Avon 2009 Annual Report Download - page 97

Non-cash write-offs associated with employee-related costs are the result of settlement, curtailment and special termination benefit charges
for pension plans and postretirement due to the initiatives implemented.
The charges, net of adjustments, of initiatives approved to date under the 2009 Restructuring Program by reportable business segment were
as follows:
Latin
America
North
America
Central &
Eastern
Europe
Western
Europe,
Middle East
&Africa
Asia
Pacific China Corporate Total
Charges recorded to date $17.8 $26.8 $25.8 $31.8 $6.8 $2.1 $14.9 $126.0
Charges to be incurred on approved initiatives 6.0 2.7 3.6 1.9 1.1 .2 –15.5
Total expected charges on approved initiatives $23.8 $29.5 $29.4 $33.7 $7.9 $2.3 $14.9 $141.5
As noted previously, we expect to record total costs to
implement in the range of $300 to $400 before taxes for all
restructuring initiatives under the 2009 Restructuring Program,
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 on approved initiatives represent charges
recorded to date plus charges yet to be recorded for approved
initiatives as the relevant accounting criteria for recording an
expense have not yet been met. In addition to the charges
included in the tables above, we will incur other costs to
implement restructuring initiatives such as consulting, other
professional services, and accelerated depreciation.
NOTE 15. Contingencies
In 2002, 2003 and 2004, our Brazilian subsidiary received aser-
ies of excise tax assessments from the Brazilian tax authorities for
alleged tax deficiencies during the years 1997-2001 asserting
that the establishment in 1995 of separate manufacturing and
distribution companies in that country was done without avalid
business purpose and that Avon Brazil did not observe minimum
pricing rules to define the taxable basis of excise tax, based on
purported market sales data. The structure adopted in 1995 is
comparable to that used by other companies in Brazil. We believe
that our Brazilian corporate structure is appropriate, both opera-
tionally and legally, and that the assessments are unfounded.
This matter is being vigorously contested and in the opinion of
our outside counsel, the likelihood that the assessments ulti-
mately will be upheld is remote. Management believes that the
likelihood that the assessments will have amaterial impact on
our consolidated financial position, results of operations or cash
flows is correspondingly remote. As of December 31, 2009, the
total assessments related to these remote contingencies, includ-
ing penalties and accruing interest, amounted to approximately
$620 at the exchange rate on December 31, 2009. 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. We are currently awaiting decisions at the first
administrative level for the 2002 assessment and at the second
administrative level for the 2003 and 2004 assessments. It is not
possible to make areasonable 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.
As previously reported, we have engaged outside counsel to
conduct an internal investigation and compliance reviews
focused on compliance with the Foreign Corrupt Practices Act
and related U.S. and foreign laws in China and additional coun-
tries. The internal investigation and compliance reviews, which
are being conducted under the oversight of our Audit Commit-
tee, began in June 2008. We voluntarily contacted the United
States Securities and Exchange Commission and the United
States Department of Justice to advise both agencies of our
internal investigation and compliance reviews and we are, as we
have done from the beginning of the internal investigation, con-
tinuing to cooperate with both agencies and have signed tolling
agreements with them.
The internal investigation and compliance reviews, which started
in China, are focused on reviewing certain expenses and books
and records processes, including, but not limited to, travel,
entertainment, gifts, and payments to third-party agents and
others, in connection with our business dealings, directly or
indirectly, with foreign governments and their employees. The
internal investigation and compliance reviews of these matters
are ongoing. At this point we are unable to predict the duration,
scope or results of the internal investigation and compliance reviews.
AVON2009 F-33