Kimberly-Clark 2007 Annual Report Download - page 54

PART II
(Continued)
$98 million to pension trusts in 2007 compared with $132 million in 2006. In addition, the Corporation made
direct benefit payments of $14.8 million in 2007 compared to $12.8 million in 2006. While the Corporation is not
required to make a contribution in 2008 to the U.S. plan, the benefit of a contribution will be evaluated. The
Corporation currently anticipates contributing about $82 million to its pension plans outside the U.S. in 2008.
The discount rate used for each country’s pension obligation is similar to the discount rate used for that
country’s other postretirement obligation. The discount rates displayed for the two types of obligations for the
Corporation’s consolidated operations may appear different due to the weighting used in the calculation of the
two weighted-average discount rates.
Other Postretirement Benefits
Substantially all U.S. retirees and employees are covered by unfunded health care and life insurance benefit
plans. Certain benefits are based on years of service and/or age at retirement. The plans are principally
noncontributory for employees who were eligible to retire before 1993 and contributory for most employees who
retire after 1992, except that the Corporation provides no subsidized benefits to most employees hired after 2003.
The Corporation made benefit payments of $76.6 million in 2007 compared with $75.8 million in 2006. The
determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the
pension benefit section above. If the discount rate assumptions for these plans were reduced by 0.25 percent,
2008 other postretirement benefit expense would increase by approximately $1 million and the December 31,
2007 benefit liability would increase by about $19 million.
The health care cost trend rate is based on a combination of inputs including the Corporation’s recent claims
history and insights from external advisers regarding recent developments in the health care marketplace, as well
as projections of future trends in the marketplace. The annual increase in the consolidated weighted-average
health care cost trend rate is expected to be 8.44 percent in 2008, 7.46 percent in 2009 and to gradually decline to
5.21 percent in 2020 and thereafter. See Item 8, Note 7 to the Consolidated Financial Statements for disclosure of
the effect of a one percentage point change in the health care cost trend rate.
Retained Insurable Risks
Selected insurable risks are retained, primarily those related to property damage, workers’ compensation,
and product, automobile and premises liability based upon historical loss patterns and management’s judgment of
cost effective risk retention. Accrued liabilities for incurred but not reported events, principally related to
workers’ compensation and automobile liability, are based upon undiscounted loss development factors.
Property and Depreciation
Estimating the useful lives of property, plant and equipment requires the exercise of management judgment,
and actual lives may differ from these estimates. Changes to these initial useful life estimates are made when
appropriate. Property, plant and equipment are tested for impairment in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, whenever events or changes in circumstances
indicate that the carrying amounts of such long-lived assets may not be recoverable from future net pretax cash
flows. Impairment testing requires significant management judgment including estimating the future success of
product lines, future sales volumes, growth rates for selling prices and costs, alternative uses for the assets and
estimated proceeds from disposal of the assets. Impairment testing is conducted at the lowest level where cash
flows can be measured and are independent of cash flows of other assets. An asset impairment would be
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