Albertsons 2012 Annual Report Download - page 55

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The reserves for self-insurance are included in Other current liabilities and the long-term portion is included in
Other long-term liabilities in the Consolidated Balance Sheets. The self-insurance liabilities as of the end of the
fiscal year are net of discounts of $159 and $178 as of February 25, 2012 and February 26, 2011, respectively.
Benefit Plans
The Company recognizes the funded status of its Company sponsored defined benefit plans in its Consolidated
Balance Sheets and gains or losses and prior service costs or credits not yet recognized as a component of other
comprehensive income (loss), net of tax, in the Consolidated Statement of Stockholders’ Equity. The Company
sponsors pension and other postretirement plans in various forms covering substantially all employees who meet
eligibility requirements. The determination of the Company’s obligation and related expense for Company-
sponsored pension and other postretirement benefits is dependent, in part, on management’s selection of certain
actuarial assumptions in calculating these amounts. These assumptions include, among other things, the discount
rate, the expected long-term rate of return on plan assets and the rates of increase in compensation and healthcare
costs. These assumptions are disclosed in Note 12—Benefit Plans in the accompanying Notes to Consolidated
Financial Statements. Actual results that differ from the assumptions are accumulated and amortized over future
periods in accordance with accounting standards.
The Company contributes to various multiemployer pension plans under collective bargaining agreements,
primarily defined benefit pension plans. Pension expense for these plans is recognized as contributions are
funded. Refer to Note 12—Benefit Plans in the accompanying Notes to Consolidated Financial Statements for
additional information on the Company’s participation in those multiemployer plans.
The Company also contributes to several employee 401(k) retirement savings plans. Benefit expense for these
plans is recognized as contributions are made to these plans. Note 12—Benefit Plans in the accompanying Notes
to Consolidated Financial Statements for additional information.
Derivatives
The Company’s limited involvement with derivatives is primarily to manage its exposure to changes in interest
rates and energy utilized in its stores, warehouses, and shipping process. The Company uses derivatives only to
manage well-defined risks. The Company does not use financial instruments or derivatives for any trading or
other speculative purposes. The Company enters into energy commitments that it expects to utilize in the normal
course of business.
Stock-based Compensation
The Company uses the straight-line method to recognize compensation expense based on the fair value on the
date of grant, net of the estimated forfeiture rate, over the requisite service period related to each award.
The fair value of stock options are estimated as of the date of grant using the Black-Scholes option pricing model
using Level 3 inputs. The estimation of the fair value of stock options incorporates certain assumptions, such as
risk-free interest rate, expected volatility, expected dividend yield and expected life of options.
The fair value of performance awards granted under the Company’s long-term incentive program (“LTIP”), are
estimated as of the date of the grant using the Monte Carlo option pricing model using Level 3 inputs. See
Note 9—Stock-Based Awards for further discussion of LTIP performance awards. The fair value of each
performance award contains a variable cash settlement feature that is measured at fair value on a recurring basis
using Level 3 inputs. The estimation of the fair value of each performance award, including the cash settlement
feature, incorporates certain assumptions such as risk-free interest rate, expected volatility, expected dividend
yield and expected life of awards. The fair value of the cash settlement features that is measured at fair value on a
recurring basis was insignificant as of February 25, 2012.
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