Snapple 2013 Annual Report Download - page 54

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Description Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Revenue Recognition
We recognize revenue, net of the costs of our
customer incentives, at the time risk of loss has
been transferred to our customer.
See the discussion above under Customer
Incentives and Marketing Programs for further
information.
Our revenue recognition accounting methodology
contains uncertainties because it requires
management to make assumptions and to apply
judgment to estimate the amount of shipments
where risk of loss has not yet transferred. Our
estimates are based primarily on historical
transactional experience, which is reviewed
annually.
We have not made any material changes in the
accounting methodology we used to measure our
estimate for shipments where risk of loss has not
yet transferred.
A 10% change in the estimate for shipment where
the risk of loss has not yet transferred as of
December 31, 2013, would have affected net
income by less than $1 million for the year ended
December 31, 2013.
Pension and Postretirement Benefits
We have several pension and postretirement plans
covering employees who satisfy age and length of
service requirements. Depending on the plan,
pension and postretirement benefits are based on a
combination of factors, which may include salary,
age and years of service.
Our largest U.S. defined benefit pension plan,
which is a cash balance plan, was suspended and
the accrued benefit was frozen effective December
31, 2008. Participants in this plan no longer earn
additional benefits for future services or salary
increases.
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 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 the actuarial
methods to determine 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.
Refer to Note 14 of the Notes to our Audited
Consolidated Financial Statements for further
information about the key assumptions.
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, 2013, by approximately $24 million
and $28 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, 2013, by
approximately $1 million.
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, 2013 by
approximately $2 million.
Multi-employer Pension Plan Withdrawal Liability
We contribute to a number of multi-employer
defined benefit plans under the terms of collective
bargaining agreements that cover its union-
represented employees. We record liabilities to exit
a participating plan when an exit becomes both
probable and estimable. The estimated withdrawal
liability is determined from actuarial analyses
based on historical and anticipated employer
contributions.
The calculation of the multi-employer pension
plan withdrawal liability and related expense is
dependent on several assumptions used to estimate
the present value of the estimated withdrawal
liability.
The key assumptions we use in the actuarial
methods to determine the estimated withdrawal
liability and related expenses include: (1) the
amount of the anticipated contributions, which is
based upon the timing of the withdrawal liability
assessment provided by the trustee; (2) the discount
rate used to calculate the present value of the
estimated withdrawal liability; and (3) the
expected return on plan assets. Our assumptions
reflect our best judgment regarding the outcome of
the assessment.
The effect of a 10% increase or decrease in the
anticipated contributions used by the trustee to
assess the withdrawal liability would change the
withdrawal liability as of December 31, 2013, by
approximately $6 million.
The effect of a 1% increase or decrease in the
discount rate used to determine the withdrawal
liability would change the withdrawal liability as
of December 31, 2013, by approximately $7
million and $9 million, respectively.