Eli Lilly 2012 Annual Report Download - page 84

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72
The U.S. examination of certain matters related to tax years 2008-2009 that were not settled as part of
previous examinations remains in progress. Management believes it is reasonably possible the remaining
2008-2009 tax matters could be concluded within the next 12 months. However, resolution of these matters is
still dependent upon a number of factors, including the potential for formal administrative and legal
proceedings. As a result, it is not possible to estimate the range of the reasonably possible changes in
unrecognized tax benefits that could occur within the next 12 months related to these years, nor is it possible
to estimate reliably the total future cash flows related to these unrecognized tax benefits.
We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense.
During the years ended December 31, 2012, 2011, and 2010, we recognized income tax expense (benefit) of
$42.3 million, $(47.3) million, and $38.3 million, respectively, related to interest and penalties. At
December 31, 2012 and 2011, our accruals for the payment of interest and penalties totaled $187.5 million
and $134.6 million, respectively. Substantially all of the expense (benefit) and accruals relate to interest.
Note 14: Retirement Benefits
We use a measurement date of December 31 to develop the change in benefit obligation, change in plan
assets, funded status, and amounts recognized in the consolidated balance sheets at December 31 for our
defined benefit pension and retiree health benefit plans, which were as follows:
Defined Benefit
Pension Plans Retiree Health
Benefit Plans
2012 2011 2012 2011
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . $ 9,191.2 $ 8,115.0 $ 2,308.6 $ 2,088.5
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253.1 236.3 63.3 72.4
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455.1 447.9 114.9 118.0
Actuarial (gain) loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834.0 794.7 (57.0) 110.2
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (404.2) (400.1) (67.2) (77.9)
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.6) 10.0 (28.4) 1.1
Foreign currency exchange rate changes and other
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95.2 (12.6) 3.5 (3.7)
Benefit obligation at end of year. . . . . . . . . . . . . . . . . . . . 10,423.8 9,191.2 2,337.7 2,308.6
Change in plan assets
Fair value of plan assets at beginning of year. . . . . . . . . 7,186.3 6,983.0 1,339.0 1,327.7
Actual return on plan assets. . . . . . . . . . . . . . . . . . . . . . . 922.7 209.2 183.4 16.6
Employer contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 469.7 402.4 62.8 72.6
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (404.2) (400.1) (67.2) (77.9)
Foreign currency exchange rate changes and other
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.1 (8.2) ——
Fair value of plan assets at end of year. . . . . . . . . . . . . . 8,286.6 7,186.3 1,518.0 1,339.0
Funded status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,137.2) (2,004.9) (819.7) (969.6)
Unrecognized net actuarial loss. . . . . . . . . . . . . . . . . . . . 5,187.5 4,857.5 1,156.7 1,367.4
Unrecognized prior service (benefit) cost . . . . . . . . . . . . 54.9 57.3 (203.4) (215.1)
Net amount recognized. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,105.2 $ 2,909.9 $ 133.6 $ 182.7
Amounts recognized in the consolidated balance sheet
consisted of:
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . . $ 125.5 $ 160.8 $ — $ —
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . (61.2) (57.5) (8.9) (9.3)
Accrued retirement benefit. . . . . . . . . . . . . . . . . . . . . . . . (2,201.6) (2,108.2) (810.8) (960.3)
Accumulated other comprehensive loss before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,242.5 4,914.8 953.3 1,152.3
Net amount recognized. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,105.2 $ 2,909.9 $ 133.6 $ 182.7