IBM 2015 Annual Report Download - page 135

Download and view the complete annual report

Please find page 135 of the 2015 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
133
Assumptions Used to Determine Plan Financial Information
Underlying both the measurement of benefit obligations and net
periodic (income)/cost are actuarial valuations. These valuations
use participant-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 table below presents the assumptions used to measure
the net periodic (income)/cost and the year-end benefit obligations
for retirement-related benefit plans.
Defi ned Benefi t Pension Plans
U.S. Plans Non-U.S. Plans
2015 2014 2013 2015 2014 2013
Weighted-average assumptions used to measure net
periodic (income)/cost for the year ended December 31
Discount rate 3.70% 4.50% 3.60% 2.34% 3.32% 3.23%
Expected long-term returns on plan assets 7.50% 8.00% 8.00% 5.67% 6.08% 6.21%
Rate of compensation increase N/A N/A N/A 2.49% 2.52% 2.51%
Weighted-average assumptions used to measure
benefi t obligations at December 31
Discount rate 4.00% 3.70% 4.50% 2.40% 2.34% 3.32%
Rate of compensation increase N/A N/A N/A 2.40% 2.49% 2.52%
N/A—Not applicable
Nonpension Postretirement Benefi t Plans
U.S. Plan Non-U.S. Plans
2015 2014 2013 2015 2014 2013
Weighted-average assumptions used to measure net
periodic cost for the year ended December 31
Discount rate 3.40% 4.10% 3.30% 7.51% 7.78% 6.43%
Expected long-term returns on plan assets N/A N/A 0.35% 10.17% 10.22% 9.01%
Weighted-average assumptions used to measure
benefi t obligations at December 31
Discount rate 3.70% 3.40% 4.10% 7.06% 7.51% 7.78%
N/A—Not applicable
Discount Rate
The discount rate assumptions used for retirement-related ben-
efit plans accounting reflect the yields available on high-quality,
fixed-income debt instruments at the measurement date. For
the U.S. and certain non-U.S. countries, a portfolio of high-qual-
ity corporate bonds is used to construct a yield curve. The cash
flows from the company’s expected benefit obligation payments
are then matched to the yield curve to derive the discount rates.
In other non-U.S. countries, where the markets for high-quality
long-term bonds are not generally as well developed, a portfo-
lio of long-term government bonds is used as a base, to which a
credit spread is added to simulate corporate bond yields at these
maturities in the jurisdiction of each plan, as the benchmark for
developing the respective discount rates.