Neiman Marcus 2010 Annual Report Download - page 49

Table of Contents
calculations of minimum rentals, we recognize rent expense on a straight-line basis over the lease term. We recognize contingent rent
expenses when it is probable that the sales thresholds will be reached during the year.
Benefit Plans. We sponsor a noncontributory defined benefit pension plan (Pension Plan), an unfunded supplemental
executive retirement plan (SERP Plan) which provides certain employees additional pension benefits and a postretirement plan
providing eligible employees limited postretirement health care benefits (Postretirement Plan). In calculating our obligations and
related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual
determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. We use the
projected unit credit method in recognizing pension liabilities. The Pension and SERP Plans are valued annually as of the end of each
fiscal year. As of the third quarter of fiscal year 2010, benefits offered to all employees under our Pension Plan and SERP Plan have
been frozen.
Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present
value of benefit obligations to be paid in the future, the expected long-term rate of return on assets held by our Pension Plan and the
health care cost trend rate for the Postretirement Plan. We review these assumptions annually based upon currently available
information, including information provided by our actuaries.
Significant assumptions utilized in the calculation of our projected benefit obligations as of July 30, 2011 and future expense
requirements for our Pension Plan, SERP Plan and Postretirement Plan, and sensitivity analysis related to changes in these
assumptions, are as follows:
Using Sensitivity Rate
Actual
Rate
Sensitivity
Rate
Increase/(Decrease)
Increase in
Liability
(in millions)
Increase
in Expense
(in millions)
Pension Plan:
Discount rate 5.30% (0.25)% $ 17.8 $ 0.2
Expected long-term rate of return on plan
assets 7.50% (0.50)% N/A $ 1.7
SERP Plan:
Discount rate 5.00% (0.25)% $ 2.9 $ —
Postretirement Plan:
Discount rate 5.10% (0.25)% $ 0.5 $ —
Ultimate health care cost trend rate 8.00% 1.00% $ 3.1 $ 0.1
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued guidance related to certain fair value measurements
and disclosures, which is effective for us as of the third quarter of fiscal year 2012. In June 2011, the FASB issued guidance to
improve the presentation and prominence of comprehensive income and its components as a result of convergence with International
Financial Reporting Standards, which is effective for us as of the first quarter of fiscal year 2013. We do not expect that the
implementation of the requirements of either of these standards will have a material impact on our consolidated financial statements.
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