Aflac 2006 Annual Report Download - page 72

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adjustment to accumulated other comprehensive income, net
of tax. The adjustment to accumulated other comprehensive
income at adoption represents the net unrecognized actuarial
losses, unrecognized prior service costs or credits, as
applicable, and the unrecognized transition asset remaining
from the initial adoption of SFAS 87, all of which were
previously netted against the plan’s funded status in the past
under the provisions of SFAS 87. These amounts will be
subsequently recognized as net periodic pension cost over
future periods consistent with our historical accounting policy
for amortizing such amounts. Further, the components of the
benefit obligations that arise in subsequent periods and are
not recognized as net periodic pension cost in the same
periods will be recognized as a component of other
comprehensive income. Those amounts will also be
subsequently recognized as a component of net periodic
pension cost as previously described. The adoption of SFAS
158 had no effect on our earnings for the year ended
December 31, 2006, or for any prior period presented, and it
will not affect our operating results in future periods.
The incremental effects of adopting the provisions of SFAS
158 on our consolidated balance sheets, statements of
shareholders’ equity and statements of comprehensive income
at December 31, 2006, are presented in the following table.
Had we not adopted SFAS 158 at December 31, 2006, we
would have recognized an additional minimum liability under
the provisions of SFAS 87. The effect of recognizing the
additional minimum liability is included in the table below in
the column labeled “Prior to Application of SFAS 158.”
Prior to Effect of As Reported
Application SFAS 158 December 31,
(In millions) of SFAS 158 Pension Plans Other 2006
Income taxes $ 2,488 $ (20) $ (6) $ 2,462
Other liabilities 1,257 56 16 1,329
Total liabilities 51,418 36 10 51,464
Retained earnings 9,306 (2) – 9,304
Pension liability adjustment 34 34 10 78
Accumulated other
comprehensive income 1,382 34 10 1,426
Total shareholders’ equity 8,387 (36) (10) 8,341
We recognized a charge to opening retained earnings of $2
million net of tax and a reduction of accumulated other
comprehensive income of $4 million, net of tax related to the
adoption of the measurement date provisions of SFAS 158 for
our U.S. pension plan. The Japanese pension plan previously
used a measurement date of December 31. The impact of
adopting the measurement date provisions of SFAS 158 for
our other post employment benefit plans was negligible.
The following table summarizes the amounts included
in accumulated other comprehensive income as of
December 31, 2006.
(In millions) Japan U.S. Other
Actuarial loss $ 35 $ 62 $ 16
Prior service cost (credit) (4) 1 –
Transition obligation 2 – –
Total $ 33 $ 63 $ 16
An actuarial gain of $1 million related to the Japanese plan
arose during the year and was included in accumulated other
comprehensive income; an actuarial loss of $4 million related
to the U.S. plan arose during the year and was included in
accumulated other comprehensive income. During 2006,
$2 million of actuarial loss was amortized to expense for the
Japanese plan, while $3 million was amortized to expense for
the U.S. plan.
No prior service costs or credits arose during 2006 and the
amounts of prior service costs and credits amortized to
expense were immaterial for the year ended December 31,
2006. Amortization of actuarial losses to expense in 2007 is
estimated to be $2 million for the Japanese plan and $4
million for the U.S. plan, while the amortization of prior
service cost and credit is expected to be negligible.
Reconciliations of the funded status of the basic employee
defined-benefit pension plans with amounts recognized in the
consolidated balance sheets as of December 31 were as follows:
2006 2005
(In millions) Japan U.S. Japan U.S.
Projected benefit obligation:
Benefit obligation, beginning of year $ 104 $ 162 $ 112 $ 131
Adoption of SFAS 158 –3––
Service cost 8997
Interest cost 3938
Plan amendment ––(5) –
Actuarial loss (gain) (1) 4 118
Benefits paid (3) (3) (2) (2)
Effect of foreign exchange rate changes (1) – (14) –
Benefit obligation, end of year 110 184 104 162
Plan assets:
Fair value of plan assets, beginning of year 47 95 39 70
Adoption of SFAS 158 –2––
Actual return on plan assets 312 57
Employer contribution 20 20 10 20
Benefits paid (3) (3) (2) (2)
Effect of foreign exchange rate changes (1) – (5) –
Fair value of plan assets, end of year 66 126 47 95
Funded status (44) (58) (57) (67)
Unrecognized net actuarial loss (gain) ––40 68
Unrecognized transition obligation (asset) ––2–
Unrecognized prior service cost ––(4) 2
Adjustment for minimum pension liability ––(21) (28)
Liability for accrued benefit cost $ (44) $ (58) $ (40) $ (25)
Accumulated benefit obligation $ 93 $ 137 $ 87 $ 120