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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 inde-
pendent 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 obli-
gations 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-benefit
plans relate mainly to subsidiaries in the U.S. 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 employees 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.
Summary of provision for
post-employment benefits 2009 2010
Obligations 38,070 36,121
Fair value of plan assets 22,610 22,954
Funded status (15,460) (13,167)
Unrecognized actuarial (gains)
and losses 9,155 6,995
Unrecognized past service costs 303 310
Net provisions for post-
employment benefits (6,002) (5,862)
Assumptions applied for
actuarial calculations, % December 31,
2009
December 31,
2010
Sweden  
Discount rate14.00 4.75
Expected return on plan assets26.00 6.00
Expected salary increases 3.00 3.00
Inflation 1.50 1.50
United States
Discount rate1, 3 4.00–5.75 3.25–5.50
Expected return on plan assets27.65 7.65
Expected salary increases 3.00 3.00
Inflation 2.00 2.00
France
Discount rate14.50 4.50
Expected salary increases 1.00–3.00 1.00-3.00
Inflation 1.50 1.50
Great Britain
Discount rate15.50 5.40-5.50
Expected return on plan assets25.00–6.30 5.00
Expected salary increases 3.50 3.70–3.85
Inflation 3.00 3.20
1 The discount rate for each country is determined by reference to market
yields on high-quality corporate bonds. In countries where there is no deep
market in such bonds, the market yields on government bonds are used. The
discount rate for the Swedish pension obligation 2010 is determined by ref-
erence to mortgage bonds.
2 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.
3 For all plans except one the discont rate used is within the range 4.75–5.50%
(5.00–5.75).
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