Emerson 2012 Annual Report Download - page 50

48 | 2012 Annual Report
As of September 30, 2012 there were $99 of deferred actuarial gains in accumulated other comprehensive income,
of which approximately $12 will be amortized into earnings in 2013. The assumed discount rates used in measuring
the benefit obligations as of September 30, 2012, 2011 and 2010, were 3.25 percent, 4.25 percent and 4.25 percent,
respectively. The assumed health care cost trend rate for 2013 is 7.5 percent, declining to 5.0 percent in 2018, and for
2012 was 8.0 percent, declining to 5.0 percent in 2018. A one-percentage-point increase or decrease in the assumed
health care cost trend rate for each year would increase or decrease 2012 postretirement expense less than 10 percent
and the benefit obligation as of September 30, 2012 less than 5 percent. The Company estimates that future health
care benefit payments will be $33 in 2013, $33 in 2014, $32 in 2015, $31 in 2016, $31 in 2017 and $138 in total over
the five years 2018 through 2022.
(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, 2012, 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.
(13) Income Taxes
Pretax earnings from continuing operations consist of the following:
2010 2011 2012
United States $1,303 1,891 1,742
Non-U.S. 1,576 1,740 1,373
Total pretax earnings from continuing operations $2,879 3,631 3,115
The principal components of income tax expense follow:
2010 2011 2012
Current:
Federal $496 503 750
State and local 33 37 61
Non-U.S. 413 477 466
Deferred:
Federal (55) 149 (129)
State and local (1) 3 (4)
Non-U.S. (38) (42) (53)
Income tax expense $848 1,127 1,091