Verizon Wireless 2013 Annual Report Download - page 33

31
• We maintain benet plans for most of our employees, including, for
certain employees, pension and other postretirement benet plans.
At December 31, 2013, in the aggregate, pension plan benet obliga-
tions exceeded the fair value of pension plan assets, which will result
in higher future pension plan expense. Other postretirement benet
plans have larger benet obligations than plan assets, resulting in
expense. Signicant benet plan assumptions, including the discount
rate used, the long-term rate of return on plan assets and health care
trend rates are periodically updated and impact the amount of benet
plan income, expense, assets and obligations. A sensitivity analysis of
the impact of changes in these assumptions on the benet obligations
and expense (income) recorded, as well as on the funded status due to
an increase or a decrease in the actual versus expected return on plan
assets as of December 31, 2013 and for the year then ended pertaining
toVerizon’spensionandpostretirementbenetplansisprovidedinthe
table below.
(dollars in millions)
Percentage
point
change
Increase
(decrease) at
December 31, 2013*
Pension plans discount rate +0.50 $ (1,105)
-0.50 1,224
Rateofreturnonpensionplanassets +1.00 (166)
-1.00 166
Postretirement plans discount rate +0.50 (1,332)
-0.50 1,486
Rateofreturnonpostretirementplan
assets +1.00 (26)
-1.00 26
Health care trend rates +1.00 2,539
-1.00 (2,086)
* In determining its pension and other postretirement obligation, the Company used
a weighted-average discount rate of 5.0%. The rate was selected to approximate the
composite interest rates available on a selection of high-quality bonds available in the
market at December 31, 2013. The bonds selected had maturities that coincided with
the time periods during which benefits payments are expected to occur, were non-
callable and available in sufficient quantities to ensure marketability (at least $0.3 billion
par outstanding).
• Our current and deferred income taxes, and associated valuation allow-
ances, are impacted by events and transactions arising in the normal
course of business as well as in connection with the adoption of new
accounting standards, changes in tax laws and rates, acquisitions and
dispositions of businesses and non-recurring items. As a global com-
mercial enterprise, our income tax rate and the classication of income
taxes can be aected by many factors, including estimates of the
timing and realization of deferred income tax assets and the timing
and amount of income tax payments. We account for tax benets
taken or expected to be taken in our tax returns in accordance with the
accounting standard relating to the uncertainty in income taxes, which
requires the use of a two-step approach for recognizing and measuring
tax benets taken or expected to be taken in a tax return. We review
and adjust our liability for unrecognized tax benets based on our best
judgment given the facts, circumstances, and information available at
each reporting date. To the extent that the nal outcome of these tax
positions is dierent than the amounts recorded, such dierences may
impact income tax expense and actual tax payments. We recognize
any interest and penalties accrued related to unrecognized tax benets
in income tax expense. Actual tax payments may materially dier from
estimated liabilities as a result of changes in tax laws as well as unan-
ticipated transactions impacting related income tax balances.
• Our Plant, property and equipment balance represents a signicant
component of our consolidated assets. We record plant, property and
equipment at cost. We depreciate plant, property and equipment on a
straight-line basis over the estimated useful life of the assets. We expect
that a one-year increase in estimated useful lives of our plant, property
and equipment would result in a decrease to our 2013 depreciation
expense of $1.8 billion and that a one-year decrease would result in an
increase of approximately $2.1 billion in our 2013 depreciation expense.
Recent Accounting Standards
In July 2013, the accounting standard update relating to the presentation
of an unrecognized tax benet when a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward exists was issued. The standard
update provides that a liability related to an unrecognized tax benet
should be oset against same jurisdiction deferred tax assets for a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward
if such settlement is required or expected in the event the uncertain tax
position is disallowed. We will adopt this standard update during the rst
quarter of 2014. We are currently evaluating the consolidated balance
sheet impact related to this standard update.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued