Sara Lee 2011 Annual Report Download - page 110

NOTES TO FINANCIAL STATEMENTS
The funded status of defined benefit pension plans at the
respective year-ends was as follows:
U.S. Plans International Plans
In millions 2011 2010 2011 2010 Projected benefit obligation Beginning of year $1,372 $1,172 $2,963 $2,689 Service cost 7173537 Interest cost 73 74 161 166 Plan amendments/other 8 – (24) – Benefits paid (63) (63) (151) (143) Participant contributions ––23 Actuarial (gain) loss (27) 207 (169) 500 Divestitures – – (8) – Settlement/curtailment – (35) (6) (10) Foreign exchange – – 310 (279) End of year $1,370 $1,372 $3,113 $2,963 Fair value of plan assets Beginning of year $1,127 $÷«857 $2,760 $2,652 Actual return on plan assets 179 177 241 397 Employer contributions 6 156 118 117 Participant contributions ––23 Benefits paid (63) (63) (151) (143) Divestitures – – (5) – Settlement –––(3) Foreign exchange – – 307 (263) End of year 1,249 1,127 3,272 2,760 Funded status $÷(121) $÷(245) $÷«159 $÷(203) Amounts recognized on the
consolidated balance sheets Noncurrent asset $÷÷÷«7 $÷÷÷«– $÷«258 $÷÷÷«7 Accrued liabilities (6) (5) (3) (1) Pension obligation (122) (240) (96) (209)
Net asset (liability) recognized $««(121) $÷(245) $÷«159 $÷(203) Amounts recognized in
accumulated other
comprehensive income Unamortized prior service cost $÷÷÷«7 $÷÷÷«4 $÷÷«20 $÷÷«45 Unamortized actuarial loss, net 215 353 500 679
Total $÷«222 $÷«357 $÷«520 $÷«724
The underfunded status of the U.S. plans declined from
$245 million in 2010 to $121 million in 2011, due to a $122 mil- lion increase in plan assets. The increase in plan assets was the result of the strong investment performance during the year.
The funded status of the international plans improved to an
overfunded position of $159 million from a $203 million underfunded position in the prior year. The improvement was the result of actuar- ial gains, a strong investment performance and currency changes as a $512 million increase in plan assets was only partially offset by a $150 million increase in the projected benefit obligation.
In 2010, the corporation also recognized a curtailment loss of
$10 million associated with its household and body care businesses as a result of the expected decline in expected years of future service. This amount is being reported as part of the results of discontinued operations. See Note 5 – “Discontinued Operations” for additional information. The corporation also recognized a settlement loss of $2 million in 2009.
The net periodic benefit cost associated with the North American
fresh bakery operations are recognized in discontinued operations as the buyer is expected to assume all of the pension liabilities associated with those businesses.
Although the results of the household and body care businesses
are classified as discontinued operations, the corporation has retained a significant portion of the pension and postretirement medical obligations related to these businesses. However, the corpo- ration will no longer incur service cost for the participants in these plans after these businesses are sold and this cost component is being recognized in discontinued operations, while the remainder of the net periodic benefit cost associated with these businesses is recognized in continuing operations.
The net periodic benefit cost of the corporation’s U.S. defined
benefit pension plans in 2011 was $44 million lower than in 2010. The decrease was primarily due to an increase in expected return on assets due to an increase in plan assets resulting from improved assets returns as well as a $200 million contribution into the U.S. plans in the fourth quarter of 2010. The benefit costs were also favor- ably impacted by a reduction in service cost and amortization due to the freezing of the U.S salaried pension plan, which not only reduced the amount of actuarial loss to be amortized but also increased the period of time over which the amount is to being amortized.
The net periodic benefit cost of the corporation’s U. S. defined
benefit pension plans in 2010 was $34 million higher than in 2009. The increase was primarily due to a $34 million increase in amorti- zation of net actuarial losses due to net actuarial losses in the prior year, which increased the amount subject to amortization; as well as the increase in interest expense due to the year-over-year change in projected benefit obligations.
The net periodic benefit cost of the corporation’s international
defined benefit pension plans in 2011 was $19 million lower than in 2010 due to a $22 million improvement in the expected return on assets partially offset by an increase in the amortization of actuarial losses resulting from actuarial losses in the prior year due to a decline in the discount rate. The 2010 expense was $6 million higher than the 2009 due to a decline in the expected return on assets.
The amount of prior service cost and net actuarial loss that is
expected to be amortized from accumulated other comprehensive income and reported as a component of net periodic benefit cost in continuing operations during 2012 is $1 million and $2 million, respectively, for U.S. plans and $3 million and $9 million, respec- tively, for international plans.