Avon 2010 Annual Report Download - page 26

PART I
We are investigating Foreign Corrupt Practices Act (FCPA) and related U.S. and foreign law
matters, and from time to time we may conduct other internal investigations and compliance
reviews, the consequences of which could negatively impact our business.
From time to time, we may conduct internal investigations and compliance reviews, the consequences of which could negatively impact our
business. Any determination that our operations or activities are not in compliance with existing United States or foreign laws or regulations
could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third party relationships,
termination of necessary licenses and permits, and other legal or equitable sanctions. Other legal or regulatory proceedings, as well as
government investigations, which often involve complex legal issues and are subject to uncertainties, may also follow as a consequence. It is
our policy to cooperate with U.S. and foreign government agencies and regulators, as appropriate, in connection with our investigations
and compliance reviews.
As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on
compliance with the FCPA and related U.S. and foreign laws in China and additional countries. The internal investigation, which is being
conducted under the oversight of our Audit Committee, began in June 2008. As we reported in October 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. We are continuing to cooperate with both agencies and inquiries by them, including but not limited to, signing tolling
agreements, translating and producing documents and assisting with interviews.
As previously reported in July 2009, in connection with the internal investigation, we commenced compliance reviews regarding the FCPA
and related U.S. and foreign laws in additional countries in order to evaluate our compliance efforts. We are conducting these compliance
reviews in a number of other countries selected to represent each of the Company’s four other international geographic segments. The
internal investigation and compliance reviews are focused on reviewing certain expenses and books and records processes, including, but
not limited to, travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and
acquisitions, 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, and we continue to
cooperate with both agencies with respect to these matters. At this point we are unable to predict the duration, scope, developments in,
results of, or consequences of the internal investigation and compliance reviews.
Any determination that our operations or activities, including our licenses or permits, importing or exporting, or product testing or approvals
are not in compliance with existing laws or regulations could result in the imposition of substantial fines, civil and criminal penalties,
interruptions of business, modification of business practices and compliance programs, equitable remedies, including disgorgement,
injunctive relief and other sanctions that we may take against our personnel or that may be taken against us or our personnel. In addition,
pending the outcome of these matters, certain personnel actions have been taken, including the placing of the Senior Vice President,
Western Europe, Middle East & Africa, Asia Pacific and China on administrative leave in connection with the internal investigation relating to
our China operations, and additional personnel actions may be taken in the future. Further, other countries in which we do business may
initiate their own investigations and impose similar sanctions. Because the internal investigation and compliance reviews are ongoing, there
can be no assurance as to how the resulting consequences, if any, may impact our internal controls, business, reputation, results of
operations or financial condition.
Significant changes in pension fund investment performance, assumptions relating to pension
costs or required legal changes in pension funding rules may have a material effect on the
valuation of pension obligations, the funded status of pension plans and our pension cost.
Our funding policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected
benefit obligations. Our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets
available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Significant changes in
investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the
valuation of plan assets, particularly equity securities, or in a change of the expected rate of return on plan assets. A change in the discount
rate would result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our
pension plans as well as the net periodic pension cost in the following fiscal years. Similarly, changes in the expected return on plan assets
can result in significant changes in the net periodic pension cost of the following fiscal years. Finally, recent pension funding requirements