Chrysler 2011 Annual Report Download - page 205

Consolidated
Financial
Statements
at 31 December
2011
Notes
204
The main assumptions used to determine the net liability for the pension benefits were as follows:
At 31 December 2011 At 31 December 2010
(In %) USA
Canada &
Mexico UK USA
Canada &
Mexico UK
Discount rate 5.0 4.1 5.1 5.2 n/a 5.2
Future salary increase rate 3.8 3.5 2.7 n/a n/a 3.5
Inflation rate n/a n/a 2.7 n/a n/a 3.5
Expected long term rate of return on plan assets 7.5 7.0 7.0 8.0 n/a 7.0
The main assumptions used to determine the net liability for other post-employment benefits were as follows:
At 31 December 2011 At 31 December 2010
(In %) USA
Canada &
Mexico Italy USA
Canada &
Mexico Italy
Discount rate 5.1 4.2 4.4 5.2 n/a 4.2
Future salary increase rate n/a 2.7 3.2 n/a n/a 3.3
Inflation rate n/a n/a 2.0 n/a n/a 2.0
Weighted average ultimate healthcare cost trend rate 5.0 3.7 n/a 8.0 n/a n/a
The discount rates are used in measuring the obligation and the interest component of net period cost. The Group selects these rates on the basis of the
yields on high-quality fixed income investments for which the timing and amounts of payments match the timing and amounts of the projected pension and
other post-employment plan.
The expected long-term rates of return on plan assets reflect the Group’s expectations on long-term rates of return on invested funds. The expected rates
are based on estimates made by various consultants for long-term returns on the capital markets and on the outlook for inflation and bond yields, and also
by taking into account asset make-up and the Group’s investment strategy.
The annual rate of increase in the cost of health care benefits in the United States was assumed to be 8.5% in 2011. The annual rate was assumed to
decrease gradually to 5.0% after 2017 and remain at that level thereafter. The annual rate of increase in the cost of health care benefits in Canada was
assumed to be 3.7% in 2011. The annual rate was assumed to remain at 3.7% thereafter.
Assumed health care cost trend rates have a significant effect on the amount recognised in profit or loss. A one percentage point change in assumed health
care cost trend rates would have the following effects:
(€ million)
One percentage
point increase
One percentage
point decrease
Effect on the aggregate of the service costs and interest cost 2 (2)
Effect on defined benefit obligation 52 (44)