Macy's 2013 Annual Report Download - page 33

Table of Contents
If the Company commits to a plan to dispose of a long-lived asset before the end of its previously estimated useful life, estimated cash flows are revised
accordingly, and the Company may be required to record an asset impairment write-down. Additionally, related liabilities arise such as severance, contractual
obligations and other accruals associated with store closings from decisions to dispose of assets. The Company estimates these liabilities based on the facts
and circumstances in existence for each restructuring decision. The amounts the Company will ultimately realize or disburse could differ from the amounts
assumed in arriving at the asset impairment and restructuring charge recorded.
The Company classifies certain long-lived assets as held for disposal by sale and ceases depreciation when the particular criteria for such classification
are met, including the probable sale within one year. For long-lived assets to be disposed of by sale, an impairment charge is recorded if the carrying amount of
the asset exceeds its fair value less costs to sell. Such valuations include estimations of fair values and incremental direct costs to transact a sale.
Income Taxes
Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which the Company operates. Deferred
income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Deferred income tax assets are evaluated for recoverability based on all available evidence, including past operating results, estimates of future taxable income,
and the feasibility of tax planning strategies. Deferred income tax assets are reduced by a valuation allowance when it is more likely than not that some portion
of the deferred income tax assets will not be realized.
Uncertain tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on
examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Uncertain tax positions meeting
the more-likely-than-not recognition threshold are then measured to determine the amount of benefit eligible for recognition in the financial statements. Each
uncertain tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. Uncertain tax positions
are evaluated and adjusted as appropriate, while taking into account the progress of audits of various taxing jurisdictions. The Company does not anticipate
that resolution of these matters will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Significant judgment is required in evaluating the Company's uncertain tax positions, provision for income taxes, and any valuation allowance recorded
against deferred tax assets. Although the Company believes that its judgments are reasonable, no assurance can be given that the final tax outcome of these
matters will not be different from that which is reflected in the Company's historical income provisions and accruals.
Self-Insurance Reserves
The Company, through its insurance subsidiary, is self-insured for workers' compensation and general liability claims up to certain maximum liability
amounts. Although the amounts accrued are actuarially determined by third parties based on analysis of historical trends of losses, settlements, litigation costs
and other factors, the amounts the Company will ultimately disburse could differ from such accrued amounts.
Pension and Supplementary Retirement Plans
The Company has a funded defined benefit pension plan (the “Pension Plan”) and an unfunded defined benefit supplementary retirement plan (the
“SERP”). The Company accounts for these plans in accordance with ASC Topic 715, “Compensation - Retirement Benefits.” Under ASC Topic 715, an
employer recognizes the funded status of a defined benefit postretirement plan as an asset or liability on the balance sheet and recognizes changes in that
funded status in the year in which the changes occur through comprehensive income. Additionally, pension expense is generally recognized on an accrual basis
over employees' approximate service periods. The pension expense calculation is generally independent of funding decisions or requirements.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no longer earn future pension service
credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods will be provided through defined
contribution plans. As a result of these changes, the Company recognized reductions in the projected benefit obligations of the Pension Plan of $254 million
and the SERP of $42 million as of February 2, 2013.
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