Snapple 2008 Annual Report Download - page 86

SFAS No. 158. In accordance with SFAS 106, the Company accrues the cost of these benefits during the years that
employees render service. Refer to Note 15 for additional information.
Risk Management Programs
The Company retains selected levels of property, casualty, workers’ compensation and other business risks.
Many of these risks are covered under conventional insurance programs with high deductibles or self-insured
retentions. Accrued liabilities related to the retained casualty risks are calculated based on loss experience and
development factors, which contemplate a number of variables including claim history and expected trends. These
loss development factors are established in consultation with external insurance brokers and actuaries. At
December 31, 2008, the Company had accrued liabilities related to the retained risks of $60 million, including
both current and long-term liabilities. At December 31, 2007, the Company had accrued liabilities of $49 million
primarily related to retained risks to cover long-term, self-insured liabilities for our Bottling Group prior to
participation in the Cadbury placed insurance programs. Prior to the separation from Cadbury, DPS participated in
insurance programs placed by Cadbury. Prior to and upon separation, Cadbury retained the risk and accrued
liabilities for the exposures insured under these insurance programs.
Income Taxes
Income taxes are accounted for using the asset and liability approach under SFAS No. 109, Accounting for
Income Taxes (“SFAS 109”). This method involves determining the temporary differences between combined assets
and liabilities recognized for financial reporting and the corresponding combined amounts recognized for tax
purposes and computing the tax-related carryforwards at the enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The resulting amounts are
deferred tax assets or liabilities and the net changes represent the deferred tax expense or benefit for the year. The
total of taxes currently payable per the tax return and the deferred tax expense or benefit represents the income tax
expense or benefit for the year for financial reporting purposes.
The Company periodically assesses the likelihood of realizing its deferred tax assets based on the amount of
deferred tax assets that the Company believes is more likely than not to be realized. The Company bases its
judgment of the recoverability of its deferred tax asset primarily on historical earnings, its estimate of current and
expected future earnings, prudent and feasible tax planning strategies, and current and future ownership changes.
Refer to Note 13 for additional information.
As of December 31, 2008, undistributed earnings considered to be permanently reinvested in non-U.S. sub-
sidiaries totaled approximately $124 million. Deferred income taxes have not been provided on this income as the
Company believes these earnings to be permanently reinvested. It is not practicable to estimate the amount of
additional tax that might be payable on these undistributed foreign earnings.
DPS’ effective income tax rate may fluctuate on a quarterly basis due to various factors, including, but not
limited to, total earnings and the mix of earnings by jurisdiction, the timing of changes in tax laws, and the amount
of tax provided for uncertain tax positions.
Revenue Recognition
The Company recognizes sales revenue when all of the following have occurred: (1) delivery; (2) persuasive
evidence of an agreement exists; (3) pricing is fixed or determinable; and (4) collection is reasonably assured.
Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the
terms of the contract between the Company and the customer. The timing of revenue recognition is largely
dependent on contract terms. For sales to other customers that are designated in the contract as free-on-board
destination, revenue is recognized when the product is delivered to and accepted at the customer’s delivery site. Net
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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)