Emerson 2011 Annual Report Download - page 44

42 | 2011 Emerson
(11) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health care) for U.S. retirees and their
dependents. The components of net postretirement benefits expense for the years ended September 30 follow:
2009 2010 2011
Service cost $ 4 5 3
Interest cost 30 24 17
Net amortization 15 1 (7)
Net postretirement expense $49 30 13
Reconciliations of the actuarial present value of accumulated postretirement benefit obligations follow:
2010 2011
Benefit obligation, beginning $499 417
Service cost 5 3
Interest cost 24 17
Actuarial (gain) loss (36) (25)
Benefits paid (32) (20)
Plan amendments (34) –
Acquisitions/divestitures and other (9) –
Benefit obligation, ending (recognized in balance sheet) $417 392
As of September 30, 2011 there was $84 of deferred actuarial gains in accumulated other comprehensive income,
of which approximately $10 will be amortized into earnings in 2012. The assumed discount rates used in measuring
the benefit obligations as of September 30, 2011, 2010 and 2009, were 4.25 percent, 4.25 percent and 5.0 percent,
respectively. The assumed health care cost trend rate for 2012 is 8.0 percent, declining to 5.0 percent in the year 2018,
and for 2011 was 8.0 percent, declining to 5.0 percent in the year 2017. A one-percentage-point increase or decrease
in the assumed health care cost trend rate for each year would increase or decrease 2011 postretirement expense and
the benefit obligation as of September 30, 2011 less than 5 percent. The Company estimates that future health care
benefit payments will be $37 in 2012, $37 in 2013, $36 in 2014, $36 in 2015, $34 in 2016 and $156 in total over the
five years 2017 through 2021.
(12) Contingent Liabilities and Commitments
Emerson is a party to a number of pending legal proceedings and claims, including those involving general and product
liability and other matters, several of which claim substantial amounts of damages. The Company accrues for such
liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can
be reasonably estimated. Accruals are based on developments to date; management’s estimates of the outcomes of
these matters; the Company’s experience in contesting, litigating and settling similar matters; and any related insur-
ance coverage. Although it is not possible to predict the ultimate outcome of these matters, the Company historically
has been successful in defending itself against claims and suits that have been brought against it, and will continue to
defend itself vigorously in all such matters. While the Company believes a material adverse impact is unlikely, given the
inherent uncertainty of litigation, a remote possibility exists that a future development could have a material adverse
impact on the Company.
The Company enters into certain indemnification agreements in the ordinary course of business in which the indemni-
fied party is held harmless and is reimbursed for losses incurred from claims by third parties, usually up to a prespecified
limit. In connection with divestitures of certain assets or businesses, the Company often provides indemnities to the
buyer with respect to certain matters including, as examples, environmental or unidentified tax liabilities related to
periods prior to the disposition. Because of the uncertain nature of the indemnities, the maximum liability cannot
be quantified. As such, liabilities are recorded when they are both probable and reasonably estimable. Historically,
payments under indemnity arrangements have been inconsequential.
At September 30, 2011, there were no known contingent liabilities (including guarantees, pending litigation, taxes and
other claims) that management believes will be material in relation to the Company’s financial statements, nor were
there any material commitments outside the normal course of business.