Union Pacific 2009 Annual Report Download - page 64

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been recognized in our financial statements or tax returns. These expected future tax consequences are
measured based on current tax law; the effects of future changes in tax laws are not anticipated. Future
tax law changes, such as a change in the corporate tax rate, could have a material impact on our financial
condition, results of operations, or liquidity.
When appropriate, we record a valuation allowance against deferred tax assets to reflect that these tax
assets may not be realized. In determining whether a valuation allowance is appropriate, we consider
whether it is more likely than not that all or some portion of our deferred tax assets will not be realized,
based on management’ s judgments using available evidence about future events.
At times, we may claim tax benefits that may be challenged by a tax authority. We recognize tax benefits
only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely
to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits
claimed in our tax returns that do not meet these recognition and measurement standards.
Pension and Postretirement Benefits – We incur certain employment-related expenses associated with
pensions and postretirement health benefits. In order to measure the expense associated with these
benefits, we must make various assumptions including discount rates used to value certain liabilities,
expected return on plan assets used to fund these expenses, salary increases, employee turnover rates,
anticipated mortality rates, and expected future healthcare costs. The assumptions used by us are based on
our historical experience as well as current facts and circumstances. We use third-party actuaries to assist
us in properly measuring the expense and liability associated with these benefits.
Personal Injury – The cost of injuries to employees and others on our property is charged to expense
based on estimates of the ultimate cost and number of incidents each year. We use third-party actuaries to
assist us in properly measuring the expense and liability. Our personal injury liability is discounted to
present value using applicable U.S. Treasury rates. Legal fees and incidental costs are expensed as
incurred.
Asbestos – We estimate a liability for asserted and unasserted asbestos-related claims based on an
assessment of the number and value of those claims. We use an external consulting firm to assist us in
properly measuring our potential liability. Our liability for asbestos-related claims is not discounted to
present value due to the uncertainty surrounding the timing of future payments. Legal fees and incidental
costs are expensed as incurred.
Environmental – When environmental issues have been identified with respect to property currently or
formerly owned, leased, or otherwise used in the conduct of our business, we and our consultants perform
environmental assessments on such property. We expense the cost of the assessments as incurred. We
accrue the cost of remediation where our obligation is probable and such costs can be reasonably
estimated. We do not discount our environmental liabilities when the timing of the anticipated cash
payments is not fixed or readily determinable. Legal fees and incidental costs are expensed as incurred.
3. Stock Split
On May 28, 2008, we completed a two-for-one stock split, effected in the form of a 100% stock dividend.
The stock split entitled all shareholders of record at the close of business on May 12, 2008, to receive one
additional share of our common stock, par value $2.50 per share, for each share of common stock held on
that date. All references to common shares and per share amounts have been restated to reflect the stock
split for all periods presented.