Black & Decker 2014 Annual Report Download - page 52

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primary Black & Decker U.S pension and post employment benefit plans were curtailed in late 2010, as well as the only
material Black & Decker international plan, and in their place the Company implemented defined contribution benefit plans.
The vast majority of the projected benefit obligation pertains to plans that have been frozen; the remaining defined benefit plans
that are not frozen are predominantly small domestic union plans and those that are statutorily mandated in certain international
jurisdictions. The Company recognized $16 million of defined benefit plan expense in 2014, which may fluctuate in future
years depending upon various factors including future discount rates and actual returns on plan assets.
ENVIRONMENTAL — The Company incurs costs related to environmental issues as a result of various laws and regulations
governing current operations as well as the remediation of previously contaminated sites. Future laws and regulations are
expected to be increasingly stringent and will likely increase the Company’s expenditures related to environmental matters.
The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable
that a liability has been incurred and the amount of loss can be reasonably estimated. The amount of liability recorded is based
on an evaluation of currently available facts with respect to each individual site and includes such factors as existing
technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities
recorded do not take into account any claims for recoveries from insurance or third parties. As assessments and remediation
progress at individual sites, the amounts recorded are reviewed periodically and adjusted to reflect additional technical and
legal information that becomes available.
As of January 3, 2015, the Company had reserves of $177.3 million for remediation activities associated with Company-owned
properties as well as for Superfund sites, for losses that are probable and estimable. The range of environmental remediation
costs that is reasonably possible is $135.7 million to $268.9 million which is subject to change in the near term. The Company
may be liable for environmental remediation of sites it no longer owns. Liabilities have been recorded on those sites in
accordance with this policy.
INCOME TAXES — Income taxes are accounted for in accordance with ASC 740, "Accounting for Income Taxes," which requires
that deferred tax assets and liabilities be recognized, using enacted tax rates, for the effect of temporary differences between the
book and tax bases of recorded assets and liabilities. Deferred tax assets, including net operating losses and capital losses, are
reduced by a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax assets will not be
realized.
In assessing the need for a valuation allowance, the Company considers all positive and negative evidence including: estimates
of future taxable income, considering the feasibility of ongoing tax planning strategies, the realizability of tax loss carry-forwards
and the future reversal of existing temporary differences. Valuation allowances related to deferred tax assets can be impacted by
changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine
that it would not be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged
to earnings in the period in which that determination is made. By contrast, if the Company were to determine that it would be able
to realize deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation allowance
through a favorable adjustment to earnings in the period in which that determination is made.
The Company is subject to tax in a number of locations, including many state and foreign jurisdictions. Significant judgment is
required when calculating its worldwide provision for income taxes. The Company considers many factors when evaluating and
estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate
actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's
unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of
settlement of ongoing audits or final decisions in transfer pricing matters. The Company periodically assesses its liabilities and
contingencies for all tax years still subject to audit based on the most current available information, which involves inherent
uncertainty. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded
the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing
authority under the premise that the taxing authority has full knowledge of all relevant information. For those income tax positions
where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
The Company recognizes interest and penalties associated with uncertain tax positions as a component of income taxes in the
Consolidated Statement of Operations. See Note Q, Income Taxes, in the Notes to Consolidated Financial Statements for further
discussion.
RISK INSURANCE — To manage its insurance costs efficiently, the Company self insures for certain U.S. business exposures
and generally has low deductible plans internationally. For domestic workers’ compensation, automobile and product liability
(liability for alleged injuries associated with the Company’s products), the Company generally purchases insurance coverage
only for severe losses that are unlikely, and these lines of insurance involve the most significant accounting estimates. While
different self insured retentions, in the form of deductibles and self insurance through its captive insurance company, exist for