Emerson 2010 Annual Report Download - page 50

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(11) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health care) for U.S. retirees and their depen-
dents. The components of net postretirement benefits expense for the years ended September 30 follow:
2008 2009 2010
Service cost $ 5 4 5
Interest cost 29 30 24
Net amortization 27 15 1
Net postretirement expense $61 49 30
Reconciliations of the actuarial present value of accumulated postretirement benefit obligations follow:
2009 2010
Benefit obligation, beginning $465 499
Service cost 4 5
Interest cost 30 24
Actuarial (gain)/loss 24 (36)
Benefits paid (34) (32)
Plan amendments – (34)
Acquisitions/divestitures and other 10 (9)
Benefit obligation, ending, recognized in balance sheet $499 417
Approximately $8 of $65 of credits deferred in accumulated other comprehensive income at September 30, 2010
will be amortized into earnings in 2011. The assumed discount rates used in measuring the benefit obligations as of
September 30, 2010, 2009 and 2008, were 4.25 percent, 5.0 percent and 6.5 percent, respectively. The assumed health
care cost trend rate for 2011 is 8.0 percent, declining to 5.0 percent in the year 2017, and for 2010 was 8.5 percent,
declining to 5.0 percent in the year 2017. A one-percentage-point increase or decrease in the assumed health care
cost trend rate for each year would increase or decrease 2010 postretirement expense and the benefit obligation as of
September 30, 2010 less than 5 percent. The Company estimates that future health care benefit payments will be $39
in 2011, $39 in 2012, $38 in 2013, $37 in 2014, $36 in 2015 and $160 in total over the five years 2016 through 2020.
(12) Contingent Liabilities and Commitments
Emerson is a party to a number of pending legal proceedings and claims, including those involving general and product
liability and other matters, several of which claim substantial amounts of damages. The Company accrues for such
liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can
be reasonably estimated. Accruals are based on developments to date; management’s estimates of the outcomes of
these matters; the Company’s experience in contesting, litigating and settling similar matters; and any related insur-
ance coverage. Although it is not possible to predict the ultimate outcome of these matters, the Company historically
has been successful in defending itself against claims and suits that have been brought against it, and will continue to
defend itself vigorously in all such matters. While the Company believes a material adverse impact is unlikely, given the
inherent uncertainty of litigation, a remote possibility exists that a future development could have a material adverse
impact on the Company.
The Company enters into certain indemnification agreements in the ordinary course of business in which the indemni-
fied party is held harmless and is reimbursed for losses incurred from claims by third parties, usually up to a prespecified
limit. In connection with divestitures of certain assets or businesses, the Company often provides indemnities to the
buyer with respect to certain matters including, as examples, environmental or unidentified tax liabilities related to
periods prior to the disposition. Because of the uncertain nature of the indemnities, the maximum liability cannot
be quantified. As such, liabilities are recorded when they are both probable and reasonably estimable. Historically,
payments under indemnity arrangements have been inconsequential.
At September 30, 2010, there were no known contingent liabilities (including guarantees, pending litigation, taxes and
other claims) that management believes will be material in relation to the Company’s financial statements, nor were
there any material commitments outside the normal course of business.