Tyson Foods 2015 Annual Report Download - page 40
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Judgments and Uncertainties
Effect if Actual Results Differ From
Assumptions
Defined benefit pension plans
Wesponsorninedefinedbenefitpensionplansthat
provideretirementbenefitstocertainemployees.
Wealsoparticipateinamulti-employerplanthat
providesdefinedbenefitstocertainemployees
coveredbycollectivebargainingagreements.Such
plansareusuallyadministeredbyaboardof
trusteescomposedofthemanagementofthe
participatingcompaniesandlaborrepresentatives.
Weuseindependentthird-partyactuariestoassist
usindeterminingourpensionobligationsandnet
periodicbenefitcost.Weandtheactuariesreview
assumptionsthatincludeestimatesofthepresent
valueoftheprojectedfuturepensionpaymenttoall
planparticipants,takingintoconsiderationthe
likelihoodofpotentialfutureeventssuchassalary
increasesanddemographicexperience.We
accumulateandamortizetheeffectofactuarial
gainsandlossesoverfutureperiods.
Netperiodicbenefitcostsforthedefinedbenefit
pensionplanswere$16millioninfiscal2015.The
projectedbenefitobligationwas$1,986millionat
theendoffiscal2015.Unrecognizedactuarial
losseswere$100millionattheendoffiscal2015.
Wecurrentlyexpectnetperiodicbenefitcostfor
fiscal2016tobeapproximately$35million.
Planassetsarecurrentlycomprisedof
approximately85%fixedincomesecuritiesand
11%equitysecurities.Fixedincomesecuritiescan
include,butarenotlimitedto,directbond
investmentsandpooledorindirectbond
investments.Otherinvestmentsmayinclude,but
arenotlimitedto,internationalanddomestic
equities,realestate,commoditiesandprivate
equity.
Weexpecttocontributeapproximately$63million
ofcashtoourpensionplansinfiscal2016.The
exactamountofcashcontributionsmadeto
pensionplansinanyyearisdependentupona
numberoffactors,includingminimumfunding
requirements.
Ourdefinedbenefitpensionplanscontain
uncertaintiesduetoassumptionsrequiredand
judgmentsused.
Thekeyassumptionsusedindevelopingthe
requiredestimatesincludesuchfactorsasdiscount
rates,expectedreturnsonplanassets,retirement
rates,andmortality.
Theseassumptionscanhaveamaterialimpactupon
thefundedstatusandthenetperiodicbenefitcost.
Thediscountratesweredeterminedusingacash
flowmatchingtechniquewherebytheratesofayield
curve,developedfromhigh-qualitydebtsecurities,
wereappliedtothebenefitobligationstodetermine
theappropriatediscountrate.Indeterminingthe
long-termrateofreturnonplanassets,wefirst
examinedhistoricalratesofreturnforthevarious
assetclasseswithintheplans.Wethendetermineda
long-termprojectedrate-of-returnbasedonexpected
returns.Investment,managementandotherfeespaid
outofplanassetsarefactoredintothedetermination
ofassetreturnassumptions.Retirementratesare
basedprimarilyonactualplanexperience,while
standardactuarialtablesareusedtoestimate
mortality.
Itisreasonablylikelythatchangesinexternal
factorswillresultinchangestotheassumptionsused
tomeasurepensionobligationsandnetperiodic
benefitcostinfutureperiods.
Therisksofparticipatinginmultiemployerplansare
differentfromsingle-employerplans.Thenet
pensioncostofthemultiemployerplansisequalto
theannualcontributiondeterminedinaccordance
withtheprovisionsofnegotiatedlaborcontracts.
Assetscontributedtosuchplansarenotsegregated
orotherwiserestrictedtoprovidebenefitsonlyto
ouremployees.Thefuturecostoftheseplansis
dependentonanumberoffactorsincludingthe
fundedstatusoftheplansandtheabilityoftheother
participatingcompaniestomeetongoingfunding
obligations.
Wehavenotmadeanymaterialchangesinthe
accountingmethodologyusedtoestablishour
pensionobligationsandnetperiodicbenefitcost
duringthepastthreefiscalyears.
Wedonotbelievethereisareasonablelikelihood
therewillbeamaterialchangeintheestimatesor
assumptionsusedtocalculateourpension
obligationsandnetperiodicbenefitcost.However,
ifactualresultsarenotconsistentwithourestimates
orassumptions,theyareaccumulatedandamortized
overfutureperiodsand,thereforegenerallyaffect
thenetperiodicbenefitcostinfutureperiods.
A1%increaseinthediscountrateatOctober3,
2015,wouldresultinadecreaseintheprojected
benefitobligationandnetperiodicbenefitcostof
approximately$240millionand$5million,
respectively.A1%decreaseinthediscountrateat
October3,2015,wouldresultinanincreaseinthe
projectedbenefitobligationandnetperiodicbenefit
costofapproximately$298millionand$11million,
respectively.
A1%changeinthereturnonplanassetsatOctober
3,2015,wouldimpactthenetperiodicbenefitcost
byapproximately$16million.
Thesensitivitiesreflecttheimpactofchangingone
assumptionatatimewiththeremaining
assumptionsheldconstant.Economicfactorsand
conditionsoftenaffectmultipleassumptions
simultaneouslyandthattheeffectofchangesin
assumptionsarenotnecessarilylinear.
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