Costco 2013 Annual Report Download - page 22

20
assumptions, estimates and judgments by our management. Changes in these rules or their interpretation
or changes in underlying assumptions, estimates or judgments by our management could significantly change
our reported or expected financial performance.
Provisions for losses related to self-insured risks are generally based upon independent actuarially
determined estimates. The assumptions underlying the ultimate costs of existing claim losses can be highly
unpredictable, which can affect the liability recorded for such claims. For example, variability in inflation rates
of health care costs inherent in these claims can affect the amounts realized. Similarly, changes in legal
trends and interpretations, as well as a change in the nature and method of how claims are settled can
impact ultimate costs. Although our estimates of liabilities incurred do not anticipate significant changes in
historical trends for these variables, any changes could have a considerable effect upon future claim costs
and currently recorded liabilities and could materially impact our consolidated financial statements.
We could be subject to additional income tax liabilities.
We compute our income tax provision based on enacted tax rates in the countries in which we operate. As
the tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which
we operate could result in an unfavorable change in our overall tax provision. Additionally, any change in
the enacted tax rates, any adverse outcome in connection with any income tax audits in any jurisdiction,
including transfer pricing disputes, or any change in the pronouncements relating to accounting for income
taxes could have a material adverse effect on our financial condition and results of operations.
Significant changes in, or failure to comply with, federal, state, regional, local and international
laws and regulations relating to the use, storage, discharge and disposal of hazardous materials,
hazardous and non-hazardous wastes and other environmental matters could adversely impact
our business, financial condition and results of operations.
We are subject to a wide variety of federal, state, regional, local and international laws and regulations
relating to the use, storage, discharge and disposal of hazardous materials, hazardous and non-hazardous
wastes and other environmental matters. Any failure to comply with these laws could result in significant
costs to satisfy environmental compliance, remediation or compensatory requirements, or the imposition of
severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect
our business, financial condition and results of operations.
We are involved in a number of legal proceedings and audits and, while we cannot predict the
outcomes of such proceedings and other contingencies with certainty, some of these outcomes
could adversely affect our business, financial condition and results of operations.
Our business requires compliance with a great variety of laws and regulations. Failure to achieve compliance
could subject us to lawsuits and other proceedings, and lead to damage awards, fines and penalties. We
are, or may become involved, in a number of legal proceedings and audits including grand jury investigations,
government and agency investigations, and consumer, employment, tort and other litigation (see discussion
of Legal Proceedings in Note 11 to the consolidated financial statements included in this Report). We cannot
predict with certainty the outcomes of these legal proceedings and other contingencies, including
environmental remediation and other proceedings commenced by governmental authorities. The outcome
of some of these legal proceedings, audits, unclaimed property laws, and other contingencies could require
us to take, or refrain from taking, actions which could negatively affect our operations or could require us to
pay substantial amounts of money adversely affecting our financial condition and results of operations.
Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion
of management's attention and resources.