Snapple 2013 Annual Report Download - page 71

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
61
The Company periodically assesses the likelihood of realizing its deferred tax assets based on the amount that the Company
believes is more likely than not to be realized. The Company bases its judgment of the recoverability of its deferred tax assets
primarily on historical earnings, its estimate of current and expected future earnings and prudent and feasible tax planning strategies.
Refer to Note 12 for additional information.
As of December 31, 2013 and 2012, undistributed earnings in non-U.S. subsidiaries for which no deferred taxes have been
provided totaled approximately $291 million and $293 million, respectively. Deferred income taxes have not been provided on
these earnings because the Company has either asserted indefinite reinvestment or outside tax basis exceeds book basis. It is not
practicable to estimate the amount of additional tax that might be payable on these undistributed foreign earnings.
DPS' effective income tax rate may fluctuate on a quarterly and/or annual 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.
The Company establishes income tax liabilities to remove some or all of the income tax benefit of any of the Company's
income tax positions at the time DPS determines 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. The Company's evaluation of whether or not a tax position is uncertain is based on the following: (1) DPS
presumes the tax position will be examined by the relevant taxing authority such as the Internal Revenue Service ("IRS") 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. The Company adjusts these income tax liabilities when the Company's judgment changes as a result of new
information. Any change will impact income tax expense in the period in which such determination is made.
Revenue Recognition
The Company recognizes sales revenue when all of the following have occurred: (1) delivery; (2) persuasive evidence of an
agreement exists; (3) pricing is fixed or determinable; and (4) collection is reasonably assured. Delivery is not considered to have
occurred until the title and the risk of loss passes to the customer. Net sales are reported net of costs associated with customer
marketing programs and incentives, as described below, as well as sales taxes and other similar taxes.
Multiple deliverables were included in the arrangements entered into with PepsiCo, Inc. ("PepsiCo") and The Coca-Cola
Company ("Coca-Cola") during 2010. In these cases, the Company first determined whether each deliverable met the separation
criteria under U.S. GAAP. The primary requirement for a deliverable to meet the separation criteria is if the deliverable has stand-
alone value to the customer. Each deliverable that meets the separation criteria is considered a separate "unit of accounting". As
the sale of the manufacturing and distribution rights and the ongoing sales of concentrate would not have stand-alone value to the
customer, both deliverables were determined to represent a single element of accounting for purposes of revenue recognition. The
one-time nonrefundable cash receipts from PepsiCo and Coca-Cola were therefore recorded as deferred revenue and will be
recognized as net sales ratably over the estimated 25-year life of the customer relationship.
Customer Marketing Programs and Incentives
The Company offers a variety of incentives and discounts to bottlers, customers and consumers through various programs to
support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based
rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer
incentives and advertising assistance. These incentives and discounts are reflected as a reduction of gross sales to arrive at net
sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $3,618 million, $3,751
million and $3,733 million during the years ended December 31, 2013, 2012 and 2011, respectively. The amounts of trade spend
are larger in the Packaged Beverages segment than those related to other parts of our business. Accruals are established for the
expected payout based on contractual terms, volume-based metrics and/or historical trends and require management judgment
with respect to estimating customer participation and performance levels.