Kraft 2006 Annual Report Download - page 94
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The Company adopted FSP 106-2 in the third quarter of 2004. The impact for 2006, 2005 and 2004 was a reduction of pre-tax net postretirement health care
costs and an increase in net earnings. The amounts in the table above reflect the following benefits:
2006
2005
2004
(in millions)
Service cost $ 7 $ 7 $ 3
Interest cost 26 23 10
Amortization of unrecognized net loss from experience differences 26 25 11
Reduction of pre-tax net postretirement healthcare costs and an increase in net earnings $ 59 $ 55 $ 24
The following weighted-average assumptions were used to determine the Company's net postretirement cost for the years ended December 31:
U.S. Plans
Canadian Plans
2006
2005
2004
2006
2005
2004
Discount rate 5.60% 5.75% 6.25% 5.00% 5.75% 6.50%
Health care cost trend rate 8.00 8.00 10.00 9.00 9.50 8.00
In 2007, the discount rate used to determine the Company's net postretirement cost will be 5.90% for its U.S. plans and 5.00% for its Canadian plans, and
the health care cost trend rate will be 8.00% for its U.S. plans and 8.50% for its Canadian plans.
The Company's postretirement health care plans are not funded. The changes in the accumulated benefit obligation and net amount accrued at December 31,
2006 and 2005, were as follows:
2006
2005
(in millions)
Accumulated postretirement benefit obligation at January 1 $ 3,263 $ 2,931
Service cost 50 48
Interest cost 174 170
Benefits paid (203) (220)
Plan amendments (16) (4)
Currency 3 2
Assumption changes 13 203
Actuarial losses (50) 133
Curtailments (4)
Accrued postretirement health care costs at December 31, 2006 $ 3,230
Accumulated postretirement benefit obligation at December 31, 2005 3,263
Unrecognized actuarial losses (1,280)
Unrecognized prior service credit 156
Accrued postretirement health care costs at December 31, 2005 $ 2,139
The current portion of the Company's accrued postretirement health care costs of $216 million and $208 million at December 31, 2006 and 2005,
respectively, is included in other accrued liabilities on the consolidated balance sheets.
89
Source: KRAFT FOODS INC, 10-K, March 01, 2007