Avon 2006 Annual Report Download - page 69

2005. During 2006, we increased sequentially the purchases
under our program as we have been accelerating the pace of our
repurchase program.
NOTE 10. Employee Benefit Plans
Savings Plan
We offer a qualified defined contribution plan for U.S.-based
employees, the Avon Personal Savings Account Plan, which
allows eligible participants to contribute up to 25% of eligible
compensation through payroll deductions. Prior to February
2005, we matched employee contributions dollar for dollar up to
the first 3% of eligible compensation and fifty cents for each
dollar contributed from 4% to 6% of eligible compensation. In
February 2005, Avon temporarily suspended the matching con-
tribution. The matching contributions were resumed in 2006 at
the pre-February 2005 levels. In 2006, 2005, and 2004, match-
ing contributions approximating $12.7, $1.8 and $14.6,
respectively, were made to this plan in cash, which were then
used by the plan to purchase Avon shares in the open market.
Defined Benefit Pension and
Postretirement Plans
Avon and certain subsidiaries have contributory and non-
contributory retirement plans for substantially all employees of
those subsidiaries. Benefits under these plans are generally based
on an employee's years of service and average compensation
near retirement. Plans are funded based on legal requirements
and cash flow.
We provide health care and life insurance benefits for the
majority of employees who retire under our retirement plans in
the United States and certain foreign countries. In the U.S., the
cost of such health care benefits is shared by us and our retirees
for employees hired on or before January 1, 2005. Employees
hired after January 1, 2005, pay the full cost of the health care
benefits.
In September 2006, the FASB issued SFAS No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretire-
ment Plans – an amendment of FASB Statements No. 87, 88,
106 and 132R (“SFAS 158”). SFAS 158 requires, among other
things, the recognition of the funded status of pension and
other postretirement benefit plans on the balance sheet. Each
overfunded plan is recognized as an asset and each underfunded
plan is recognized as a liability. The initial impact of the stan-
dard, due to unrecognized prior service costs or credits and net
actuarial gains or losses, as well as subsequent changes in the
funded status, are recognized as components of accumulated
comprehensive loss in shareholders’ equity. Additional minimum
pension liabilities and related intangible assets were also
derecognized upon adoption of the new standard.
We adopted SFAS 158 as of December 31, 2006. The adoption
of SFAS 158 had no impact on our Consolidated Statement of
Income for the year ended December 31, 2006, or for any prior
period presented, and it will not effect our operating results in
future periods. SFAS 158’s provisions regarding the change in
the measurement date of defined benefit and other postretire-
ment plans had no impact as we were already using a measure-
ment date of December 31 for our pension plans. The following
table summarizes the impact of the initial adoption of SFAS 158:
Effect of Adopting
SFAS 158 at
December 31, 2006
Prior to
SFAS
158 (1)
Effect of
Adoption of
SFAS 158
Increase
(Decrease)
After
Adopting
SFAS 158
Other assets $ 448.8 $(232.8) $ 216.0
Accrued compensation – 35.5 35.5
Employee benefit plans
liability 455.5 (13.4) 442.1
Accumulated other
comprehensive loss, net
of taxes (145.3) (254.7) (400.0)
(1) Includes effects of additional minimum liability that would have been
recognized at December 31, 2006, had we not been required to adopt
SFAS 158.
A V O N 2006 F-19