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Amortization of the unrecognized actuarial gain or loss is included
as a component of expense for a year if the magnitude of the net
unamortized gain or loss in accumulated other comprehensive
income exceeds 10% of the greater of the benefit obligation or the
market-related value of assets (10% corridor). The amortization
component is equal to that excess divided by the average
remaining service period of active employees expected to receive
benefits under the plan. At the end of 2007, the Company had net
unamortized actuarial gains in accumulated other comprehensive
income potentially subject to amortization that were outside the 10%
corridor that resulted in amortized gains of $6,168,000 being
included in the 2008 pension cost. Primarily as a result of the
significant pension asset losses during 2008, increased life
expectations and a decrease in the discount rate, the Company
had net unamortized actuarial losses in accumulated other
comprehensive income potentially subject to amortization that were
outside the corridor that resulted in amortized losses of $40,000
being included in the 2009 pension cost. During 2009, there were
pension asset gains that resulted in no net unamortized actuarial
gains or losses in accumulated other comprehensive income subject
to amortization outside the 10% corridor, and therefore, no
amortized gain or loss amounts were included in the pension cost
(credit) in 2010. During 2010, there were pension asset gains and
a decrease in the discount rate. The Company currently estimates
that there will be no net unamortized actuarial gains or losses in
accumulated other comprehensive income potentially subject to
amortization outside the corridor, and therefore, no amortized gain
or loss amounts included in the pension cost (credit) in 2011.
Note M to the Company’s Consolidated Financial Statements
provides additional details surrounding pension costs and related
assumptions.
Income Tax Valuation Allowances. Deferred income taxes arise
from temporary differences between the tax and financial statement
recognition of assets and liabilities. In evaluating its ability to
recover deferred tax assets within the jurisdiction from which they
arise, the Company considers all available positive and negative
evidence, including scheduled reversals of deferred tax liabilities,
projected future taxable income, tax planning strategies and recent
financial operations. These assumptions require significant judgment
about forecasts of future taxable income.
As of January 2, 2011, the Company had state income tax net
operating loss carryforwards of $523.7 million, which will expire at
various dates from 2011 through 2030. Also at January 2, 2011,
the Company had approximately $39.7 million of foreign income
tax loss carryforwards, of which $36.4 million may be carried
forward indefinitely and $3.3 million that, if unutilized, will start to
expire in 2012. At January 2, 2011, the Company has established
approximately $41.4 million in valuation allowances against these
deferred state and foreign income taxes, net of U.S. Federal income
taxes, as the Company believes that it is more likely than not that
the benefit from certain state and foreign net operating loss carry-
forwards will not be realized. The Company has established
valuation allowances against state income tax benefits recognized,
without considering potentially offsetting deferred tax liabilities
established with respect to prepaid pension cost and goodwill.
Prepaid pension cost and goodwill have not been considered a
source of future taxable income for realizing deferred tax benefits
recognized since these temporary differences are not likely to
reverse in the foreseeable future. The valuation allowances
established against state income tax benefits recorded may increase
or decrease within the next 12 months, based on operating results
or the market value of investment holdings; as a result, the
Company is unable to estimate the potential tax impact, given the
uncertain operating and market environment.
Recent Accounting Pronouncements. See Note B to the
Company’s Consolidated Financial Statements for a discussion of
recent accounting pronouncements.
60 THE WASHINGTON POST COMPANY