McKesson 2012 Annual Report Download - page 87

Download and view the complete annual report

Please find page 87 of the 2012 McKesson 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 128

  • 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

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
83
Weighted-average assumptions used to estimate the net periodic pension expense and the actuarial present value
of benefit obligations were as follows:
Years Ended March 31,
2012 2011 2010
Net periodic pension expense
Discount rates 4.98% 5.30% 7.68%
Rate of increase in compensation 3.74 3.75 3.62
Expected long-term rate of return on plan assets 7.60 7.79 7.90
Benefit obligation
Discount rates 4.23% 4.99% 5.33%
Rate of increase in compensation 3.56 3.74 3.75
Our U.S. defined benefit pension plan liabilities are valued using a discount rate based on a yield curve
developed from a portfolio of high quality corporate bonds rated AA or better whose maturities are aligned with the
expected benefit payments of our plans. For March 31, 2012, we used a weighted average discount rate of 4.15%,
which represents a decrease of 73 basis points from our 2011 weighted-average discount rate of 4.88%.
Sensitivity to changes in the weighted-average discount rate for our U.S. pension plans is as follows:
(In millions)
One Percentage
Point Increase
One Percentage
Point Decrease
Increase (decrease) on projected benefit obligation $ (38) $ 44
Increase (decrease) on net periodic pension cost (2) 3
Plan Assets
Investment Strategy: The overall objective for McKesson’s pension plan assets is to generate long-term
investment returns consistent with capital preservation and prudent investment practices, with a diversification of
asset types and investment strategies. Periodic adjustments are made to provide liquidity for benefit payments and
to rebalance plan assets to their target allocations.
The target allocations for plan assets at March 31, 2012 are 53% equity investments, 35% fixed income
investments and 12% to all other types of investments including cash and cash equivalents. The target allocations
for plan assets at March 31, 2011 were 61% equity investments, 32% fixed income investments and 7% to all other
types of investments including cash and cash equivalents. Equity investments include common stock, preferred
stock, and equity commingled funds. Fixed income investments include corporate bonds, government securities,
mortgage-backed securities, asset-backed securities, other directly held fixed income investments, and fixed income
commingled funds. Other investments include real estate funds, hedge funds, other commingled funds and cash and
cash equivalents.
We develop our expected long-term rate of return assumption based on the projected performance of the asset
classes in which plan assets are invested. Our target asset allocation was determined based on the liability and risk
tolerance characteristics of the plans and at times may be adjusted to achieve our overall investment objectives.