Avon 2011 Annual Report Download - page 93

Supplemental Retirement Programs
We offer a non-qualified deferred compensation plan, the Avon Products, Inc. Deferred Compensation Plan (the “DCP”), for certain higher
paid 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 a participant’s base salary, the deferral of up to 100% of incentive compensation bonuses, the
deferral of performance restricted stock units for certain employees, and the deferral of contributions that would normally have been made
to the Avon Personal Savings Account Plan (the “PSA”) but are not deferred because the amount was 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 $1.8 for 2011, $3.7 for 2010, and $6.6 for 2009. The accrued liability for the
DCP was $79.6 at December 31, 2011 and $85.6 at December 31, 2010 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 key 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 $9.8 in 2011, $10.0 in 2010 and $11.5 in 2009 The benefit obligation under these programs was $68.4 at December 31,
2011, and $72.4 at December 31, 2010 and was included in employee benefit plans and accrued compensation.
We also maintain a Supplemental Life Plan (“SLIP”) under which additional death benefits ranging from $.4 to $2.0 are provided to certain
active and retired officers. The SLIP has not been offered to new officers since January 1, 2010.
We established a grantor 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:
2011 2010
Corporate-owned life insurance policies $41.9 $44.4
Cash and cash equivalents 0.7 1.4
Total $42.6 $45.8
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.
NOTE 13. Segment Information
Our segments are based on geographic operations and include commercial business units in Latin America; North America; Central &
Eastern Europe; Western Europe, Middle East & Africa; and Asia Pacific. Beginning in the first quarter of 2011, the results of Asia Pacific and
China were managed as a single operating segment. Accordingly, Asia Pacific amounts include the results of China for all periods presented.
Global expenses include, among other things, costs related to our executive and administrative offices, information technology, research and
development, marketing and professional and related fees associated with the FCPA investigation and compliance reviews. 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, costs of implementing restructuring initiatives
related to our global functions or professional and related fees associated with the FCPA investigation and compliance reviews. Costs of
implementing restructuring initiatives related to a specific 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.
A V O N 2011 F-33