Mondelez 2014 Annual Report Download - page 45

Table of Contents
Trade and marketing programs:
We promote our products with advertising, marketing, sales incentives and trade promotions. These programs include, but are not
limited to, cooperative advertising, in-store displays, consumer promotions, new product introduction fees, discounts, coupons,
rebates and volume-based incentives. We expense advertising costs either in the period the advertising first takes place or as
incurred. Sales incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated due
to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption
rates. For interim reporting purposes, advertising expenses and sales incentives are charged to operations as a percentage of
volume, based on estimated volume and estimated program spending. We do not defer costs on our year-end consolidated
balance sheet and all marketing costs are recorded as an expense in the year incurred.
Employee Benefit Plans:
We sponsor various employee benefit plans throughout the world. These include primarily pension plans and postretirement
healthcare benefits. For accounting purposes, we estimate the pension and post-retirement healthcare benefit obligations utilizing
assumptions and estimates for discount rates; expected returns on plan assets; expected compensation increases; employee-
related factors such as turnover, retirement age and mortality (during 2014, we applied the new mortality tables in accounting for
our U.S. pension plans); and health care cost trends. We review our actuarial assumptions on an annual basis and make
modifications to the assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical
experiences and management’s best judgment regarding future expectations. These and other assumptions affect the annual
expense and obligations recognized for the underlying plans.
As permitted by U.S. GAAP, we generally amortize the effect of changes in the assumptions over future periods. The cost or benefit
of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included
in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
Since pension and post-retirement liabilities are measured on a discounted basis, the discount rate significantly affects our plan
obligations and expenses. The expected return on plan assets assumption affects our pension plan expenses, since many of our
pension plans are partially funded. The assumptions for discount rates and expected rates of return and our process for setting
these assumptions are described in Note 10, Benefit Plans , to the consolidated financial statements.
While we do not anticipate further changes in the 2015 assumptions for our U.S. and non-U.S. pension and postretirement health
care plans, as a sensitivity measure, a fifty-basis point change in our discount rates or the expected rate of return on plan assets
would have the following effects, increase / (decrease), on our annual benefit plan costs:
Income Taxes:
As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The provision for
income taxes includes the amounts payable or refundable in the current year, the effect of deferred taxes and impacts from
uncertain tax positions. Our provision for income taxes is significantly affected by shifts in the geographic mix of our pre-tax
earnings across tax jurisdictions, changes in tax laws and regulations, tax planning opportunities available in each tax jurisdiction
and the ultimate outcome of various tax audits.
42
As of December 31, 2014
U.S. Plans
Non
-
U.S. Plans
Fifty
-
Basis
-
Point
Fifty
-
Basis
-
Point
Increase
Decrease
Increase
Decrease
(in millions)
Effect of change in discount rate on
pension costs
$
(13
)
$
14
$
(56
)
$
82
Effect of change in expected rate
of return on plan assets on pension
costs
(5
)
5
(41
)
41
Effect of change in discount rate on
postretirement health care costs
(3
)
3
(1
)
1