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Note 24 Provisions for post-employment benefits
Post-employment benefits, such as pensions, healthcare and other
benefits are mainly settled by means of regular payments to
in dependent authorities or bodies that assume pension obligations
and administer pensions through defined contribution plans. The
remaining post-employment benefits are defined benefit 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 the
period for defined benefit plans are calculated based on actuarial
assumptions and measured on a discounted basis. The Volvo Group
defined benefits plans relate mainly to subsidiaries in the US and
comprise both pensions and other benefits, such as healthcare. Other
large-scale defined benefit plans apply for salaried employees in
Sweden (mainly through the Swedish ITP pension plan) and employ-
ees in France and Great Britain. See note 1 for further information
about the accounting principles.
The following tables disclose information about defined benefit
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
balance sheet date for the period over which the obligations are to be
settled and reflect the time-value of money but not the actuarial or
investment risk.
Summary of provision for
post-employment benefits 2008 2009
Obligations 41,171 38,070
Fair value of plan assets 22,105 22,610
Funded status (19,066) (15,460)
Unrecognized actuarial
(gains) and losses 9,320 9,155
Unrecognized past service costs 482 303
Net provisions for post-
employment benefits (9,264) (6,002)
Assumptions applied for
actuarial calculations, % December 31,
2008 December 31,
2009
Sweden
Discount rate 4.50 4.00
Expected return on plan assets16.00 6.00
Expected salary increases 3.50 3.00
Inflation 2.00 1.50
United States
Discount rate 5.75–6.25 4.00–5.75
Expected return on plan assets17.65 7.65
Expected salary increases 3.50 3.00
Inflation 2.50 2.00
France
Discount rate 5.25 4.50
Expected salary increases 3.00 1.00–3.00
Inflation 2.00 1.50
Great Britain
Discount rate 5.75 5.50
Expected return on plan assets14.60–5.50 5.00–6.30
Expected salary increases 3.60–4.90 3.50
Inflation 3.00 3.00
1 Applicable for the following accounting period. These assumptions reflect
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.
93