Emerson 2015 Annual Report Download - page 51

2015 Annual Report | 49
(11) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health care) for certain U.S. retirees and
their dependents. The components of net postretirement benefits expense for the years ended September 30 follow:
2013 2014 2015
Service cost $2 1 1
Interest cost 12 11 9
Net amortization (13) (21) (22)
Net postretirement expense $1 (9) (12)
Details of the changes in actuarial present value of accumulated postretirement benefit obligations follow:
2014 2015
Benefit obligation, beginning $278 248
Service cost 1 1
Interest cost 11 9
Actuarial (gain) loss (12) (12)
Benefits paid (17) (18)
Plan amendments (13) —
Divestitures — (15)
Benefit obligation, ending (recognized in balance sheet) $248 213
As of September 30, 2015 there were $154 of deferred actuarial gains in accumulated other comprehensive
income, of which approximately $21 will be amortized into earnings in 2016. The discount rates used to measure
the benefit obligation as of September 30, 2015, 2014 and 2013 were 3.80 percent, 3.75 percent and 4.00 percent,
respectively. The health care cost trend rate used for both 2016 and 2015 is assumed to be 6.5 percent initially,
and declining to 5.0 percent over the subsequent three years. A one percentage point increase or decrease in the
health care cost trend rate assumption for either year would have an inconsequential impact on postretirement
benefits expense and the benefit obligation. The Company estimates that future health care benefit payments will
be approximately $20 per year for 2016 through 2020, and $77 in total over the five years 2021 through 2025.
(12) Contingent Liabilities and Commitments
The Company 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 insurance coverage. Although it is not possible to predict the ultimate outcome of these matters,
the Company historically has been largely 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 indemnified 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, for example, 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, contingent liabilities are recorded when they are both probable and reasonably estimable. Historically,
payments under indemnity arrangements have been inconsequential.
At September 30, 2015, 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.