ADT 2005 Annual Report Download - page 200

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and Contingencies (Continued)
these proceedings, either individually or in the aggregate, to have a material adverse effect on its
financial position, results of operations or cash flows.
18. Retirement Plans
Measurement Date—In 2005, the Company changed the measurement date for its pension and post
retirement benefit plans from September 30th to August 31st. The Company believes that the one-month
change of measurement date is a preferable change as it allows management adequate time to evaluate
and report the actuarial information in the Company’s Consolidated Financial Statements under the
accelerated reporting deadlines. Accordingly, all amounts presented as of and for the year ended
September 30, 2005 reflect an August 31 measurement date, while prior years reflect a September 30
measurement date. The Company has accounted for the change in measurement date as a change in
accounting principle. The cumulative effect of the accounting principle change as of the beginning of
2005 was a $21 million after tax gain ($28 million pretax). The current year effects of this change in
measurement date did not have a material effect on net periodic benefit costs.
Defined Benefit Pension Plans—The Company has a number of noncontributory and contributory
defined benefit retirement plans covering certain of its U.S. and non-U.S. employees, designed in
accordance with conditions and practices in the countries concerned. Net periodic pension benefit cost
is based on periodic actuarial valuations which use the projected unit credit method of calculation and
is charged to the Consolidated Statements of Income on a systematic basis over the expected average
remaining service lives of current participants. Contribution amounts are determined based on the
advice of professionally qualified actuaries in the countries concerned. The benefits under the defined
benefit plans are based on various factors, such as years of service and compensation. The following
tables exclude amounts related to discontinued operations for all periods presented.
The net periodic benefit cost for all U.S. and non-U.S. defined benefit pension plans for 2005,
2004 and 2003 is as follows ($ in millions):
U.S. Plans Non-U.S. Plans
2005 2004 2003 2005 2004 2003
Service cost ................................. $ 21 $ 25 $ 25 $106 $102 $ 85
Interest cost ................................. 127 127 129 136 123 101
Expected return on plan assets ................... (149) (112) (98) (107) (86) (75)
Amortization of initial net (asset) obligation .......... — (1) (1) — — 1
Amortization of prior service cost ................. 3 3 3 (1) 1 1
Amortization of net actuarial loss ................. 42 46 39 47 52 43
Curtailment/settlement loss and special termination
benefits ................................... 1 3 10 (4) 5 10
Net periodic benefit cost ........................ $ 45 $ 91 $107 $177 $197 $ 166
Weighted-average assumptions used to determine net pension
cost during the period:
Discount rate ................................ 6.00% 6.00% 6.75% 4.90% 4.84% 5.09%
Expected return on plan assets ................... 8.00% 8.00% 8.49% 6.46% 6.29% 6.89%
Rate of compensation increase ................... 4.25% 4.30% 4.27% 3.61% 3.42% 3.48%
124 2005 Financials