IBM 2006 Annual Report Download - page 108

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In 2006, the company redesigned certain non-U.S. defined benefit
pension plans that resulted in a reduction to the PBO of $688 million
and had no impact on the current-year net periodic cost/(income).
The majority of the reduction was attributed to modified plans in the
United Kingdom, Switzerland and the Netherlands. There were no
significant amendments of the significant U.S. retirement-related
benefit plans during the year ended December 31, 2006 that would
have a material effect on the Consolidated Statement of Earnings.
In December 2005, the company approved amendments to the PPP
and the SRP which provided that active participants will no longer
accrue benefits under these plans after December 31, 2007. As a result
of this action, the company recorded a curtailment charge of approxi-
mately $267 million in the Consolidated Statement of Earnings for the
year ended December 31, 2005. In addition, the company recorded a
reduction in the PBO balances of approximately $775 million and $13
million at December 31, 2005 for the PPP and the SRP, respectively.
In addition, in December 2005, the company amended the IBM
Japan Pension Plan, which modified certain plan terms including a
change in the method of calculating benefits for certain participants
at December 31, 2005. This amendment did not impact the 2005 net
periodic cost/(income), however, the amendment resulted in a $561
million reduction to the PBO as of December 31, 2005.
Assumptions Used to Determine
Plan Financial Information
Underlying both the measurement of the PBO and net periodic
cost/(income) are actuarial valuations. These valuations use partici-
pant-specific information such as salary, age and years of service, as
well as certain assumptions, the most significant of which include
estimates of discount rates, expected return on plan assets, rate of
compensation increases, interest crediting rates and mortality rates.
The company evaluates these assumptions, at a minimum, annually,
and makes changes as necessary.
The following table presents the assumptions which can have a
material impact on net periodic cost/(income) and the year-end ben-
efit obligations for significant retirement-related benefit plans:
NONPENSION POSTRETIREMENT
SIGNIFICANT DEFINED BENEFIT PENSION PLANS BENEFIT PLANS
U.S. PLAN NON-U.S. PLANS U.S. PLAN
2006 2005 2004 2006 2005* 2004 2006 2005 2004
Weighted-average assumptions
used to determine net periodic
cost/(income) for the year
ended December 31:
Discount rate .% .% .% .% .% .% .% .% .%
Expected long-term return on plan assets .% .% .% .% .% .% N/A N/A N/A
Rate of compensation increase .% .% .% .% .% .% N/A N/A N/A
Weighted-average assumptions
used to determine benefit
obligation at December 31:
Discount rate .% .% .% .% .% .% .% .% .%
Rate of compensation increase .% .% .% .% .% .% N/A N/A N/A
N/A—Not applicable
* Reclassified to conform with 2006 presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
106 2006 Annual Report
Consolidated Statements ......................................................... 
Notes .....................................................................................
A-G ......................................................................................... 
H-M ......................................................................................... 
N-S .......................................................................................... 
T-X .......................................................................................... 
T. Rental Expense and Lease Commitments ....................... 
U. Stock-Based Compensation ............................................ 
V. Retirement-Related Benefits ......................................... 100
W. Segment Information.................................................... 111
X. Subsequent Events ........................................................ 115
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