UPS 2006 Annual Report Download - page 78

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
agreements. We have the right to modify or terminate certain of these plans. These benefits have been provided
to certain retirees on a noncontributory basis; however, in many cases, retirees are required to contribute all or a
portion of the total cost of the coverage.
On December 31, 2006, we adopted the recognition and disclosure provisions of FAS 158. FAS 158
required us to recognize the funded status of our defined benefit pension and other postretirement plans in our
balance sheet with a corresponding adjustment to AOCI, net of tax. The adoption of FAS 158 did not affect our
operating results in the current period and will not have any effect in future periods. We have presented below
the incremental effects of adopting FAS 158 to our balance sheet for the individual line items impacted from this
adoption, as of December 31, 2006 (in millions).
Prior to Adopting
FAS 158
Effect of Adopting
FAS 158
As Reported under
FAS 158
Pension and Postretirement Benefit
Assets ............................. $4,681 $(2,637) $2,044
Intangible Assets, Net .................. 699 (11) 688
Other Current Liabilities ................ 1,336 73 1,409
Pension and Postretirement Benefit
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 2,114 634 2,748
Deferred Income Tax Liabilities .......... 3,787 (1,258) 2,529
Accumulated Other Comprehensive Loss . . . 108 2,097 2,205
Net Periodic Benefit Cost
Information about net periodic benefit cost for the pension and postretirement benefit plans is as follows (in
millions):
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International Pension
Benefits
2006 2005 2004 2006 2005 2004 2006 2005 2004
Net Periodic Cost:
Service cost ....................... $ 474 $374 $334 $102 $ 92 $ 91 $ 24 $ 14 $ 10
Interest cost ....................... 726 612 521 170 170 164 26 16 12
Expected return on assets ............. (1,106) (922) (800) (43) (38) (34) (22) (13) (9)
Amortization of:
Transition obligation ............ 3 3 6 ——————
Prior service cost ............... 36 37 37 (8) (7) — 1 1 —
Actuarial (gain) loss ............. 148 68 118 29 31 30 7 4 3
Settlements / curtailments ............ — — ———— 1——
Net periodic benefit cost ............. $ 281 $172 $216 $250 $248 $251 $ 37 $ 22 $ 16
Actuarial Assumptions
The table below provides the weighted-average actuarial assumptions used to determine the net periodic
benefit cost.
Pension Benefits
Postretirement
Medical Benefits
International
Pension Benefits
2006 2005 2004 2006 2005 2004 2006 2005 2004
Discount rate .... 5.75% 6.25% 6.25% 5.75% 6.25% 6.25% 4.93% 5.76% 5.92%
Rate of
compensation
increase . . . . . . . 4.00% 4.00% 4.00% N/A N/A N/A 3.94% 3.46% 2.88%
Expected return on
assets ........ 8.96% 8.96% 8.96% 9.00% 9.00% 9.00% 7.67% 7.68% 7.90%
F-18