Tyson Foods 2011 Annual Report Download - page 34

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34
Description
Judgments and Uncertainties
Effect if Actual Results Differ From
Assumptions
Accrued self insurance
We are self insured for certain losses
related to health and welfare, workers’
compensation, auto liability and general
liability claims.
We use an independent third-party
actuary to assist in determining our self-
insurance liability. We and the actuary
consider a number of factors when
estimating our self-insurance liability,
including claims experience,
demographic factors, severity factors
and other actuarial assumptions.
We periodically review our estimates
and assumptions with our third-party
actuary to assist us in determining the
adequacy of our self-insurance liability.
Our policy is to maintain an accrual
within the central to high point of the
actuarial range.
Our self-insurance liability contains
uncertainties due to assumptions
required and judgment used.
Costs to settle our obligations,
including legal and healthcare costs,
could increase or decrease causing
estimates of our self-insurance liability
to change.
Incident rates, including frequency and
severity, could increase or decrease
causing estimates in our self-insurance
liability to change.
We have not made any material
changes in the accounting methodology
used to establish our self-insurance
liability during the past three fiscal
years.
We do not believe there is a reasonable
likelihood there will be a material
change in the estimates or assumptions
used to calculate our self-insurance
liability. However, if actual results are
not consistent with our estimates or
assumptions, we may be exposed to
gains or losses that could be material.
A 10% increase in the actuarial
estimate at October 1, 2011, would not
result in a material change in the
amount we recorded for our self-
insurance liability. A 10% decrease in
the actuarial estimate at October 1,
2011, would result in a decrease in the
amount we recorded for our self-
insurance liability of approximately
$23 million.
Impairment of long-lived assets
Long-lived assets are evaluated for
impairment whenever events or changes
in circumstances indicate the carrying
value may not be recoverable.
Examples include a significant adverse
change in the extent or manner in which
we use a long-lived asset or a change in
its physical condition.
When evaluating long-lived assets for
impairment, we compare the carrying
value of the asset to the asset’s
estimated undiscounted future cash
flows. An impairment is indicated if the
estimated future cash flows are less
than the carrying value of the asset. The
impairment is the excess of the carrying
value over the fair value of the long-
lived asset.
We recorded impairment charges
related to long-lived assets of $15
million, $19 million and $25 million,
respectively, in fiscal 2011, 2010 and
2009.
Our impairment analysis contains
uncertainties due to judgment in
assumptions and estimates surrounding
undiscounted future cash flows of the
long
-
lived asset, including forecasting
useful lives of assets and selecting the
discount rate that reflect
s the risk
inherent in future cash flows to
determine fair value.
We have not made any material
changes in the accounting methodology
used to evaluate the impairment of
long-lived assets during the last three
fiscal years.
We do not believe there is a reasonable
likelihood there will be a material
change in the estimates or assumptions
used to calculate impairments of long-
lived assets. However, if actual results
are not consistent with our estimates
and assumptions used to calculate
estimated future cash flows, we may be
exposed to impairment losses that
could be material. Additionally, we
continue to evaluate our future
international business strategies, which
may expose us to future impairment
losses.