Halliburton 2013 Annual Report Download - page 87

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71
Fair value measurements of plan assets
The following table sets forth by level within the fair value hierarchy the fair value of assets held by our international
pension plans.
Millions of dollars
Level 1
Level 2
Level 3
Total
Common/collective trust funds (a)
Equity funds
$
—
$
247
$
—
$
247
Bond funds
—
118
—
118
Balanced funds
—
13
—
13
Non-United States equity securities
165
—
—
165
United States equity securities
139
—
—
139
Corporate bonds
—
110
—
110
Other assets
2
59
34
95
Fair value of plan assets at December 31, 2013
$
306
$
547
$
34
$
887
Common/collective trust funds (a)
Equity funds
$
—
$
204
$
—
$
204
Bond funds
—
112
—
112
Balanced funds
—
13
—
13
Non-United States equity securities
130
—
—
130
United States equity securities
110
—
—
110
Corporate bonds
—
107
—
107
Other assets
27
16
35
78
Fair value of plan assets at December 31, 2012
$
267
$
452
$
35
$
754
(a) Strategies are generally to invest in equity or debt securities, or a combination thereof, that match or outperform
certain predefined indices.
Our Level 1 plan asset fair values are based on quoted prices in active markets for identical assets, our Level 2 plan
asset fair values are based on significant observable inputs for similar assets, and our Level 3 plan asset fair values are based on
significant unobservable inputs.
Equity securities are traded in active markets and valued based on their quoted fair value by independent pricing
vendors. Corporate bonds are valued using quotes from independent pricing vendors based on recent trading activity and other
relevant information, including other observable inputs such as market interest rate curves, referenced credit spreads, and
estimated prepayment rates. Common/collective trust funds are valued at the net asset value of units held by the plans at year-
end.
Our investment strategy varies by country depending on the circumstances of the underlying plan. Typically, less
mature plan benefit obligations are funded by using more equity securities, as they are expected to achieve long-term growth
while exceeding inflation. More mature plan benefit obligations are funded using more fixed income securities, as they are
expected to produce current income with limited volatility. The fixed income allocation is generally invested with a similar
maturity profile to that of the benefit obligations to ensure that changes in interest rates are adequately reflected in the assets of
the plan. Risk management practices include diversification by issuer, industry, and geography, as well as the use of multiple
asset classes and investment managers within each asset class.
For our United Kingdom pension plan, which constituted 81% of our international pension plans’ projected benefit
obligation at December 31, 2013, the target asset allocation during 2013 and 2012 was 65% equity securities and 35% fixed
income securities. Beginning in 2014, we are implementing a de-risking program intended to improve the funded status, with
the plan's assets increasingly invested over time in low-risk fixed income securities.
Net periodic benefit cost
Net periodic benefit cost for our international pension plans was $32 million in 2013, $26 million in 2012, and $27
million in 2011.
Actuarial assumptions
Certain weighted-average actuarial assumptions used to determine benefit obligations of our international pension
plans at December 31 were as follows:
2013
2012
Discount rate
4.8%
4.8%
Rate of compensation increase
5.5%
5.5%