Express Scripts 2013 Annual Report Download - page 43

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43 Express Scripts 2013 Annual Report
FACTORS AFFECTING ESTIMATE
The factors that could impact our estimates of guarantees expense and guarantees payable are as follows:
• differences between the rates guaranteed by us to clients and rates contracted by us with pharmacies in our
retail networks or with pharmaceutical manufacturers for drugs dispensed from our home delivery pharmacies
• changes in drug utilization patterns, including the mix of brand and generic drugs as well as utilization of our
home delivery pharmacy
ALLOWANCE FOR DOUBTFUL ACCOUNTS
ACCOUNTING POLICY
We provide an allowance for doubtful accounts equal to estimated uncollectible receivables. This estimate is based
on the current status of each customer’s receivable balance.
FACTORS AFFECTING ESTIMATE
We record allowances for doubtful accounts based on a variety of factors including the length of time the
receivables are past due, the financial health of the customer and historical experience. Our estimate could be impacted by
changes in economic and market conditions as well as changes to our customers’ financial condition.
SELF-INSURANCE ACCRUALS
ACCOUNTING POLICY
We record self-insurance accruals based upon estimates of the aggregate liability of claim costs in excess of our
insurance coverage which are probable and estimable. Accruals are estimated using certain actuarial assumptions followed in
the insurance industry and our historical experience. The majority of these claims are legal claims and our liability estimate is
primarily related to the cost to defend these claims. We do not accrue for settlements, judgments, monetary fines or penalties
until such amounts are probable and estimable. Under authoritative FASB guidance, if the range of possible loss is broad, and
no amount within the range is more likely than any other, the liability accrual is based on the low end of the range.
FACTORS AFFECTING ESTIMATE
Self-insurance accruals are based on management’s estimates of the costs to defend legal claims. We do not have
significant experience with certain of these types of cases. As such, differences between actual costs and management’s
estimates could be significant. Actuaries do not have a significant history with the PBM industry. Therefore, changes to
assumptions used in the development of these accruals can affect net income in a given period. In addition, changes in the legal
environment and the number and nature of claims could impact our estimate. The self-insurance accruals and changes in those
estimates have not been material to the consolidated financial statements for the periods presented herein.
INCOME TAXES
ACCOUNTING POLICY
Deferred tax assets and liabilities are recorded based on temporary differences between the financial statement
basis and the tax basis of assets and liabilities using presently enacted tax rates. We evaluate tax positions to determine whether
the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax
position.
FACTORS AFFECTING ESTIMATE
The factors that could impact our estimates of uncertain tax positions are as follows:
• likelihood of being sustained upon audit based on the technical merits of the tax position
• assumed interest and penalties associated with uncertain tax positions