LabCorp 2015 Annual Report Download - page 61

Index
in 2014 was due to decreases in the amount of net amortization and deferral as a result of higher discount rates. Projected pension expense for the Company
Plan and the PEP is expected to increase to $12.9 in 2016 as a result of a lower assumed discount rate and changes in participant mortality tables. Projected
pension expense for the SERP is expected to increase to $0.4 in 2016 as a result of a one-time curtailment gain in 2015 offset by an increase in the assumed
discount rate. Projected pension expense for the Germany Plan and the United Kingdom Plans is expected to increase to $2.4 in 2016 as a result of a lower
assumed discount rate and changes in participant mortality tables.
Further information on the Company’s defined benefit retirement plan is provided in Note 16 to the consolidated financial statements.

Accruals for self-insurance reserves (including workers’ compensation, auto and employee medical) are determined based on a number of assumptions and
factors, including historical payment trends and claims history, actuarial assumptions and current and estimated future economic conditions. These estimated
liabilities are not discounted.
The Company is self-insured (up to certain limits) for professional liability claims arising in the normal course of business, generally related to the testing
and reporting of laboratory test results. The Company maintains excess insurance which limits the Company’s maximum exposure on individual claims. The
Company estimates a liability that represents the ultimate exposure for aggregate losses below those limits. The liability is discounted and is based on
actuarial assumptions and factors for known and incurred but not reported claims, including the frequency and payment trends of historical claims.
If actual trends differ from these estimates, the financial results could be impacted. Historical trends have not differed materially from these estimates.
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The Company accounts for income taxes utilizing the asset and liability method. Under this method deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company does not recognize a tax benefit, unless the Company concludes that it is
more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If
the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that the Company believes is greater
than 50% likely to be realized. The Company records interest and penalties in income tax expense.

The Company assesses goodwill and indefinite-lived intangibles for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. Following the Acquisition, the Company changed the timing of its annual
impairment testing to the beginning of the fourth quarter. In accordance with the FASB updates to their authoritative guidance regarding goodwill and
indefinite-lived intangible asset impairment testing, an entity is allowed to first assess qualitative factors as a basis for determining whether it is necessary to
perform quantitative impairment testing. If an entity determines that it is not more likely than not that the estimated fair value of an asset is less than its
carrying value, then no further testing is required. Otherwise, impairment testing must be performed in accordance with the original accounting standards.
The updated FASB guidance also allows an entity to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed directly
to performing the first step of the two-step assessment. Similarly, a company can proceed directly to a quantitative assessment in the case of impairment
testing for indefinite-lived intangible assets as well.
Step One of the goodwill impairment test includes the estimation of the fair value of each reporting unit as compared to the carrying value of the
reporting unit. Reporting units are businesses with discrete financial information that is available and reviewed by management. The Company estimates the
fair value of a reporting unit using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit's
forecasted future cash flows that are discounted to the present value using the reporting unit's weighted average cost of capital. For the market-based
approach, the Company utilizes a number of factors such as publicly available information regarding the market capitalization of the Company as well as
operating results, business plans, market multiples, and present value techniques. Based upon the range of estimated values developed from the income and
market-based methods, the Company determines the estimated fair value for the reporting unit. If the estimated fair
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