The Company's estimates of future cash flows involve anticipating future revenue
streams, which contain many assumptions that are subject to variability, as well
as estimates for future cash outlays, the amounts of which, and the timing of
which are both uncertain. Actual results that differ from the Company's budget
and long-range plan could result in a significantly different result to an
impairment test, which could impact earnings.
Foreign Currency Translation
Monetary assets and liabilities of the Company's operations which are denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the end of the period. Non-monetary items are translated at historical exchange rates. Revenue and expense transactions are translated at exchange rates prevalent at the transaction date. In the first quarter of 2013, the Company determined that the functional currency of one of its wholly-owned subsidiaries had changed from the Company's reporting currency to the currency of the nation in which it domiciled. The adjustment attributable to current-rate translation of non-monetary assets as of the date of the change shall be reported in other comprehensive income ("OCI"). The functional currency of its other wholly-owned subsidiaries continues to be
the United Statesdollar. Such exchange gains and losses are included in the determination of earnings in the period in which they arise. 59
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Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the consolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in OCI and reclassified to the consolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement of operations.
Pension Plan and Postretirement Benefit Obligations Assumptions
The Company's pension plan and postretirement benefit obligations and related costs are calculated using actuarial concepts, within the framework of the Compensation - Retirement Benefits Topic of the FASB ASC. A critical assumption to this accounting is the discount rate. The Company evaluates this critical assumption annually or when otherwise required to by accounting standards. Other assumptions include factors such as expected retirement date, mortality rate, rate of compensation increase, and estimates of inflation. The discount rate enables the Company to state expected future cash payments for benefits as a present value on the measurement date. The guideline for setting this rate is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pension expense. The Company's discount rate was determined by considering the average of pension yield curves constructed from a large population of high-quality corporate bonds. The resulting discount rate reflects the matching of plan liability cash flows to the yield curves.