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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Pension Benefits Retiree Health
2008 2007 2006 2005 2008 2007 2006 2005
Weighted-average assumptions used to determine net
periodic benefit cost for years ended December 31
Discount rate ............................................... 5.9% 5.3% 5.2% 5.6% 6.2% 5.8% 5.6% 5.8%
Expected return on plan assets ............................... 7.6 7.6 7.8 8.0 – (1) –(1) –(1) –(1)
Rate of compensation increase ............................... 4.1 4.1 3.9 4.0 – (2) –(2) –(2) –(2)
(1) Expected return on plan assets is not applicable to retiree health benefits as these plans are not funded.
(2) Rate of compensation increase is not applicable to retiree health benefits as compensation levels do not impact
earned benefits.
Assumed health care cost trend rates at December 31:
2007 2006
Health care cost trend rate assumed for next year ................................................... 10.4% 9.9%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) ....................... 5.0% 5.2%
Year that the rate reaches the ultimate trend rate ................................................... 2013 2011
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects (in millions):
One-percentage-point
increase One-percentage-point
decrease
Effect on total service and interest cost components ....................... $ 7 $ (5)
Effect on post-retirement benefit obligation .............................. 86 (73)
Note 15 – Income and Other Taxes
Income before income taxes for the three years ended December 31, 2007 were as follows (in millions):
2007 2006 2005
Domestic income ........................................................................ $ 667 $429 $386
Foreign income ......................................................................... 771 379 444
Income before income taxes ....................................................... $1,438 $808 $830
Provisions (benefits) for income taxes for the three years ended December 31, 2007 were as follows (in millions):
2007 2006 2005
Federal income taxes
Current ............................................................................. $ 30 $(448) $(94)
Deferred ............................................................................ 92 94 (59)
Foreign income taxes
Current ............................................................................. 144 50 95
Deferred ............................................................................ 120 (9) 37
State income taxes
Current ............................................................................. 2 11 9
Deferred ............................................................................ 12 14 7
Total .......................................................................... $400 $(288) $ (5)
Xerox Annual Report 2007 115