Pfizer 2006 Annual Report Download - page 58

56 2006 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
majority of our international plans. In December 2003, the Medicare
Prescription Drug Improvement and Modernization Act of 2003 (the
Act) was enacted. The Act introduced a prescription drug benefit
under Medicare (Medicare Part D), as well as a federal subsidy to
sponsors of retiree healthcare benefit plans that provide a benefit
that is at least actuarially equivalent to Medicare Part D. During the
third quarter of 2004, in accordance with FASB Staff Position
No.106-2 (FSP 106-2), Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug Improvement and
Modernization Act of 2003, we began accounting for the effect of
the federal subsidy under the Act; the associated reduction to the
benefit obligations of certain of our postretirement benefit plans
and the related benefit cost was not significant.
During 2006, pursuant to the divestiture of our Consumer
Healthcare business, certain defined benefit obligations and
related plan assets, if applicable, were transferred to the purchaser
of that business.
A. Adoption of New Accounting Standard
As of December 31, 2006, we adopted the provisions of SFAS No.
158, Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans (an amendment of FASB Statements
No. 87, 88, 106 and 132R), which requires us to recognize on our
balance sheet the difference between our benefit obligations and
any plan assets of our defined benefit plans. In addition, we are
required to recognize as part of other comprehensive
income/(expense), net of taxes, gains and losses due to differences
between our actuarial assumptions and actual experience
(actuarial gains and losses) and any effects on prior service due
to plan amendments (prior service costs or credits) that arise
during the period and which are not being recognized as net
periodic benefit costs. Upon adoption, SFAS 158 requires the
recognition of previously unrecognized actuarial gains and losses,
prior service costs or credits and net transition amounts within
Accumulated other comprehensive income (expense), net of tax.
The incremental impact of applying SFAS 158 to our balance
sheet as of December 31, 2006, was to reduce our total
shareholders’ equity by $2.1 billion, primarily due to the
recognition of previously unrecognized actuarial losses. The
following table sets forth the incremental effect of applying
SFAS 158 to individual line items in our balance sheet as of
December 31, 2006:
YEAR ENDED DEC. 31, 2006
________________________________________________________
BEFORE AFTER
ADOPTION OF ADOPTION OF
(MILLIONS OF DOLLARS) SFAS 158 ADJUSTMENTS
(a)
SFAS 158
Identifiable intangible assets,
less accumulated
amortization $24,365 $ (15) $24,350
Other assets, deferred taxes
and deferred charges 3,886 (1,748) 2,138
Other current liabilities 6,372 138 6,510
Pension benefit obligations 2,768 864 3,632
Postretirement benefit
obligations 1,394 576 1,970
Deferred taxes 9,216 (1,201) 8,015
Accumulated other
comprehensive
income/(expense) 1,671 (2,140) (469)
(a)
The adoption of SFAS 158 also impacted the subtotals on the
balance sheet, including, Total assets, Total current liabilities, Total
shareholders’ equity and Total liabilities and shareholders’ equity.
B. Components of Net Periodic Benefit Costs
The annual cost of the U.S. qualified, U.S. supplemental (non-qualified) and international pension plans and postretirement plans for the
years ended December 31, 2006, 2005 and 2004, follows:
PENSION PLANS
U.S. SUPPLEMENTAL
U.S. QUALIFIED (NON-QUALIFIED) INTERNATIONAL POSTRETIREMENT PLANS
(MILLIONS OF DOLLARS) 2006 2005 2004 2006 2005 2004 2006 2005 2004 2006 2005 2004
Service cost $ 368 $ 318 $ 277 $43 $37 $33 $ 303 $ 293 $ 264 $47 $38 $39
Interest cost 444 410 391 60 59 60 307 309 288 127 113 113
Expected return on plan assets (628) (594) (569) — — — (311) (297) (278) (28) (23) (20)
Amortization of:
Actuarial losses 119 101 99 45 39 35 106 95 59 36 21 15
Prior service costs/(credits) 9 10 17 (3) 1 2 — (2) 5 1 11
Net transition obligation — ————— 2 11— ——
Curtailments and
settlements—net 117 12 37 (8) 41(17) 19 (9) 6 ——
Special termination benefits 17 5————14 29 21 12 2 (1)
Less: amounts included in
discontinued operations (81) (15) (13) 4 (2) (2) 15 (2) (2) 9 (4) (3)
Net periodic benefit costs $ 365 $ 247 $ 239 $141 $138 $129 $ 419 $ 445 $ 349 $210 $148 $144
(a)
(a)
Includes a credit of $21 million relating to the adoption of FSP 106-2 in 2004.