Sears 2007 Annual Report Download - page 79

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
participants following retirement. The effect of this plan change, which was to reduce the projected benefit
obligation of the Sears domestic pension plan by approximately $80 million, has been recorded as a component
of purchase accounting.
In addition to providing pension benefits, Sears provides domestic and Canadian employees and retirees
certain medical benefits. These benefits provide access to medical plans, with Company subsidies for certain
eligible retirees. Certain domestic Sears’ retirees are also provided life insurance benefits. To the extent we share
the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of
retirement. Sears’ postretirement benefit plans are not funded. We have the right to modify or terminate these
plans.
Effective January 1, 2006, we eliminated our subsidization of retiree medical costs under the Sears’
domestic retiree medical plan for those Sears’ retirees who were under age 65 as of December 31, 2005. The
effect of this plan change, which was to reduce the projected benefit obligation associated with the plan by
approximately $174 million, has been recorded as a component of purchase accounting.
Changes in Accounting for Pensions and Postretirement Plans
In September 2006, the FASB issued SFAS No. 158, which became effective for us as of February 3, 2007,
and requires recognition of an asset or liability in the statement of financial position reflecting the funded status
of pension and other postretirement benefit plans, with current-year changes in the funded status recognized in
shareholders’ equity. SFAS No. 158 did not change the existing criteria for measurement of periodic benefit
costs, plan assets or benefit obligations. The following table summarizes the incremental effects of the initial
adoption of SFAS No. 158 on the consolidated balance sheet at February 3, 2007.
millions
Before
Application of
SFAS 158
SFAS 158
Adjustments
After Application
of SFAS 158
Other assets ............................................. $ 447 $ (50) $ 397
Total assets ............................................. 29,956 (50) 29,906
Other current liabilities .................................... 3,852 43 3,895
Pension and postretirement benefits .......................... 1,620 27 1,647
Minority interest and other liabilities ......................... 2,993 (195) 2,798
Total liabilities .......................................... 17,325 (125) 17,200
Accumulated other comprehensive income (loss) ............... (16) 75 59
Total shareholders’ equity ................................. 12,631 75 12,706
Sears Canada Curtailment Gain
In February 2007, Sears Canada announced amendments to its post-retirement programs including the
introduction of a defined contribution component to its pension plan and the discontinuation of retiree medical,
dental and life benefits for those Sears Canada associates who will not have achieved eligibility for such benefits
by December 31, 2008. The amendments to the post-retirement programs generated a curtailment gain and
reduction to the benefit plan obligation in the amount of $27 million during the fiscal year ended February 2,
2008.
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