Danaher 2009 Annual Report Download - page 60

Table of Contents
other short-term incentive programs, are recorded as a reduction in reported revenues at the time of sale because these allowances reflect a reduction in the
purchase price. Product returns, customer allowances and rebates are estimated based on historical experience and known trends. Revenue related to separately
priced extended warranty and product maintenance agreements is recognized as revenue over the term of the agreement.
Revenues for contractual arrangements consisting of multiple elements (i.e., deliverables) are recognized for the separate elements when the product or services
have value on a stand-alone basis, fair value of the separate elements exists (or in the case of software related products, vendor specific objective evidence of
fair value) and, in arrangements that include a general right of refund relative to the delivered element, performance of the undelivered element is considered
probable and substantially in the Company’s control. While determining fair value and identifying separate elements requires judgment, generally fair value
and the separate elements are identifiable as those elements are also sold unaccompanied by other elements.
Share-Based Compensation: The Company accounts for share-based compensation by measuring the cost of employee services received in exchange for all
equity awards granted, including stock options, restricted stock units (“RSUs”) and restricted shares, based on the fair value of the award as of the grant
date. Equity-based compensation expense is recognized net of an estimated forfeiture rate on a straight-line basis over the requisite service period of the award.
In the case of performance based share-based awards, compensation expense is recognized on an accelerated attribution method.
Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of subjective assumptions,
including the expected life of the awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards
represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors
change and we use different assumptions, our equity-based compensation expense could be materially different in the future. In addition, we are required to
estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our
estimate, the equity-based compensation expense could be significantly different from what we have recorded in the current period.
Pension and Other Postretirement Benefits : Certain of the Company’s employees and retired employees are covered by defined benefit pension plans (pension
plans) and certain eligible retirees are entitled to health care and life insurance benefits under postretirement benefit plans (postretirement plans). The Company
measures its pension and post retirement plans’ assets and obligations as of the end of each year to determine the funded status of each plan. The Company
recognizes an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in its statement of financial position. Changes in the funded
status of the plans are recognized in the year in which the changes occur and are reported in comprehensive income. Accounting standards require that the
amounts the Company records, including the expense or income, associated with the pension and postretirement plans be computed using actuarial valuations.
Calculations of the amount of pension and other postretirement benefit costs and obligations depend on the assumptions used in the actuarial valuations
including assumptions relating to financial market and other economic conditions. The assumptions used in the actuarial valuation include discount rates,
expected return on plan assets, rate of salary increases, health care cost trend rates, mortality rates, and other factors. Changes in key economic indicators can
result in changes in the assumptions used by the Company. While the Company believes that the assumptions used in calculating its pension and other
postretirement benefits costs and obligations are appropriate, differences in actual experience or changes in the assumptions may affect the Company’s
financial position or results of operations. For the U.S. plan, the Company used a 5.75% discount rate in computing the amount of the minimum pension
liability to be recorded at December 31, 2009, which represents a decrease of 50 basis points in the discount rate from December 31, 2008. For non-U.S.
plans, rates appropriate for each plan are determined based on investment grade instruments with maturities approximately equal to the average expected benefit
payout under the plan. A 25 basis point reduction in the discount rate used for the plans would have increased the U.S. and non-U.S. net obligation by $54
million ($37 million on an after tax basis) from the amount recorded in the financial statements at December 31, 2009.
For 2009, the expected long-term rate of return assumption applicable to assets held in the United States plan was estimated at 8% which is the same as the rate
used in 2008. This expected rate of return reflects the asset allocation
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Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
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