Estee Lauder 2012 Annual Report Download - page 134

132 THE EST{E LAUDER COMPANIES INC.
tax assets is a valuation allowance for deferred tax assets,
where management believes it is more-likely-than-not that
the deferred tax assets will not be realized in the relevant
jurisdiction. Based on the Company’s assessments, no
additional valuation allowance is required. If the Company
determines that a deferred tax asset will not be realizable,
an adjustment to the deferred tax asset will result in a
reduction of net earnings at that time.
The Company provides tax reserves for U.S. federal,
state, local and foreign exposures relating to periods sub-
ject to audit. The development of reserves for these expo-
sures requires judgments about tax issues, potential
out comes and timing, and is a subjective critical estimate.
The Company assesses its tax positions and records tax
benefits for all years subject to examination based upon
management’s evaluation of the facts, circumstances, and
information available at the reporting dates. For those tax
positions where it is more-likely-than-not that a tax benefit
will be sustained, the Company has recorded the largest
amount of tax benefit with a greater than 50% likelihood of
being realized upon settlement with a tax authority that has
full knowledge of all relevant information. For those tax
positions where it is not more-likely-than-not that a
tax benefit will be sustained, no tax benefit has been
recognized in the consolidated financial statements. The
Company classifies applicable interest and penalties as a
component of the provision for income taxes. Although
the outcome relating to these exposures is uncertain, in
management’s opinion adequate provisions for income
taxes have been made for estimable potential liabilities
emanating from these exposures. If actual outcomes differ
materially from these estimates, they could have a mate rial
impact on the Company’s consolidated results of operations.
Recently Adopted Accounting Standards
In September 2011, the Financial Accounting Standards
Board (“FASB”) amended its authoritative guidance
related to multiemployer benefit plans. This revised guid-
ance is intended to provide enhanced qualitative and
quantitative disclosures about an employer’s significant
financial obligations to a multiemployer pension plan and,
therefore, help financial statement users better under-
stand the financial health of all significant plans in which
the employer participates. To the extent the information
required under the revised standard is not available in the
public domain, as may be the case for some foreign plans,
employers should include more qualitative information
about the plan. This disclosure-only guidance became
effective for the Company’s fiscal 2012, with full retro-
spective application required. One of the Company’s
international affiliates participates in a multiemployer
benefit plan, and the Company has concluded that its par-
ticipation in this plan is not significant and did not require
additional disclosure in the Company’s consolidated
financial statements.
In May 2011, the FASB amended its authoritative
guidance related to fair value measurements to provide a
consistent definition and measurement of fair value, as
well as similar disclosure requirements between U.S.
GAAP and International Financial Reporting Standards
(“IFRS”). This guidance clarifies the application of existing
fair value measurement and expands the existing disclo-
sure requirements. This guidance became effective for the
Company’s fiscal 2012 third quarter and was applied pro-
spectively. This guidance did not have an impact on the
Company’s results of operations, financial position or cash
flows. As a result of the adoption of this guidance, the
Company did not change its valuation techniques but
made additional disclosures included in Note 12 — Fair
Value Measurements.
In December 2010, the FASB amended its authoritative
guidance related to Step 1 of the goodwill impairment
test for reporting units with zero or negative carrying
amounts. For those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if
it is more-likely-than-not that a goodwill impairment
exists. In determining whether it is more-likely-than-not
that a goodwill impairment exists, consideration should
be made as to whether there are any adverse qualitative
factors indicating that an impairment may exist. This
guidance became effective for the Company’s fiscal
2012 first quarter. The adoption of this standard did
not have an impact on the Company’s consolidated
financial statements.
In December 2010, the FASB amended its authoritative
guidance related to business combinations entered into
by an entity that are material on an individual or aggre-
gate basis. These amendments clarify existing guidance
that if an entity presents comparative financial statements
that include a material business combination, the entity
should disclose revenue and earnings of the combined
entity as though the business combination that occurred
during the current year had occurred as of the beginning
of the comparable prior annual reporting period. The
amendments also expand the supplemental pro forma
disclosures to include a description of the nature and
amount of material, nonrecurring pro forma adjustments
directly attributable to the business combination included
in the reported pro forma revenue and earnings. This
guidance became effective prospectively for business
combinations for which the acquisition date was on or
after the first day of the Company’s fiscal 2012. The adop-
tion of this disclosure-only guidance did not have an