Union Pacific 2007 Annual Report Download - page 59

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recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement
criteria. For additional information on the adoption of FIN 48, see note 4 to the Consolidated Financial
Statements.
Pension and Postretirement Benefits – We incur certain employment-related expenses associated with
pensions and postretirement health benefits. In order to measure the expense associated with these benefits,
we must make various assumptions including discount rates used to value certain liabilities, expected return
on plan assets used to fund these expenses, salary increases, employee turnover rates, anticipated mortality
rates, and expected future healthcare costs. The assumptions used by us are based on our historical experience
as well as current facts and circumstances. We use third-party actuaries to assist us in properly measuring the
expense and liability associated with these benefits.
Personal Injury – The cost of injuries to employees and others on our property is charged to expense based on
estimates of the ultimate cost and number of incidents each year. We use third-party actuaries to assist us in
properly measuring the expense and liability. Our personal injury liability is discounted to present value using
applicable U.S. Treasury rates. Legal fees and incidental costs are expensed as incurred.
Environmental – When environmental issues have been identified with respect to property currently or
formerly owned, leased, or otherwise used in the conduct of our business, we and our consultants perform
environmental assessments on such property. We expense the cost of the assessments as incurred. We accrue
the cost of remediation where our obligation is probable and such costs can be reasonably estimated. We do
not discount our environmental liabilities when the timing of the anticipated cash payments is not fixed or
readily determinable. Legal fees and incidental costs are expensed as incurred.
Asbestos – We estimate a liability for asserted and unasserted asbestos-related claims based on an assessment
of the number and value of those claims. We use an external consulting firm to assist us in properly measuring
the expense and liability. Our liability for asbestos-related claims is not discounted to present value due to the
uncertainty surrounding the timing of future payments. Legal fees and incidental costs are expensed as
incurred.
2. Operations and Segmentation
We are a Class I railroad that operates in the United States. We have 32,205 route miles, linking Pacific Coast
and Gulf Coast ports with the Midwest and eastern United States gateways and providing several corridors to
key Mexican gateways. We serve the western two-thirds of the country and maintain coordinated schedules
with other rail carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the
Southeast, the Southwest, Canada, and Mexico. Export and import traffic is moved through Gulf Coast and
Pacific Coast ports and across the Mexican and Canadian borders.