Chrysler 2010 Annual Report Download - page 228

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In 2010 and in 2009 changes in Other provisions for employees and in Other long-term employee benefits are as follows:
Change in the scope Reclassified to
At 31 December of consolidation Discontinued At 31 December
(€ million) 2009 Provision Utilisation and other changes Operations 2010
Other provisions for employees 504 542 (269) (1) (285) 491
Other long-term employee benefits 160 32 (15) 6 (59) 124
Total 664 574 (284) 5 (344) 615
Change in the
scope of
At 31 December consolidation and At 31 December
(€ million) 2008 Provision Utilisation other changes 2009
Other provisions for employees 329 363 (152) (36) 504
Other long-term employee benefits 169 11 (20) - 160
Total 498 374 (172) (36) 664
Post-employment benefits and other long-term employee benefits are calculated on the basis of the following assumptions:
At 31 December 2010 At 31 December 2009
(in %) Italy USA UK Other Italy USA UK Other
Discount rate 4.2 5.2 5.2 4.5 5.02 5.5 5.75 5.5
Future salary increase 3.26 n/a 3.5 2.2 4.02 n/a 3.5 3
Inflation rate 2 n/a 3.5 2.1 2.00 n/a 3.5 2
Weighted average, initial healthcare cost trend rate n/a 8 n/a n/a n/a 9 n/a n/a
Weighted average, ultimate healthcare cost trend rate n/a 5 n/a n/a n/a 5 n/a n/a
Expected return on plan assets n/a 8 7 n/a n/a 8 7 n/a
Assumed discount rates are used in measurements of pension and postretirement benefit obligations and interest cost components of net periodic cost. The
Group selects its assumed discount rates based on the consideration of equivalent yields on high-quality fixed income investments at the measurement date.
The assumed health care trend rate represents the rate at which health care costs are assumed to increase. Rates are determined based on the Agricultural
and Construction Equipment sector specific experience, consultation with actuaries and outside consultants, and various trend factors including general
and health care sector-specific inflation projections from the United States Department of Health and Human Services Health Care Financing Administration.
The initial trend is a short-term assumption based on recent experience and prevailing market conditions. The ultimate trend is a long-term assumption of
health care cost inflation based on general inflation, incremental medical inflation, technology, new medicine, government cost-shifting, utilisation changes,
aging population, and a changing mix of medical services.
The expected long-term rate of return on plan assets reflects management’s expectations on long-term average rates of return on funds invested to
provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixed income returns, and equity
returns, while also considering asset allocation and investment strategy, premiums for active management to the extent asset classes are actively managed
and plan expenses. Return patterns and correlations, consensus return forecasts and other relevant financial factors are analysed to check for reasonability
and appropriateness.