Avon 2009 Annual Report Download - page 91

Supplemental Retirement Programs
We offer anon-qualified deferred compensation plan, the Avon
Products, Inc. Deferred Compensation Plan (the “DCP”), for
certain key employees. The DCP is an unfunded, unsecured plan
for which obligations are paid to participants out of our general
assets. The DCP allows for the deferral of up to 50% of apartic-
ipant’s base salary, the deferral of up to 100% of incentive
compensation bonuses, and the deferral of contributions that
would have been made to the Avon Personal Savings Account
Plan (the “PSA”) but that are in excess of U.S. Internal Revenue
Code limits on contributions to the PSA. Participants may elect to
have their deferred compensation invested in one or more of
three investment alternatives. Expense associated with the DCP
was $6.6 for2009, $4.6 for2008 and $6.8 for2007. The accrued
liability for the DCP was $90.8 at December 31, 2009 and $94.1
at December 31, 2008 and was included in other liabilities.
We maintain supplemental retirement programs consisting of
the Supplemental Executive Retirement Plan of Avon Products,
Inc. (“SERP”) and the Benefit Restoration Pension Plan of Avon
Products, Inc. under which non-qualified supplemental pension
benefits are paid to higher paid employees in addition to
amounts received under our qualified retirement plan, which is
subject to IRS limitations on covered compensation. The annual
cost of these programs has been included in the determination
of the net periodic benefit cost shown previously and amounted
to $7.4 in 2009, $7.9 in 2008 and $9.5 in 2007. The benefit
obligation under these programs was $69.8 at December 31,
2009, and $73.1 at December 31, 2008 and was included in
employee benefit plans.
We also maintain aSupplemental Life Plan (“SLIP”) under which
additional death benefits ranging from $.4 to $2.0 are provided
to certain active and retired officers. The SLIP will not be offered
to new officers after 2009.
We established agrantor trust to provide assets that may be
used for the benefits payable under the SERP and SLIP. The trust
is irrevocable and, although subject to creditors’ claims, assets
contributed to the trust can only be used to pay such benefits
with certain exceptions. The assets held in the trust are included
in other assets and at December 31 consisted of the following:
2009 2008
Fixed-income portfolio $.2$.9
Corporate-owned life insurance policies 42.3 40.2
Cash and cash equivalents 7.6 20.1
Total $50.1 $61.2
The assets are recorded at fair market value, except for investments
in corporate-owned life insurance policies which are recorded at
their cash surrender values as of each balance sheet date. Changes
in the cash surrender value during the period are recorded as a
gain or loss in the Consolidated Statements of Income.
The fixed-income portfolio held in the grantor trust is classified
as available-for-sale securities.
NOTE 12. Segment Information
Our operating segments, which are our reportable segments, are
based on geographic operations and include commercial busi-
ness units in Latin America; North America; Central &Eastern
Europe; Western Europe, Middle East &Africa; Asia Pacific; and
China. Global expenses include, among other things, costs
related to our executive and administrative offices, information
technology, research and development, and marketing. We allocate
certain planned global expenses to our business segments primarily
based on planned revenue. The unallocated costs remain as
global expenses. We do not allocate to our segments income
taxes, foreign exchange gains or losses, or costs of implementing
restructuring initiatives related to our global functions. Costs of
implementing restructuring initiatives related to aspecific segment
are recorded within that segment. In Europe, our manufacturing
facilities primarily support Western Europe, Middle East &Africa
and Central &Eastern Europe. In our disclosures of total assets,
capital expenditures and depreciation and amortization, we have
allocated amounts associated with the European manufacturing
facilities between Western Europe, Middle East &Africa and
Central &Eastern Europe based upon planned beauty unit volume.
Asimilar allocation is done in Asia where our manufacturing
facilities primarily support Asia Pacific and China.
The segments have similar business characteristics and each
offers similar products through similar customer access methods.
The accounting policies of thesegments are thesame as those
described in Note 1, Description of the Business and Summary of
Significant Accounting Policies. We evaluatethe performance of
our segments based on revenuesand operating profits or losses.
Segment revenues reflect direct salesofproducts to Representa-
tives based on the Representative’s geographic location. Inter-
segment sales and transfers are not significant. Each segment
records direct expenses related to its employees and itsoperations.
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