Tyson Foods 2014 Annual Report Download - page 42

CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements requires us to make estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of certain accounting estimates we consider critical.
37
Description
Judgments and Uncertainties
Effect if Actual Results Differ From
Assumptions
Contingent liabilities
We are subject to lawsuits, investigations
and other claims related to wage and
hour/labor, environmental, product, taxing
authorities and other matters, and are
required to assess the likelihood of any
adverse judgments or outcomes to these
matters, as well as potential ranges of
probable losses.
A determination of the amount of reserves
and disclosures required, if any, for these
contingencies is made after considerable
analysis of each individual issue. We accrue
for contingent liabilities when an assessment
of the risk of loss is probable and can be
reasonably estimated. We disclose
contingent liabilities when the risk of loss is
reasonably possible or probable.
Our contingent liabilities contain uncertainties
because the eventual outcome will result from
future events, and determination of current
reserves requires estimates and judgments
related to future changes in facts and
circumstances, differing interpretations of the
law and assessments of the amount of
damages, and the effectiveness of strategies or
other factors beyond our control.
We have not made any material changes in the
accounting methodology used to establish our
contingent liabilities 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 contingent liabilities. However, if actual
results are not consistent with our estimates or
assumptions, we may be exposed to gains or
losses that could be material.
Marketing and advertising costs
We incur advertising, retailer incentive and
consumer incentive costs to promote
products through marketing programs. These
programs include cooperative advertising,
volume discounts, in-store display
incentives, coupons and other programs.
Marketing and advertising costs are charged
in the period incurred. We accrue costs
based on the estimated performance,
historical utilization and redemption of each
program.
Cash consideration given to customers is
considered a reduction in the price of our
products, thus recorded as a reduction to
sales. The remainder of marketing and
advertising costs is recorded as a selling,
general and administrative expense.
Recognition of the costs related to these
programs contains uncertainties due to
judgment required in estimating the potential
performance and redemption of each program.
These estimates are based on many factors,
including experience of similar promotional
programs.
We have not made any material changes in the
accounting methodology used to establish our
marketing accruals 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 marketing accruals. 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% change in our marketing accruals at
September 27, 2014, would impact pretax
earnings by approximately $18 million.