Boeing 2008 Annual Report Download - page 64

As of December 31, 2008 and 2007, we had $499 million of indefinite-lived intangible assets related to
the Jeppesen and Aviall brand and trade names acquired in business combinations. We test these
intangibles for impairment by comparing their carrying value to current projections of discounted cash
flows attributable to the brand and trade names. Any excess carrying value over the amount of
discounted cash flows represents the amount of the impairment. A 10% decrease in the discounted
cash flows could result in an impairment charge of approximately $17 million.
Postretirement Plans
Substantially all our employees are covered by defined benefit pension plans. We also have other
postretirement benefits consisting principally of healthcare coverage for eligible retirees and qualifying
dependents. Accounting rules require an annual measurement of our projected obligations and plan
assets. These measurements require several assumptions, the most significant of which are the discount
rate, the expected long-term rate of asset return, and medical trend rate (rate of growth for medical
costs). Changes in assumptions can significantly affect our future annual expense and projected benefit
obligations. In addition, as a result of our adoption of SFAS 158, differences between actual and
expected returns on assets, changes in assumptions, and changes in plan provisions could significantly
increase or decrease Shareholders’ Equity (net of taxes) at future measurement dates. Effective for
December 31, 2008, SFAS 158 requires us to measure our plan assets and benefit obligations as of
December 31, our year-end. Previously, our annual measurement date was September 30.
We use a discount rate that is based on a point-in-time estimate as of our December 31 annual
measurement date. Changes in the discount rate will increase or decrease our recorded liabilities with
a corresponding adjustment to Shareholders’ Equity as of the measurement date. In the following
table, we show the sensitivity of our pension and other postretirement benefit plan liabilities and net
periodic cost to a 25 basis point change in the discount rate.
As of December 31, 2008 (in millions)
Change in discount rate
Increase 25 bps
Change in discount rate
Decrease 25 bps
Pension plans Dollars Dollars
Projected benefit obligation (pensions) (1,350) 1,599
Net periodic pension cost (164) 181
Other postretirement benefit plans
Accumulated postretirement benefit obligation (165) 180
Net periodic postretirement benefit cost (14) 14
Pension expense is also sensitive to changes in the expected long-term rate of asset return. A
decrease or increase of 25 basis points in the expected long-term rate of asset return would have
increased or decreased 2008 net periodic pension expense by $116 million. For 2009, we are reducing
our expected rate of return on pension plan assets by 25 basis points to 8.00% which will increase
2009 net periodic pension cost by approximately $100 million.
Differences between actual and expected returns can affect future year’s pension cost. The asset
balance used to calculate the expected return on pension plan assets is a calculated value that
recognizes changes in the fair value of assets over a five year period. Losses incurred on our pension
investments in 2008 will increase 2009 net periodic pension cost by approximately $450 million through
a combination of lower expected returns on assets and higher amortization of actuarial losses. Absent
a recovery of asset values or higher interest rates or higher contributions, net periodic pension
expense will increase further in future years.
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