Avon 2011 Annual Report Download - page 99

The charges, net of adjustments, of initiatives approved to date under the 2005 and 2009 Restructuring Programs by reportable business
segment were as follows:
Latin
America
North
America
Central &
Eastern
Europe
Western
Europe,
Middle East
& Africa
Asia
Pacific Corporate Total
2005 $ 3.5 $ 6.9 $ 1.0 $ 11.7 $22.4 $ 6.1 $ 51.6
2006 34.6 61.8 6.9 45.1 14.2 29.5 192.1
2007 14.9 7.0 4.7 65.1 4.9 12.7 109.3
2008 1.9 (1.1) 1.7 19.0 (.7) (3.0) 17.8
2009 19.2 26.7 25.1 27.4 19.9 12.0 130.3
2010 13.6 17.8 .3 (1.1) (.3) 11.0 41.3
2011 2.1 (1.1) 1.0 .9 (.3) .8 3.4
Charges recorded to date $89.8 $118.0 $40.7 $168.1 $60.1 $69.1 $545.8
Charges to be incurred on approved initiatives 4.4 – 1.9 1.3 (.1) – 7.5
Total expected charges on approved initiatives $94.2 $118.0 $42.6 $169.4 $60.0 $69.1 $553.3
As noted previously, we expect to record total costs to implement of approximately $510 before taxes for all restructuring initiatives under
the 2005 Restructuring Program and in the range of $300 to $310 before taxes for all restructuring initiatives under the 2009 Restructuring
Program, in each case 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 other
professional services and accelerated depreciation. These future costs are expected to be more than offset by gains on the sales of properties
exited due to restructuring initiatives.
NOTE 16. Contingencies
In 2002, our Brazilian subsidiary received an excise tax assessment from the Brazilian tax authorities for alleged tax deficiencies during the
years 1997-1998 asserting that the establishment in 1995 of separate manufacturing and distribution companies in that country was done
without a valid business purpose and that Avon Brazil did not observe minimum pricing rules to define the taxable basis of excise tax. The
structure adopted in 1995 is comparable to that used by many other companies in Brazil. We believe that our Brazilian corporate structure is
appropriate, both operationally and legally, and that the 2002 assessment is unfounded. This matter is being vigorously contested and in the
opinion of our outside counsel, the likelihood that the assessment ultimately will be upheld is remote. Management believes that the
likelihood that the assessment will have a material impact on our consolidated financial position, results of operations or cash flows is
correspondingly remote. Other similar excise tax assessments involving different periods have been canceled and officially closed in our favor
by the second administrative level.
In October 2010, the 2002 assessment was upheld at the first administrative level at an amount reduced to $34 from $80, including
penalties and accruing interest, at the exchange rate on December 31, 2011. We have appealed this decision to the second administrative
level. In the event that the 2002 assessment is upheld at the third and last administrative level, 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 an estimate
of the amount or range of loss that it is reasonably possible that we could incur from an unfavorable outcome in respect of this and 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 (“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 (“SEC”) and the United States
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