Snapple 2011 Annual Report Download - page 66

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required, our assumptions could have a material impact on the measurement of our pension and postretirement obligations and
expenses. Refer to Note 13 of the Notes to our Audited Consolidated Financial Statements for further information.
The effect of a 1% increase or decrease in the weighted-average discount rate used to determine the pension benefit obligations
for U.S. plans would change the benefit obligation as of December 31, 2011, by approximately $27 million and $30 million,
respectively. The effect of a 1% increase or decrease in the weighted-average discount rate used to determine the net periodic
pension costs would change the costs for the year ended December 31, 2011, by approximately $1 million each. The effect of a
1% increase or decrease in the expected return on plan assets used to determine the net periodic pension costs would change the
costs for the year ended December 31, 2011 by approximately $2 million each.
Risk Management Programs
We retain selected levels of property, casualty, workers' compensation, health and other business risks. Many of these risks
are covered under conventional insurance programs with high deductibles or self-insured retentions. Accrued liabilities related to
the retained casualty and health risks are calculated based on loss experience and development factors, which contemplate a number
of variables including claim history and expected trends. These loss development factors are established in consultation with
external insurance brokers and actuaries. At December 31, 2011 and 2010, we had accrued liabilities related to the retained risks
of $89 million and $80 million, respectively, including both current and long-term liabilities.
We believe the use of actuarial methods to estimate our future losses provides a consistent and effective way to measure our
self-insured liabilities. However, the estimation of our liability is judgmental and uncertain given the nature of claims involved
and length of time until their ultimate cost is known. The final settlement amount of claims can differ materially from our estimate
as a result of changes in factors such as the frequency and severity of accidents, medical cost inflation, legislative actions, uncertainty
around jury verdicts and awards and other factors outside of our control.
Income Taxes
Income taxes are accounted for using the asset and liability approach under U.S. GAAP. This method involves determining
the temporary differences between assets and liabilities recognized for financial reporting and the corresponding amounts
recognized for tax purposes and computing the tax-related carryforwards at the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The resulting amounts are deferred
tax assets or liabilities and the net changes represent the deferred tax expense or benefit for the year. The total of taxes currently
payable per the tax return and the deferred tax expense or benefit represents the income tax expense or benefit for the year for
financial reporting purposes.
We periodically assess the likelihood of realizing our deferred tax assets based on the amount of deferred tax assets that we
believe is more likely than not to be realized. We base our judgment of the recoverability of our deferred tax asset primarily on
historical earnings, our estimate of current and expected future earnings, prudent and feasible tax planning strategies, and current
and future ownership changes.
As of December 31, 2011 and 2010, undistributed earnings considered to be permanently reinvested in non-U.S. subsidiaries
totaled approximately $244 million and $203 million, respectively. Deferred income taxes have not been provided on this income
as the Company believes these earnings to be permanently reinvested. It is not practicable to estimate the amount of additional
tax that might be payable on these undistributed foreign earnings.
Our effective income tax rate may fluctuate on a quarterly basis due to various factors, including, but not limited to, total
earnings and the mix of earnings by jurisdiction, the timing of changes in tax laws, and the amount of tax provided for uncertain
tax positions.
We establish income tax reserves to remove some or all of the income tax benefit of any of our income tax positions at the
time we determine that the positions become uncertain based upon one of the following: (1) the tax position is not "more likely
than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax
position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken.
Our evaluation of whether or not a tax position is uncertain is based on the following: (1) we presume the tax position will be
examined by the relevant taxing authority that has full knowledge of all relevant information, (2) the technical merits of a tax
position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their
applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without considerations of
the possibility of offset or aggregation with other tax positions taken. We adjust these income tax reserves when our judgment
changes as a result of new information. Any change will impact income tax expense in the period in which such determination is
made.