in the earlier
stages of review, it may be necessary for us to provide security to
pursue further appeals, which, depending on the circumstances,
may result in a charge to income. It is not possible to make a
reasonable estimate of the amount or range of expense that
could result from an unfavorable outcome in respect of these or
any additional assessments that may be issued for subsequent
periods. The structure adopted in 1995 is comparable to that
used by many companies in Brazil, and we believe that it is
appropriate, both operationally and legally, and that the assess-
ments are unfounded. This matter is being vigorously contested
and in the opinion of our outside counsel the likelihood that the
assessments ultimately will be upheld is remote. Management
believes that the likelihood that the assessments will have a
material impact on our consolidated financial position, results of
operations or cash flows is correspondingly remote.
Kendall v. Employees’ Retirement Plan of Avon Products and the
Retirement Board is a purported class action commenced in April
2003 in the United States District Court for the Southern District
of New York. Plaintiff is a retired employee of Avon who, before
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