Kimberly-Clark 2015 Annual Report Download - page 30

asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered
appropriate.Pensionexpenseisdeterminedusingthefairvalueofassetsratherthanacalculatedvaluethataveragesgainsandlosses("CalculatedValue")
overaperiodofyears.Investmentgainsorlossesrepresentthedifferencebetweentheexpectedreturncalculatedusingthefairvalueofassetsandthe
actualreturn based onthe fairvalue ofassets. The variancebetween actualand expected gainsand losseson pensionassets is recognizedin pension
expensemorerapidlythanitwouldbeifaCalculatedValuewasusedforplanassets.
As of December 31, 2015 , the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.4 billion . These
unrecognizednetlossesmayincreasefuturepensionexpenseifnotoffsetby(i)actualinvestmentreturnsthatexceedtheassumedinvestmentreturns,
(ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial
gains,includingwhethersuchaccumulatedactuariallossesateachmeasurementdateexceedthe"corridor"asrequired. Iftheexpectedlong-termratesof
returnonassetsforthePrincipalPlanswereloweredby0.25percent,theimpactonannualpensionexpensewouldnotbematerialin2016.
•Discountrate.Thediscount(orsettlement) rateused todeterminethe presentvalue ofourfuture U.S.pensionobligation atDecember31,2015was
basedonaportfolioofhighqualitycorporatedebtsecuritieswithcashflowsthatlargelymatchtheexpectedbenefitpaymentsoftheplan.FortheU.K.
plan,thediscountratewasdeterminedbasedonyieldcurvesconstructedfromaportfolioofhighqualitycorporatedebtsecurities.Eachyear'sexpected
futurebenefitpaymentswerediscountedtotheirpresentvalueattheappropriateyieldcurveratetodeterminethepensionobligations.Ifthediscountrate
assumptions for these same plans were reduced by 0.25 percent, the increase in annual pension expense would not be material in 2016 , and the
December31,2015pensionliabilitywouldincreasebyabout$127.
• Otherassumptions.Thereareanumberofotherassumptionsinvolvedinthecalculationofpensionexpenseandbenefitobligations,primarilyrelatedto
participantdemographicsandbenefitelections.
Pension expense for defined benefit pension plans isestimated to approximate $75in2016. Pension expense beyond 2016 will depend on future investment
performance,ourcontributionstothepensiontrusts,changesindiscountratesandvariousotherfactorsrelatedtothecoveredemployeesintheplans.
Other Postretirement Benefit Plans
SubstantiallyallU.S.retireesandemployeeshaveaccesstoourunfundedhealthcareandlifeinsurancebenefitplans.Changesinsignificantassumptionscould
affecttheconsolidatedexpenseandbenefitobligations,particularlythediscountratesusedtocalculatetheobligationsandthehealthcarecosttrendrate:
•Discountrate.Thedeterminationofthediscountratesusedtocalculatethebenefitobligationsoftheplansisdiscussedinthepensionbenefitsection
above,andthemethodologyforeachcountryisthesameasthemethodologyusedtodeterminethediscountrateforthatcountry'spensionobligation.If
thediscountrateassumptionsfortheseplanswerereducedby0.25percent,therewouldbenoimpactto2016otherpostretirementbenefitexpenseand
the increase in the December 31,2015 benefit liability would not be material. The discount rates displayed for the two types of obligations for our
consolidatedoperationsmayappeardifferentduetotheuniquebenefitpaymentsoftheplans.
• Healthcare cost trendrate . The healthcare cost trend rate is based on a combination of inputs including our recent claims history and insights from
externaladvisersregardingrecentdevelopmentsinthehealthcaremarketplace,aswellasprojectionsoffuturetrendsinthemarketplace.
Ourrelatedaccountingpolicies,accountbalancesandtheeffectsofaonepercentagepointchangeinthehealthcarecosttrendratearediscussedinItem8,Note9
totheConsolidatedFinancialStatements.
Deferred Income Taxes and Potential Assessments
AsaglobalorganizationwearesubjecttoincometaxrequirementsinvariousjurisdictionsintheU.S.andinternationally.Changesincertainassumptionsrelated
to income taxes could significantly affect consolidated results, particularly with regard to valuation allowances on deferred tax assets, unremitted earnings of
subsidiariesoutsidetheU.S.anduncertaintaxpositions:
• Deferred tax assets and related valuation allowances . We have recorded deferred tax assets related to, among other matters, income tax loss
carryforwards,incometaxcreditcarryforwardsandcapitallosscarryforwardsandhaveestablished
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26 KIMBERLY-CLARKCORPORATION - 2015 Annual Report