Harman Kardon 2008 Annual Report Download - page 87

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69
We rely on historical long-term rates of return by asset class, the current long-term U.S. Treasury bond
rate, and the current and expected asset allocation strategy to determine the expected long-term rate of
return assumptions. The discount rate used for our European pension benefits are primarily based on
yields for German federal bonds and Euro denominated bonds provided by Deutsche Bundesbank. The
discount rate was also derived based on the anticipated cash flow of the plan and the spot yields on
corporate bonds published in the Citigroup Pension Liability Index as of June 30, 2008. The rates used
represent the single discount rate equal to the yield on a bond portfolio constructed to settle the plan’s
cash flows, or to use a method that approximates the yield on such a portfolio and that does not yield a
materially different result.
Adoption of SFAS No. 158
Effective June 30, 2007, we adopted SFAS No. 158, which requires that the consolidated balance sheet
reflect the funded status of pension plans. The funded status of the plans is measured as the difference
between the plan assets at fair value and the projected benefit obligation. We have recognized the
aggregate of all underfunded plans in either accrued liabilities or other non-current liabilities. The portion
of the amount by which the actuarial present value of benefits included in the projected benefit obligation
exceeds the fair value of plan assets, payable in the next 12 months, is reflected in accrued liabilities.
At June 30, 2007, previously unrecognized differences between actual amounts and estimates based on
actuarial assumptions are included in accumulated other comprehensive loss in our consolidated balance
sheets as required by SFAS No. 158. In reporting periods thereafter, the differences between actual
amounts and estimates based on actuarial assumptions are recognized in other comprehensive income or
loss in the period in which they occur.
The following table shows the incremental effect of applying SFAS No. 158 on individual line items in
the consolidated balance sheet at June 30, 2007:
($000s omitted)
Before
application
of SFAS
No. 158 Adjustments
After
application
of SFAS
No. 158
Incremental impact of applying SFAS No. 158
Other assets $ 15,432 (3,777) 11,655
Total assets 15,432 (3,777) 11,655
Accrued liabilities 101,589 (92,360) 9,229
Other non-current liabilities 14,993 95,836 110,829
Total liabilities 116,582 3,476 120,058
Accumulated other comprehensive income (loss) (8,525) (7,253) (15,778)
Total shareholders’ equity (8,525) (7,253) (15,778)