Baker Hughes 2010 Annual Report Download - page 137

2 0 1 0 F o r m 1 0 - K 55
Weighted average assumptions used to determine benefit obligations for these plans are as follows for the years ended December 31:
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2010 2009 2010 2009 2010 2009
Discount rate 4.9% 5.9% 5.5% 5.6% 4.9% 5.9%
Rate of compensation increase 5.4% 4.0% 4.3% 4.1% n/a n/a
Social security increase 2.8% 3.5% 2.9% 3.1% n/a n/a
The development of the discount rate for our U.S. plans was based on a bond matching model whereby a hypothetical bond
portfolio of high-quality, fixed-income securities is selected that will match the cash flows underlying the projected benefit obliga-
tion. The discount rate assumption for our non-U.S. plans reflects the market rate for high-quality, fixed-income securities.
Accumulated Other Comprehensive Loss
The amounts recognized in accumulated other comprehensive loss consist of the following as of December 31:
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2010 2009 2010 2009 2010 2009
Net loss $ 149 $ 150 $ 114 $ 132 $ 10 $ –
Net prior service cost (credit) 3 3 – – (31) 2
Total $ 152 $ 153 $ 114 $ 132 $ (21) $ 2
The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated
other comprehensive loss into net periodic benefit cost over the next fiscal year are $14 million and $1 million, respectively. The esti-
mated prior service credit for the other postretirement benefits that will be amortized from accumulated other comprehensive loss
into net periodic benefit cost over the next fiscal year is $2 million.
Net Periodic Benefit Costs
The components of net periodic cost (benefit) are as follows for the years ended December 31:
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2010 2009 2008 2010 2009 2008 2010 2009 2008
Service cost $ 32 $ 29 $ 30 $ 8 $ 3 $ 2 $ 10 $ 8 $ 8
Interest cost 22 20 17 26 15 17 9 10 9
Expected return on plan assets (28) (25) (38) (23) (15) (20) – – –
Amortization of prior service cost – 1 – – – – 1 1 1
Amortization of net loss 11 14 1 4 2 1 – – –
Curtailment – 1 – (1) – – – – –
Other – 3 – – (1) (2) – – –
Net periodic cost (benefit) $ 37 $ 43 $ 10 $ 14 $ 4 $ (2) $ 20 $ 19 $ 18
Weighted average assumptions used to determine net periodic benefit costs for these plans are as follows for the years ended
December 31:
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2010 2009 2008 2010 2009 2008 2010 2009 2008
Discount rate 5.9% 6.3% 6.3% 5.6% 6.4% 5.7% 5.9% 6.3% 6.3%
Expected long-term
return on plan assets 7.8% 8.5% 8.5% 6.6% 7.2% 7.2% n/a n/a n/a
Rate of compensation increase 4.0% 4.0% 4.0% 4.2% 4.0% 4.1% n/a n/a n/a
Social security increase 3.5% 3.5% 3.5% 3.2% 3.1% 3.1% n/a n/a n/a
In selecting the expected rate of return on plan assets, we consider the average rate of earnings expected on the funds invested
or to be invested to provide for the benefits of these plans. This includes considering the trusts’ asset allocation and the expected
returns likely to be earned over the life of the plans.