Kraft 2009 Annual Report Download - page 43

and trade promotion activities are recorded as a reduction to revenues based on amounts estimated as being due to customers and consumers at
the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising
and consumer incentive expenses are charged to operations as a percentage of volume, based on estimated volume and related expense for the
full year. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in the year
incurred.
Environmental Costs:
We are subject to laws and regulations relating to the protection of the environment. We accrue for environmental remediation obligations on an
undiscounted basis when amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or
circumstances change. Recoveries of environmental remediation costs from third parties are recorded as assets when recovery of those costs is
deemed probable. At December 31, 2009, our subsidiaries were involved in 71 active actions in the U.S. under Superfund legislation (and other
similar actions) related to current operations and certain former or divested operations for which we retain liability.
Based on information currently available, we believe that the ultimate resolution of existing environmental remediation actions and our compliance
in general with environmental laws and regulations will not have a material effect on our financial results. However, we cannot quantify with
certainty the potential impact of future compliance efforts and environmental remediation actions.
Employee Benefit Plans:
In September 2006, new guidance was issued surrounding employers’ accounting for defined benefit pension and other postretirement plans. The
new guidance required us to measure plan assets and benefit obligations as of the balance sheet date beginning in 2008. We previously
measured our non-U.S. pension plans (other than certain Canadian and French pension plans) at September 30 of each year. On December 31,
2008, we recorded an after-tax decrease of $8 million to retained earnings using the 15-month approach to proportionally allocate the transition
adjustment required upon adoption of the measurement provision of the new guidance. The plan assets and benefit obligations of our pension
plans and the benefit obligations of our postretirement plans are now all measured at year-end.
We provide a range of benefits to our employees and retired employees. These include pension benefits, postretirement health care benefits and
postemployment benefits, consisting primarily of severance. We record amounts relating to these plans based on calculations specified by U.S.
GAAP. These calculations require the use of various actuarial assumptions, such as discount rates, assumed rates of return on plan assets,
compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis and make
modifications to the assumptions based on current rates and trends when appropriate. As permitted by U.S. GAAP, we generally amortize any
effect of the modifications over future periods. We believe that the assumptions used in recording our plan obligations are reasonable based on
our experience and advice from our actuaries. Refer to Note 11, Benefit Plans, to the consolidated financial statements for a discussion of the
assumptions used.
We recorded the following amounts in earnings for these employee benefit plans during the years ended December 31, 2009, 2008 and 2007:
2009 2008 2007
(in millions)
U.S. pension plan cost $ 313 $ 160 $ 212
Non-U.S. pension plan cost 77 82 123
Postretirement health care cost 221 254 260
Postemployment benefit plan cost 143 571 140
Employee savings plan cost 94 93 83
Multiemployer pension plan contributions 29 27 26
Multiemployer medical plan contributions 35 33 33
Net expense for employee benefit plans $ 912 $ 1,220 $ 877
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠