Safeway 2013 Annual Report Download - page 55

Table of Contents
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claims incurred but not yet reported, and is discounted using a risk-free rate of interest. The present value of such claims was calculated
using a discount rate of 1.75% in 2013, 0.75% in 2012 and 0.75% in 2011.
A summary of changes in Safeway’s self-insurance liability is as follows (in millions):
 2012 2011
Beginning balance  $470.9 $468.5
Expense, including the effect of discount rate  151.6 151.1
Claim payments (142.5)(148.6)
Disposal of discontinued operations — —
Currency translation 0.1 (0.1)
Ending balance  480.1 470.9
Less current portion (137.4)(129.4)
Long-term portion  $342.7 $341.5
The current portion of the self-insurance liability is included in other accrued liabilities, and the long-term portion is included in accrued claims
and other liabilities in the consolidated balance sheets. The total undiscounted liability was $477.2 million at year-end 2013 and $496.2
million at year-end 2012.
Deferred Rent
Rent Escalations. The Company recognizes escalating rent provisions on a straight-line basis over the lease term.
Rent Holidays. Certain of the Company’s operating leases contain rent holidays. For these leases, Safeway recognizes the related rent
expense on a straight-line basis starting at the earlier of the first rent payment or the date of possession of the leased property. The difference
between the amounts charged to expense and the rent paid is recorded as deferred lease incentives and amortized over the lease term.
Income Taxes Income tax expense or benefit reflects the amount of taxes payable or refundable for the current year, the impact of deferred
tax liabilities and deferred tax assets, accrued interest on tax deficiencies and refunds and accrued penalties on tax deficiencies. Deferred
income taxes represent future net tax effects resulting from temporary differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company
is able to realize their benefits, or that future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on
management's assessments of realizable deferred tax assets.
Tax positions are recognized when they are more likely than not to be sustained upon examination. The amount recognized is measured as
the largest amount of benefit that is more likely than not of being realized upon settlement. The Company is subject to periodic audits by the
Internal Revenue Service and other foreign, state and local taxing authorities. These audits may challenge certain of the Company’s tax
positions such as the timing and amount of income and deductions and the allocation of taxable income to various tax jurisdictions. The
Company evaluates its tax positions and establishes liabilities in accordance with the applicable accounting guidance on uncertainty in
income taxes. These tax uncertainties are reviewed as facts and circumstances change and are adjusted accordingly. This requires
significant management
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