Kroger 2012 Annual Report Download - page 99

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A-41
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
Benefit Plans and Multi-Employer Pension Plans
The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheet.
Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been
recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated
Other Comprehensive Income (“AOCI”). All plans are measured as of the Company’s fiscal year end.
The determination of the obligation and expense for Company-sponsored pension plans and other
post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company
in calculating those amounts. Those assumptions are described in Note 13 and include, among others, the
discount rate, the expected long-term rate of return on plan assets and the rates of increase in compensation
and health care costs. Actual results that differ from the assumptions are accumulated and amortized over
future periods and, therefore, generally affect the recognized expense and recorded obligation in future
periods. While the Company believes that the assumptions are appropriate, significant differences in actual
experience or significant changes in assumptions may materially affect the pension and other post-retirement
obligations and future expense.
The Company also participates in various multi-employer plans for substantially all union employees.
Pension expense for these plans is recognized as contributions are funded. Refer to Note 14 for additional
information regarding the Company’s participation in these various multi-employer plans and the United Food
and Commercial Workers International Union (“UFCW”) consolidated fund.
The Company administers and makes contributions to the employee 401(k) retirement savings accounts.
Contributions to the employee 401(k) retirement savings accounts are expensed when contributed. Refer to
Note 13 for additional information regarding the Company’s benefit plans.
Stock Based Compensation
The Company accounts for stock options under fair value recognition provisions. Under this method, the
Company recognizes compensation expense for all share-based payments granted. The Company recognizes
share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of
the award. In addition, the Company records expense for restricted stock awards in an amount equal to the
fair market value of the underlying stock on the grant date of the award, over the period the awards lapse.
Deferred Income Taxes
Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis
of assets and liabilities and their financial reporting basis. Refer to Note 4 for the types of differences that give
rise to significant portions of deferred income tax assets and liabilities. Deferred income taxes are classified
as a net current or noncurrent asset or liability based on the classification of the related asset or liability for
financial reporting purposes. A deferred tax asset or liability that is not related to an asset or liability for
financial reporting is classified according to the expected reversal date.
Uncertain Tax Positions
The Company reviews the tax positions taken or expected to be taken on tax returns to determine
whether and to what extent a benefit can be recognized in its consolidated financial statements. Refer to Note 4
for the amount of unrecognized tax benefits and other related disclosures related to uncertain tax positions.
Various taxing authorities periodically audit the Company’s income tax returns. These audits include
questions regarding the Company’s tax filing positions, including the timing and amount of deductions and
the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various
tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A
number of years may elapse before a particular matter, for which an allowance has been established, is audited
and fully resolved. As of February 2, 2013, the Internal Revenue Service had concluded its field examination