Snapple 2011 Annual Report Download - page 65

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from each business combination and also assign indefinite lived intangible assets to our reporting units. We define reporting units
as Beverage Concentrates, Latin America Beverages, and Packaged Beverages’ two reporting units, DSD and WD.
The impairment test for indefinite lived intangible assets encompasses calculating a fair value of an indefinite lived intangible
asset and comparing the fair value to its carrying value. If the carrying value exceeds the estimated fair value, impairment is
recorded. The impairment tests for goodwill include comparing a fair value of the respective reporting unit with its carrying value,
including goodwill and considering any indefinite lived intangible asset impairment charges ("Step 1"). If the carrying value
exceeds the estimated fair value, impairment is indicated and a second step ("Step 2") analysis must be performed.
The tests for impairment include significant judgment in estimating the fair value of the reporting units and intangible assets
primarily by analyzing forecasts of future revenues and profit performance. Fair value is based on what the reporting units and
intangible assets would be worth to a third party market participant. Discount rates are based on a weighted average cost of equity
and cost of debt, adjusted with various risk premiums. These assumptions could be negatively impacted by various of the risks
discussed in "Risk Factors" in this Annual Report on Form 10-K.
2011 Impairment Analysis
Based on our review of the facts and circumstances and updated assumptions, we did not recalculate the fair values for the
annual impairment analysis of our goodwill, brands or distribution rights during 2011. We employed a carryforward approach, in
accordance with U.S. GAAP, since we concluded it was remote that changes in the facts and circumstances would have caused
the fair value of these assets to fall below their carrying amounts. This conclusion was based on the following factors: (1) the fair
value of our goodwill, brands and distribution rights exceeded their carrying amounts by a substantial margin in the 2010 annual
impairment analysis performed; (2) our business performance during 2011 was in line with our forecast used to estimate fair value
in the impairment analysis performed during 2010; (3) our outlook for 2012 and beyond is in line with the forecast used to estimate
fair value in the impairment analysis performed during 2010; (4) other significant assumptions used in estimating fair value, such
as our weighted average cost of capital, have improved since the 2010 impairment analysis performed; (5) the assets and liabilities
that make up the reporting units have not changed significantly since the 2010 fair value determination; and (6) we have experienced
significant appreciation in our market capitalization. As such, no impairment was required for our indefinite lived intangible assets
and goodwill as of December 31, 2011.
2010 and 2009 Impairment Analyses
Fair value is measured based on what each intangible asset or reporting unit would be worth to a third party market participant.
For our annual impairment analysis performed as of December 31, 2010 and 2009, methodologies used to determine the fair values
of the assets included an income based approach, as well as an overall consideration of market capitalization and our enterprise
value. Management's estimates of fair value, which fall under Level 3, are based on historical and projected operating performance.
Discount rates were based on a weighted average cost of equity and cost of debt and were adjusted with various risk premiums.
As of December 31, 2010 and 2009, the results of the Step 1 analysis indicated that the estimated fair value of our indefinite
lived intangible assets and goodwill substantially exceeded their carrying values and, therefore, were not impaired.
Pension and Postretirement Benefits
We have several pension and postretirement plans covering employees who satisfy age and length of service requirements.
There are five stand-alone non-contributory defined benefit pension plans and six stand-alone postretirement plans. Depending
on the plan, pension and postretirement benefits are based on a combination of factors, which may include salary, age and years
of service.
Pension expense has been determined in accordance with the principles of U.S. GAAP. Our policy is to fund pension plans
in accordance with the requirements of the Employee Retirement Income Security Act. Employee benefit plan obligations and
expenses included in our Consolidated Financial Statements are determined from actuarial analyses based on plan assumptions,
employee demographic data, years of service, compensation, benefits and claims paid and employer contributions.
The expense related to the postretirement plans has been determined in accordance with U.S. GAAP. We accrue the cost of
these benefits during the years that employees render service to us.
The calculation of pension and postretirement plan obligations and related expenses is dependent on several assumptions used
to estimate the present value of the benefits earned while the employee is eligible to participate in the plans. The key assumptions
we use in determining the plan obligations and related expenses include: (1) the discount rate used to calculate the present value
of the plan liabilities; (2) employee turnover, retirement age and mortality; and (3) the expected return on plan assets. Our
assumptions reflect our historical experience and our best judgment regarding future performance. Due to the significant judgment