DuPont 2012 Annual Report Download - page 73

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(Dollars in millions, except per share)
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Employee benefits:
Accrued other long-term benefit costs (Note 18) $ 3,271 $ 4,063
Accrued pension benefit costs (Note 18) 9,303 9,186
Accrued environmental remediation costs 353 316
Miscellaneous 1,760 1,943
$14,687 $15,508
Miscellaneous includes asset retirement obligations, litigation accruals, tax contingencies, royalty payables and certain obligations related to divested
businesses.
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Indemnifications
In connection with acquisitions and divestitures, the company has indemnified respective parties against certain liabilities that may arise in connection with
these transactions and business activities prior to the completion of the transaction. The term of these indemnifications, which typically pertain to
environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to
the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to
litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the
indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally
unlimited. The carrying amounts recorded for all indemnifications as of December 31, 2012 and 2011 were $31 and $105, respectively. The decrease in the
carrying amount at December 31, 2012 primarily relates to the payment associated with the settlement of the 2008 lawsuit filed by subsidiaries of Koch
Industries, Inc. (INVISTA).
Obligations for Equity Affiliates & Others
The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers and suppliers. At
December 31, 2012, the company had directly guaranteed $535 of such obligations. This amount represents the maximum potential amount of future
(undiscounted) payments that the company could be required to make under the guarantees. The company would be required to perform on these guarantees in
the event of default by the guaranteed party.
The company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned
based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have
published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers and suppliers. Assuming liquidation,
these assets are estimated to cover approximately 50 percent of the $350 of guaranteed obligations of customers and suppliers. Set forth below are the
company's guaranteed obligations at December 31, 2012:
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Bank borrowings (terms up to 5 years) $284 $ 64 $ 348
Leases on equipment and facilities (terms up to 4 years) — 2 2
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Bank borrowings (terms up to 1 year) 185 —185
Total $469 $66 $535
1. Existing guarantees for customers and suppliers arose as part of contractual agreements. As of December 31, 2012, approximately $14 of these guarantees relate to customers of the
Performance Coatings business.
2. Existing guarantees for equity affiliates arose for liquidity needs in normal operations.
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