Honeywell 2007 Annual Report Download - page 128

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Years Ended December 31,
2007 2006 2005
Beginning of year $ 363 $ 347 299
Accruals for warranties/guarantees issued during the year 233 268 203
Adjustment of pre-existing warranties/guarantees 3 (22) 17
Settlement of warranty/guarantee claims (203) (230) (172)
End of year $ 396 $ 363 347
Product warranties and product performance guarantees are included in the following balance sheet
accounts:
2007 2006
Accrued liabilities $ 380 347
Other liabilities 16 16
$ 396 363
Note 22—Pension and Other Postretirement Benefits
We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the
majority of our employees and retirees. Pension benefits for substantially all U.S. employees are provided
through non-contributory, qualified and non-qualified defined benefit pension plans. U.S. defined benefit pension
plans comprise 73 percent of our projected benefit obligation. Non-U.S. employees, who are not U.S. citizens,
are covered by various retirement benefit arrangements, some of which are considered to be defined benefit
pension plans for accounting purposes. Non-U.S. defined benefit pension plans comprise 27 percent of our
projected benefit obligation.
We also sponsor postretirement benefit plans that provide health care benefits and life insurance coverage to
eligible retirees. Our retiree medical plans mainly cover U.S. employees who retire with pension eligibility for
hospital, professional and other medical services. All non-union hourly and salaried employees joining Honeywell
after January 1, 2000 are not eligible to participate in our retiree medical and life insurance plans. Most of the
U.S. retiree medical plans require deductibles and copayments, and virtually all are integrated with Medicare.
Retiree contributions are generally required based on coverage type, plan and Medicare eligibility. Honeywell has
limited its subsidy of its retiree medical plans to a fixed-dollar amount for substantially all future retirees and for
almost half of its current retirees. This cap of retiree medical benefits under our plans limits our exposure to the
impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims
and expenses are paid from our operating cash flow.
As discussed in Note 1, we adopted SFAS No. 158 as of December 31, 2006. SFAS No. 158 requires that
we recognize on a prospective basis the funded status of our defined benefit pension and other postretirement
benefit plans on the consolidated balance sheet and recognize as a component of accumulated other
comprehensive income (loss), net of tax, the gains or losses and prior service costs or credits that arise during
the period but are not recognized as components of net periodic benefit cost. Additional minimum pension
liabilities and related intangible assets were also derecognized upon adoption of the new standard. The
adjustment for SFAS No. 158 affected our 2006 Consolidated Balance Sheet as follows:
90