Honeywell 2013 Annual Report Download - page 78

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impact of other potentially responsible parties, technology and information related to individual sites,
we do not believe it is possible to develop an estimate of the range of reasonably possible
environmental losses in excess of our recorded liabilities.
Asbestos Related Contingencies and Insurance Recoveries—Honeywell is a defendant in
personal injury actions related to products containing asbestos (refractory and friction products). We
recognize a liability for any asbestos related contingency that is probable of occurrence and reasonably
estimable. Regarding North American Refractories Company (NARCO) asbestos related claims, we
accrued for pending claims based on terms and conditions in agreements with NARCO, its former
parent company, and certain asbestos claimants, and an estimate of the unsettled claims pending as
of the time NARCO filed for bankruptcy protection. We also accrued for the estimated value of future
NARCO asbestos related claims expected to be asserted against the NARCO Trust through 2018 as
described in Note 22 Commitments and Contingencies. In light of the inherent uncertainties in making
long term projections and in connection with the initial operation of a 524(g) trust, as well as the stay of
all NARCO asbestos claims from January 2002 through the effective date of the NARCO Trust on April
30, 2013, we do not believe that we have a reasonable basis for estimating NARCO asbestos claims
beyond 2018. Regarding Bendix asbestos related claims, we accrued for the estimated value of
pending claims using average resolution values for the previous five years. We also accrued for the
estimated value of future anticipated claims related to Bendix for the next five years based on historic
claims filing experience and dismissal rates, disease classifications, and average resolution values in
the tort system for the previous five years. In light of the uncertainties inherent in making long-term
projections, as well as certain factors unique to friction product asbestos claims, we do not believe that
we have a reasonable basis for estimating asbestos claims beyond the next five years. We will
continue to update the resolution values used to estimate the cost of pending and future Bendix claims
during the fourth quarter each year. For additional information see Note 22. We continually assess the
likelihood of any adverse judgments or outcomes to our contingencies, as well as potential ranges of
probable losses and recognize a liability, if any, for these contingencies based on an analysis of each
individual issue with the assistance of outside legal counsel and, if applicable, other experts.
In connection with the recognition of liabilities for asbestos related matters, we record asbestos
related insurance recoveries that are deemed probable. In assessing the probability of insurance
recovery, we make judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding
insurers.
Aerospace Sales Incentives—We provide sales incentives to commercial aircraft manufacturers
and airlines in connection with their selection of our aircraft equipment, predominately wheel and
braking system hardware, avionics, and auxiliary power units, for installation on commercial aircraft.
These incentives consist of free or deeply discounted products, credits for future purchases of product
and upfront cash payments. These costs are recognized in the period incurred as cost of products sold
or as a reduction to sales, as appropriate. Generally, for aircraft manufacturers, incentives are
recorded when the products are delivered; for airlines, incentives are recorded when the associated
aircraft are delivered by the aircraft manufacturer to the airline.
Research and Development—Research and development costs for company-sponsored
research and development projects are expensed as incurred. Such costs are principally included in
Cost of Products Sold and were $1,804, $1,847 and $1,799 million in 2013, 2012 and 2011,
respectively.
Stock-Based Compensation Plans—The principal awards issued under our stock-based
compensation plans, which are described in Note 20 Stock-Based Compensation Plans, include
non-qualified stock options and restricted stock units (RSUs). The cost for such awards is measured at
the grant date based on the fair value of the award. The value of the portion of the award that is
ultimately expected to vest is recognized as expense over the requisite service periods (generally the
66
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)