Volvo 2006 Annual Report Download - page 123

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Financial information 2006 119
Note 24 Provisions for post-employment benefi ts
Post-employment benefi ts, such as pensions, healthcare and other
benefi ts are mainly settled by means of regular payments to inde-
pendent authorities or bodies that assume pension obligations and
administer pensions through defi ned contribution plans. The remain-
ing post-employment benefi ts are defi ned benefi t plans; that is, the
obligations remain within the Volvo Group or are secured by own
pension foundations. Costs and the obligations at the end of period
for defi ned benefi t plans are calculated based on actuarial assump-
tions and measured on a discounted basis. The Volvo Group defi ned
benefi ts plans relate mainly to subsidiaries in the US and comprise
both pensions and other benefi ts, such as healthcare. Other large-
scale defi ned benefi t plans apply for salaried employees in Sweden
(mainly through the Swedish ITP pension plan) and employees in
France and Great Britain. See note 1 for further information about
the accounting principles.
The following tables disclose information about defi ned benefi t
plans in the Volvo Group. Volvo report the difference between the
obligations and the plan assets adjusted for actuarial gains and
losses in the balance sheet. The information refers to assumptions
applied for actuarial calculations, periodical costs and the value of
obligations and plan assets at year-end. The tables also include
reconciliation of obligations and plan assets during the year and the
difference between fair values and carrying amounts reported on
the balance sheet date.
Assumptions applied for 2004 2005 2006
actuarial calculations Dec 31 Dec 31 Dec 31
Sweden
Discount rate 5.00 4.00 4.00
Expected return on plan assets
1 6.00 6.00 6.00
Expected salary increases 3.20 3.20 3.20
Infl ation 2.00 1.50 1.50
United States
Discount rate 5.75 5.75 5.50
Expected return on plan assets
1 7.65 7.65 7.65
Expected salary increases 3.50 3.50 3.50
Infl ation 2.50 2.50 2.50
France
Discount rate 4.75 4.00 4.25
Expected salary increases 3.00 3.00 3.00
Infl ation 2.00 2.00 2.00
Great Britain
Discount rate 5.25 4.80 5.00
Expected return on plan assets
1 6.25 5.20–6.50 5.00–5.80
Expected salary increases 3.50 3.80–4.00 4.00–4.60
Infl ation 2.50 2.75 3.00
1 Applicable for the following accounting period. These assumptions refl ect
the expected long-term return rate on plan assets, based upon historical
yield rates for different categories of investments and weighted in accord-
ance with the foundation’s investment policy. The expected return has been
calculated net of administrative expenses and applicable taxes.
Summary of provision
for post-employment benefi ts 2004 2005 2006
Obligations 30,646 36,521 34,740
Fair value of plan assets 15,139 22,278 25,227
Funded status (15,507) (14,243) (9,513)
Unrecognized actuarial (gains) and losses 1,258 2,867 2,958
Unrecognized past service costs (83) (86) (96)
Net provisions for post-
employment benefi ts (14,332) (11,462) (6,651)