Boeing 2010 Annual Report Download - page 58

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periods. A 10% decrease in the estimated fair value of any of our operations would have no impact on
the carrying value of goodwill.
As of December 31, 2010 and 2009, we had $499 million of indefinite-lived intangible assets related to
the Jeppesen and Aviall brand and trade names acquired in business combinations. We test these
intangibles for impairment by comparing their carrying value to current projections of discounted cash
flows attributable to the brand and trade names. Any excess carrying value over the amount of
discounted cash flows represents the amount of the impairment. A 10% decrease in the discounted
cash flows would reduce the carrying value of these indefinite-lived intangible assets by less than $1
million.
Postretirement Plans
Almost all of our employees are covered by defined benefit pension plans with the exception of all
nonunion and some union employees hired after December 31, 2008. We also have other
postretirement benefits consisting principally of healthcare coverage for eligible retirees and qualifying
dependents. Accounting rules require an annual measurement of our projected obligations and plan
assets. These measurements are based upon several assumptions, including the discount rate, the
expected long-term rate of asset return, and medical trend rate (rate of growth for medical costs).
Future changes in assumptions or differences between actual and expected outcomes can significantly
affect our future annual expense, projected benefit obligations and Shareholders’ equity.
The following table shows the sensitivity of our pension and other postretirement benefit plan liabilities
and net periodic cost to a 25 basis point change in the discount rate as of December 31, 2010.
(Dollars in millions)
Change in discount rate
Increase 25 bps
Change in discount rate
Decrease 25 bps
Pension plans
Projected benefit obligation $(1,772) $2,204
Net periodic pension cost (185) 225
Other postretirement benefit plans
Accumulated postretirement benefit obligation (192) 228
Net periodic postretirement benefit cost (15) 17
Pension expense is also sensitive to changes in the expected long-term rate of asset return. A
decrease or increase of 25 basis points in the expected long-term rate of asset return would have
increased or decreased 2010 net periodic pension expense by $123 million.
Differences between actual and expected returns can affect future year’s pension cost. The asset
balance used to calculate the expected return on pension plan assets is a calculated value that
recognizes changes in the fair value of assets over a five year period. Despite investment gains during
2010 and 2009, the significant losses incurred during 2008 will cause 2011 net periodic pension cost to
increase by approximately $1.0 billion and the portion recognized in earnings for 2011 to increase by
approximately $650 million primarily due to amortization of actuarial losses. Absent increases in
interest rates, higher asset values and/or higher contributions, net periodic pension cost will increase
further in future years.
46