Medtronic 2012 Annual Report Download - page 84

covered costs associated with field actions, if any, in cost of products sold in the Company’s consolidated
statements of earnings. The Company includes the warranty obligation in other accrued expenses and other
long-term liabilities on the Company’s consolidated balance sheets.
Changes in the Company’s product warranty obligations during the years ended April 27, 2012 and
April 29, 2011 consisted of the following:
(in millions)
____________
Balance as of April 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . $ 31
Warranty claims provision . . . . . . . . . . . . . . . . . . . . . . . . . 27
Settlements made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23)
_______
Balance as of April 29, 2011 . . . . . . . . . . . . . . . . . . . . . . . $ 35
Warranty claims provision . . . . . . . . . . . . . . . . . . . . . . . . . 23
Settlements made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27)
_______
Balance as of April 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . $ 31
_______
_______
Self-Insurance It is the Company’s policy to self-insure the vast majority of its insurable risks
including medical and dental costs, disability coverage, physical loss to property, business interruptions,
workers’ compensation, comprehensive general, director and officer, and product liability. Insurance
coverage is obtained for those risks required to be insured by law or contract. A provision for losses under
the self-insured program is recorded and revised quarterly. The Company uses claims data and historical
experience, as applicable, to estimate liabilities associated with the exposures that the Company has self-
insured. Based on historical loss trends, the Company believes that its self-insurance program accruals are
adequate to cover future losses. Historical trends, however, may not be indicative of future losses. These
losses could have a material adverse impact on the Company’s consolidated financial statements.
Retirement Benefit Plan Assumptions The Company sponsors various retirement benefit plans,
including defined benefit pension plans (pension benefits), post-retirement medical plans (post-retirement
benefits), defined contribution savings plans, and termination indemnity plans, covering substantially all
U.S. employees and many employees outside the U.S. Pension benefit costs include assumptions for the
discount rate, retirement age, compensation rate increases, and the expected return on plan assets. Post-
retirement medical benefit costs include assumptions for the discount rate, retirement age, expected return
on plan assets, and health care cost trend rate assumptions.
The Company evaluates the discount rate, retirement age, compensation rate increases, expected return
on plan assets, and health care cost trend rates of its pension benefits and post-retirement benefits annually.
In evaluating these assumptions, many factors are considered, including an evaluation of assumptions made
by other companies, historical assumptions compared to actual results, current market conditions, asset
allocations, and the views of leading financial advisors and economists. In evaluating the expected retirement
age assumption, the Company considers the retirement ages of past employees eligible for pension and
medical benefits together with expectations of future retirement ages. Refer to Note 15 for additional
information regarding the Company’s retirement benefit plans.
Revenue Recognition The Company sells its products primarily through a direct sales force in the
U.S. and a combination of direct sales representatives and independent distributors in international markets.
The Company recognizes revenue when title to the goods and risk of loss transfers to customers, provided
there are no material remaining performance obligations required of the Company or any matters requiring
customer acceptance. In cases where the Company utilizes distributors or ships product directly to the end
user, it recognizes revenue upon shipment provided all revenue recognition criteria have been met. A
portion of the Company’s revenue is generated from inventory maintained at hospitals or with field
representatives. For these products, revenue is recognized at the time the product has been used or
implanted. For multiple-element arrangements, the Company allocates arrangement consideration to the
deliverables by use of the relative selling price method. The selling price used for each deliverable is based
on vendor−specific objective evidence (VSOE) if available, third−party evidence (TPE) if VSOE is not
available, or best estimated selling price (BESP) if neither VSOE nor TPE is available. BESP is determined
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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)