Volvo 2008 Annual Report Download - page 109

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105
Financial information 2008
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 pen-
sion foundations. Costs and the obligations at the end of period for
defi ned benefi t plans are calculated based on actuarial assumptions
and measured on a discounted basis. The Volvo Group defi ned bene-
fi 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 reports the difference between the
obligations and the plan assets adjusted for unrecognized 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. According to IAS 19, actuarial assumptions such
as the discount rate shall be based on market expectations at the bal-
ance sheet date for the period over which the obligations are to be
settled and refl ect the time-value of money but not the actuarial or
investment risk. The market situation at the end of the fi nancial year
2008 makes discount rate assumptions especially diffi cult to deter-
mine.
Summary of provision for
post-employment benefi ts 2007 2008
Obligations 35,984 41,171
Fair value of plan assets 25,768 22,105
Funded status (10,216) (19,066)
Unrecognized actuarial
(gains) and losses 2,220 9,320
Unrecognized past service costs 353 482
Net provisions for post-
employment benefi ts (7,643) (9,264)
Assumptions applied for
actuarial calculations, % December 31,
2007
December 31,
2008
Sweden
Discount rate 4.50 4.50
Expected return on plan assets16.00 6.00
Expected salary increases 3.20 3.50
Infl ation 2.00 2.00
United States
Discount rate 5.75–6.25 5.75–6.25
Expected return on plan assets17.65 7.65
Expected salary increases 3.50 3.50
Infl ation 2.50 2.50
France
Discount rate 5.25 5.25
Expected salary increases 3.00 3.00
Infl ation 2.00 2.00
Great Britain
Discount rate 5.75 5.75
Expected return on plan assets15.30–6.10 4.60-5.50
Expected salary increases 4.20–4.90 3.60-4.90
Infl ation 3.40 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.