Union Pacific 2012 Annual Report Download - page 79

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fixed-price purchase options available in the leases could potentially provide benefits to us; however,
these benefits are not expected to be significant.
We maintain and operate the assets based on contractual obligations within the lease arrangements,
which set specific guidelines consistent within the railroad industry. As such, we have no control over
activities that could materially impact the fair value of the leased assets. We do not hold the power to
direct the activities of the VIEs and, therefore, do not control the ongoing activities that have a significant
impact on the economic performance of the VIEs. Additionally, we do not have the obligation to absorb
losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to the
VIEs.
We are not considered to be the primary beneficiary and do not consolidate these VIEs because our
actions and decisions do not have the most significant effect on the VIE’s performance and our fixed-price
purchase price options are not considered to be potentially significant to the VIE’s. The future minimum
lease payments associated with the VIE leases totaled $3.6 billion as of December 31, 2012.
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16. Leases
We lease certain locomotives, freight cars, and other property. The Consolidated Statements of Financial
Position as of December 31, 2012 and 2011 included $2,467 million, net of $966 million of accumulated
depreciation, and $2,458 million, net of $915 million of accumulated depreciation, respectively, for
properties held under capital leases. A charge to income resulting from the depreciation for assets held
under capital leases is included within depreciation expense in our Consolidated Statements of Income.
Future minimum lease payments for operating and capital leases with initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2012, were as follows:
Millions Operatin
g
Lease
s
Capita
l
Lease
s
2013 $ 525 $ 282
2014 466 265
2015 410 253
2016 375 232
2017 339 243
Later years 2,126 1,166
Total minimum lease payments $ 4,241 $ 2,441
Amount representing interest N/A (593)
Present value of minimum lease payments N/A $ 1,848
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Approximately 94% of capital lease payments relate to locomotives. Rent expense for operating leases
with terms exceeding one month was $631 million in 2012, $637 million in 2011, and $624 million in 2010.
When cash rental payments are not made on a straight-line basis, we recognize variable rental expense
on a straight-line basis over the lease term. Contingent rentals and sub-rentals are not significant.
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17. Commitments and Contingencies
Asserted and Unasserted Claims – Various claims and lawsuits are pending against us and certain of
our subsidiaries. We cannot fully determine the effect of all asserted and unasserted claims on our
consolidated results of operations, financial condition, or liquidity; however, to the extent possible, where
asserted and unasserted claims are considered probable and where such claims can be reasonably
estimated, we have recorded a liability. We do not expect that any known lawsuits, claims, environmental
costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on our
consolidated results of operations, financial condition, or liquidity after taking into account liabilities and
insurance recoveries previously recorded for these matters.
Personal Injury – The cost of personal injuries to employees and others related to our activities is
charged to expense based on estimates of the ultimate cost and number of incidents each year. We use
an actuarial analysis to measure the expense and liability, including unasserted claims. The Federal
Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages