Black & Decker 2011 Annual Report Download - page 47

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benefit obligation by approximately $87 million at December 31, 2011. The primary Black & Decker U.S pension and post
employment benefit plans were curtailed in late 2010, as well as the only material Black & Decker international plan, and in their
place the Company implemented defined contribution benefit plans. As of December 31, 2011, 83% of the projected benefit obligation
pertains to plans that have been frozen; the remaining defined benefit plans that are not frozen are predominantly small domestic union
plans and those that are statutorily mandated in certain international jurisdictions. The Company recognized $32 million of defined
benefit plan expense in 2011, which may fluctuate in future years depending upon various factors including future discount rates and
actual returns on plan assets.
ENVIRONMENTAL — The Company incurs costs related to environmental issues as a result of various laws and regulations
governing current operations as well as the remediation of previously contaminated sites. Future laws and regulations are expected to
be increasingly stringent and will likely increase the Company’s expenditures related to routine environmental matters.
The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable that a
liability has been incurred and the amount of loss can be reasonably estimated. The amount of liability recorded is based on an
evaluation of currently available facts with respect to each individual site and includes such factors as existing technology, presently
enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities recorded do not take into
account any claims for recoveries from insurance or third parties. As assessments and remediation progress at individual sites, the
amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available.
As of December 31, 2011, the Company had reserves of $165 million for remediation activities associated with Company-owned
properties as well as for Superfund sites, for losses that are probable and estimable. The range of environmental remediation costs that
is reasonably possible is $140 million to $355 million which is subject to change in the near term. The Company may be liable for
environmental remediation of sites it no longer owns. Liabilities have been recorded on those sites in accordance with this policy.
INCOME TAXES — Income taxes are accounted for in accordance with ASC 740, Accounting for Income Taxes, which requires that
deferred tax assets and liabilities be recognized, using enacted tax rates, for the effect of temporary differences between the book and
tax bases of recorded assets and liabilities. Deferred tax assets, including net operating losses, are reduced by a valuation allowance if
it is “more likely than not” that some portion or all of the deferred tax assets will not be realized.
In assessing the need for a valuation allowance, the Company considers all positive and negative evidence including; estimates of
future taxable income, considering the feasibility of ongoing tax planning strategies, the reliability of tax loss carry-forwards and the
future reversal of existing temporary differences. Valuation allowances related to deferred tax assets can be impacted by changes to
tax laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would not
be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged to earnings in the
period in which that determination is made. By contrast, if the Company were to determine that it would be able to realize deferred tax
assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation allowance through a favorable
adjustment to earnings in the period in which that determination is made.
The company is subject to tax in a number of locations, including many state and foreign jurisdictions. Significant judgment is
required when calculating our worldwide provision for income taxes. We consider many factors when evaluating and estimating our
tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is
reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will
significantly increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits or final
decisions in transfer pricing matters. The Company periodically assesses its liabilities and contingencies for all tax years still under
audit based on the most current available information, which involves inherent uncertainty. For those tax positions where it is more
likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50%
likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For
those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized
in the financial statements. The Company recognizes interest and penalties associated with uncertain tax positions as a component of
income taxes in the Consolidated Statement of Operations. See Note Q, Income Taxes, of the Notes to the Consolidated Financial
Statements for further discussion.
RISK INSURANCE — To manage its insurance costs efficiently, the Company self insures for certain U.S. business exposures and
generally has low deductible plans internationally. For domestic workers’ compensation, automobile and product liability (liability for
alleged injuries associated with the Company’s products), the Company generally purchases outside insurance coverage only for
severe losses (“stop loss” insurance) and these lines of insurance involve the most significant accounting estimates. While different
stop loss deductibles exist for each of these lines of insurance, the maximum stop loss deductible is set at no more than $5 million per
occurrence and $49 million in the aggregate per annum. The process of establishing risk insurance reserves includes consideration of
actuarial valuations that reflect the Company’s specific loss history, actual claims reported, and industry trends among statistical and
other factors to estimate the range of reserves required. Risk insurance reserves are comprised of specific reserves for individual
claims and additional amounts expected for development of these claims, as well as for incurred but not yet reported claims