Volvo 1998 Annual Report Download - page 81

79
Projected benefit obligation, accumulated obligation and
fair value of plan assets for the pension plans with accu-
mulated benefit obligation in excess of plan asset were
147, 171 and 48 at December 1998 and 67, 111 and 0
at December 1997.
Other post-retirement benefit plans
In addition to its pension plans, the Company and certain
of its subsidiaries and associated companies sponsor
unfunded plans, mainly in the U.S., to provide health care
and other benefits for retired employees who meet min-
imum age and service requirements. The plans are gener-
ally contributory, with retiree contributions being adjusted
periodically, and contain other cost-sharing features such
as deductibles and coinsurance. The estimated cost for
health-care benefits is recognized on an accrual basis in
accordance with the requirements of SFAS 106,
"Employers’ Accounting for Postretirement Benefits
Other than Pensions."
The net post-retirement benefit expenses include the following components:
1996 1997 1998
Benefits earned during the year 44 42 46
Interest expense 87 97 77
Reported insurance profits and losses (2) (4) 12
Costs attributable to restructuring 25 1 –
Net post-retirement benefit expenses 154 136 135
A change of one percentage point per year in health-
care costs would change the accumulated post-retire-
ment benefit obligation as of December 31, 1997 by
approximately 189, and the net postretirement benefit
expense by approximately 20. In 1998, an increase of
1% would increase the accumulated value of obligations
by about 189 and increase costs by about 19; a decrease
of 1% would reduce the accumulated value of obligations
by about 156 and cut costs by about 18.
Calculations made as of December 31, 1998 show an
annual increase of 9.5% in the weighted average per
capita costs of covered healt-care benefits; it is assumed
that the percentage will decline gradually to 6.0% in
2005 and then remain at that level.
The discount rate used in determining the accumulat-
ed postretirement benefit obligation as of December 31,
1998 was 6.75 % (7.0; 7.5).
Supplementary U.S. GAAP information
Classification. In accordance with SFAS 95, “cash and
cash equivalents” comprise only funds with a maturity of
three months or less. Some of Volvo’s liquid funds (see
Notes 19 and 20) do not meet this requirement.
Consequently, in accordance with SFAS 95, changes in
this portion of liquid funds should be reported as invest-
ment activities.
Cash flow analysis. Actual interest and taxes paid
during 1998 amounted to 3,897 (3,943; 3,944) and
2,485 (1,454; 2,569).
Sweden United States
Pension benefits Pension benefits Other benefits
Fair value of plan assets 11997 1998 1997 1998 1997 1998
Fair value of plan assets at beginning of year 4,287 4,859 1,408 1 ,951 – –
Lump sums not yet paid at beginning of year – – 132 (3) – –
Market value adjustment – – (16) – – –
Actual return on plan assets 203 348 336 272 – –
Employer contribution 369 312 146 77 – –
Foreign exchange translation – – 205 48 – –
Benefits paid – – (260) (145) – –
Fair value of plan assets at end of year 4,859 5,519 1 ,951 2 ,200 – –
Sweden United States
Pension benefits Pension benefits Other benefits
Funded status 1997 1998 1997 1998 1997 1998
Funded status 591 (37) (34) (180) (1,154) (1,238)
Unrecognized actuarial loss (gain) 629 1,028 50 87 (107) (136)
Unrecognized transition (asset) obligation (166) (141) – – 288 276
Unrecognized prior service cost – 608 44 177 – –
Adjustment to minimum liability (631) – – (3) – –
Net amount recognized 423 1 458 60 81 (973) (1,098)
1 Assets in pension funds, estimated at fair value.