Lexmark 2014 Annual Report Download - page 39

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Increase (Decrease) in 2014 Increase (Decrease) in Projected
Pre-tax Net Periodic Benefit Benefit Obligation for the U.S.
Cost for the U.S. Pension Plans Pension Plans as of Dec. 31, 2014
Change in Assumption (in millions) (in millions)
25 basis points decrease in discount rate $ (0.8) $ 17.6
25 basis points increase in discount rate 0.8 (16.9)
50 basis points decrease in actual return on plan assets 2.7 No Impact
50 basis points increase in actual return on plan assets (2.7) No Impact
Increase (Decrease) in 2014
Pre-tax Interim Period Increase (Decrease) in Projected
Net Periodic Benefit Cost Benefit Obligation for the U.S.
for the U.S. Pension Plans Pension Plans as of Dec. 31, 2014
(in millions) (in millions)
25 basis points decrease in expected return on plan assets $ 1.3 No Impact
25 basis points increase in expected return on plan assets (1.3) No Impact
Income Taxes
The Company estimates its tax liability based on current tax laws in the statutory jurisdictions in which it operates. These estimates
include judgments about deferred tax assets and liabilities resulting from temporary differences between assets and liabilities
recognized for financial reporting purposes and such amounts recognized for tax purposes, as well as about the realization of deferred
tax assets. If the provisions for current or deferred taxes are not adequate, if the Company is unable to realize certain deferred tax
assets or if the tax laws change unfavorably, the Company could potentially experience significant losses in excess of the reserves
established. Likewise, if the provisions for current and deferred taxes are in excess of those eventually needed, if the Company is able
to realize additional deferred tax assets or if tax laws change favorably, the Company could potentially experience significant gains.
The Company considers historical profitability, future market growth, future taxable income, the expected timing of the reversals of
existing temporary differences and tax planning strategies in determining the need for a deferred tax valuation allowance.
The Company is subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, the Company may incur
additional tax expense based upon our assessment of the more-likely-than-not outcomes of such matters. In addition, when applicable,
the Company adjusts the previously recorded tax expense to reflect examination results. Lexmark’s ongoing assessments of the more-
likely-than-not outcomes of the examinations and related tax positions require judgment and can materially increase or decrease the
Company’s effective tax rate, as well as impact the operating results. Refer to Part II, Item 8, Note 2 of the Notes to Consolidated
Financial Statements for information regarding the Company’s policy for income taxes.
Litigation and Contingencies
In accordance with guidance on accounting for contingencies, Lexmark records a provision for a loss contingency when management
has determined that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Although
the Company believes it has adequate provisions for any such matters, litigation is inherently unpredictable. Should developments
occur that result in the need to recognize a material accrual, or should any of the Company’s legal matters result in a substantial
judgment against, or settlement by the Company, the resulting liability could have a material effect on the Company’s results of
operations, financial condition and/or cash flows.
Copyright Fees
Certain countries (primarily in Europe) and/or collecting societies representing copyright owners’ interests have taken action to
impose fees on devices (such as scanners, printers and multifunction devices) alleging the copyright owners are entitled to
compensation because these devices enable reproducing copyrighted content. Other countries are also considering imposing fees on
certain devices. The amount of fees would depend on the number of products sold and the amounts of the fee on each product, which
will vary by product and by country. The Company has accrued amounts that represent its best estimate of the copyright fee issues
currently pending. Such estimates could change as the litigation and/or local legislative processes draw closer to final resolution.
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