Kroger 2014 Annual Report Download - page 103

A-38
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
Commodity Price Protection
The Company enters into purchase commitments for various resources, including raw materials utilized
in its manufacturing facilities and energy to be used in its stores, manufacturing facilities and administrative
offices. The Company enters into commitments expecting to take delivery of and to utilize those resources in
the conduct of the normal course of business. The Company’s current program relative to commodity price
protection and the methods by which the Company accounts for its purchase commitments are described in
Note 7.
Benefit Plans and Multi-Employer Pension Plans
The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets.
Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been
recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated
Other Comprehensive Income (“AOCI”). All plans are measured as of the Company’s fiscal year end.
The determination of the obligation and expense for Company-sponsored pension plans and other
post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company
in calculating those amounts. Those assumptions are described in Note 15 and include, among others, the
discount rate, the expected long-term rate of return on plan assets, mortality and the rates of increase in
compensation and health care costs. Actual results that differ from the assumptions are accumulated and
amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation
in future periods. While the Company believes that the assumptions are appropriate, significant differences
in actual experience or significant changes in assumptions may materially affect the pension and other post-
retirement obligations and future expense.
The Company also participates in various multi-employer plans for substantially all union employees.
Pension expense for these plans is recognized as contributions are funded. Refer to Note 16 for additional
information regarding the Company’s participation in these various multi-employer plans and the United Food
and Commercial Workers International Union (“UFCW”) Consolidated Pension Plan.
The Company administers and makes contributions to the employee 401(k) retirement savings accounts.
Contributions to the employee 401(k) retirement savings accounts are expensed when contributed. Refer to
Note 15 for additional information regarding the Company’s benefit plans.
Share Based Compensation
The Company accounts for stock options under fair value recognition provisions. Under this method, the
Company recognizes compensation expense for all share-based payments granted. The Company recognizes
share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the
award. In addition, the Company records expense for restricted stock awards in an amount equal to the fair
market value of the underlying stock on the grant date of the award, over the period the awards lapse. Refer
to Note 12 for additional information regarding the Company’s stock based compensation.
Deferred Income Taxes
Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis
of assets and liabilities and their financial reporting basis. Refer to Note 5 for the types of differences that give
rise to significant portions of deferred income tax assets and liabilities. Deferred income taxes are classified
as a net current or noncurrent asset or liability based on the classification of the related asset or liability for
financial reporting purposes. A deferred tax asset or liability that is not related to an asset or liability for
financial reporting is classified according to the expected reversal date.