Volvo 2004 Annual Report Download - page 77

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United Great US
Sweden States France Britain Other Other
Net provisions for post-employment benefits Pensions Pensions Pensions Pensions benefits plans Total
Funded status at December 31, 2003 (1,740) (3,980) (2,333) (732) (6,167) (533) (15,485)
Unrecognized actuarial (gains) and losses (307) 157 4 (76) 619 3 400
Unrecognized past service costs – 8 (3) 2 (14) (2) (9)
Net provisions for post-employment
benefits at December 31, 2003 (2,047) (3,815) (2,332) (806) (5,562) (532) (15,094)
whereof reported as
Prepaid pensions and other assets 3 132 3 – 1 55 194
Provisions for post-employment benefits (2,050) (3,947) (2,335) (806) (5,563) (587) (15,288)
Net provisions post-employment benefits
Funded status at December 31, 2004 (2,158) (3,358) (2,079) (894) (5,876) (1,142) (15,507)
Unrecognized actuarial (gains) and losses 145 673 73 73 785 57 1,806
Unrecognized past service costs – 2 (66) (3) (9) (7) (83)
Net provisions for post-employment benefits
at December 31, 2004 (2,013) (2,683) (2,072) (824) (5,100) (1,092) (13,784)
whereof reported as
Prepaid pensions and other assets 2 166 0 0 133 70 371
Provisions for post-employment benefits (2,015) (2,849) (2,072) (824) (5,233) (1,162) (14,155)
Volvo’s pension foundation in Sweden was formed in 1996 to secure
obligations relating to retirement pensions for salaried employees in
Sweden in accordance with the ITP plan (a Swedish individual pen-
sion plan). Plan assets amounting to 2,456 was contributed to the
foundation at its formation, corresponding to the value of the pension
obligations at that time. Since its formation, net contributions of 232
have been made to the foundation. The plan assets in Volvo’s Swedish
pension foundation are invested in Swedish and foreign shares and
mutual funds, and in interest-bearing securities, in accordance with a
distribution that is determined by the foundation’s Board of Directors.
During 2002, the fair value of the foundation’s plan assets decreased
as a result of the downturn on the stock market and provisions to
cover pensions obligations in excess of the fair value of plan assets
was made with an amount of 807 among the Group’s pension costs.
According to RR 29, Employee Benefits, which has been applied as
from 2003, Group pension costs are affected by an expected return
on the plan assets, and discrepancies between the expected return
and the actual return are treated as actuarial gains or losses. At
December 31, 2004, the fair value of the foundation’s plan assets
amounted to 4,079 (3,592), of which 55% (47%) was invested in
shares or mutual funds. At the same date, retirement pension obli-
gations attributable to the ITP plan amounted to 5,366 (4,422).
Swedish companies can secure new pension obligations through bal-
ance sheet provisions or pension fund contributions. Furthermore, a
credit insurance must be taken out for the value of the obligations. In
addition to benefits relating to retirement pensions, the ITP plan also
includes, for example, a collective family pension, which Volvo finances
through insurance with the Alecta insurance company. According to
an interpretation from the Swedish Financial Accounting Standards
Council’s interpretations committee, this is a multi-employer defined
benefit plan. For fiscal year 2004, Volvo did not have access to infor-
mation from Alecta that would have enabled this plan to be reported
as a defined benefit plan. Accordingly, the plan has been reported as
a defined contribution plan.
Volvo’s subsidiaries in the United States mainly secure their pen-
sion obligations through transfer of funds to pension plans. At the
end of 2004, the total value of pension obligations secured by pen-
sion plans of this type amounted to 10,287 (10,433). At the same
point in time, the total value of the plan assets in these plans amounted
to 7,163 (6,727), of which 64% (63%) was invested in shares or
mutual funds. The regulations for securing pension obligations stipu-
late certain minimum levels concerning the ratio between the value of
the plan assets and the value of the obligations. During 2004, Volvo
contributed 1,153 (843) to the pension plans in order to comply with
these regulations.