Form 10-K - Union Pacific
Form 10-K - Union Pacific
Form 10-K - Union Pacific
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estimated, we have recorded a liability. We do not expect that any known lawsuits, claims, environmental<br />
costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on our<br />
consolidated results of operations, financial condition, or liquidity after taking into account liabilities and<br />
insurance recoveries previously recorded for these matters.<br />
Indemnities – Our maximum potential exposure under indemnification arrangements, including certain<br />
tax indemnifications, can range from a specified dollar amount to an unlimited amount, depending on the<br />
nature of the transactions and the agreements. Due to uncertainty as to whether claims will be made or<br />
how they will be resolved, we cannot reasonably determine the probability of an adverse claim or<br />
reasonably estimate any adverse liability or the total maximum exposure under these indemnification<br />
arrangements. We do not have any reason to believe that we will be required to make any material<br />
payments under these indemnity provisions.<br />
Climate Change – Although climate change could have an adverse impact on our operations and<br />
financial performance in the future (see Risk Factors under Item 1A of this report), we are currently<br />
unable to predict the manner or severity of such impact. However, we continue to take steps and explore<br />
opportunities to reduce the impact of our operations on the environment, including investments in new<br />
technologies, using training programs to reduce fuel consumption, and changing our operations to<br />
increase fuel efficiency.<br />
CRITICAL ACCOUNTING POLICIES<br />
Our Consolidated Financial Statements have been prepared in accordance with GAAP. The preparation<br />
of these financial statements requires estimation and judgment that affect the reported amounts of<br />
revenues, expenses, assets, and liabilities. We base our estimates on historical experience and on<br />
various other assumptions that we believe are reasonable under the circumstances, the results of which<br />
form the basis for making judgments about the carrying values of assets and liabilities that are not readily<br />
apparent from other sources. The following critical accounting policies are a subset of our significant<br />
accounting policies described in Note 2 to the Financial Statements and Supplementary Data, Item 8.<br />
These critical accounting policies affect significant areas of our financial statements and involve judgment<br />
and estimates. If these estimates differ significantly from actual results, the impact on our Consolidated<br />
Financial Statements may be material.<br />
Personal Injury – The cost of personal injuries to employees and others related to our activities is<br />
charged to expense based on estimates of the ultimate cost and number of incidents each year. We use<br />
an actuarial analysis to measure the expense and liability, including unasserted claims. The Federal<br />
Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages<br />
are assessed based on a finding of fault through litigation or out-of-court settlements. We offer a<br />
comprehensive variety of services and rehabilitation programs for employees who are injured at work.<br />
Our personal injury liability is discounted to present value using applicable U.S. Treasury rates.<br />
Approximately 89% of the recorded liability related to asserted claims, and approximately 11% related to<br />
unasserted claims at December 31, 2011. Because of the uncertainty surrounding the ultimate outcome<br />
of personal injury claims, it is reasonably possible that future costs to settle these claims may range from<br />
approximately $368 million to $404 million. We record an accrual at the low end of the range as no<br />
amount of loss is more probable than any other. Our personal injury liability activity was as follows:<br />
Millions 2011 20<strong>10</strong> 2009<br />
Beginning balance $ 426 $ 545 $ 621<br />
Current year accruals 118 155 174<br />
Changes in estimates for prior years (71) (<strong>10</strong>1) (95)<br />
Payments (<strong>10</strong>5) (173) (155)<br />
Ending balance at December 31 $ 368 $ 426 $ 545<br />
Current portion, ending balance at December 31 $ <strong>10</strong>3 $ 140 $ 158<br />
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