DELPHI 2014 Annual Report Download - page 80

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The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit
obligation for the U.S. and non-U.S. pension plans were:
Assumptions used to determine benefit obligations at December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2014 2013 2014 2013
Weighted-average discount rate................................................................................... 2.50% 3.00% 3.67% 4.58%
Weighted-average rate of increase in compensation levels......................................... N/A N/A 3.65% 3.85%
Assumptions used to determine net expense for years ended December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2014 2013 2012 2014 2013 2012
Weighted-average discount rate............................................... 3.00% 2.40% 3.30% 4.58% 4.41% 5.24%
Weighted-average rate of increase in compensation levels...... N/A N/A N/A 3.85% 3.50% 3.66%
Weighted-average expected long-term rate of return on plan
assets......................................................................................... N/A N/A N/A 6.35% 6.44% 6.43%
We select discount rates by analyzing the results of matching each plan’s projected benefit obligations with a portfolio of
high-quality fixed income investments rated AA- or higher by Standard and Poor’s.
Delphi does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary for 2014,
2013 or 2012. The primary funded non-U.S. plans are in the United Kingdom and Mexico. For the determination of 2014
expense, we assumed a long-term expected asset rate of return of approximately 6.25% and 7.50% for the United Kingdom and
Mexico, respectively. We evaluated input from local actuaries and asset managers, including consideration of recent fund
performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the United
Kingdom and Mexico are primarily conservative long-term, prospective rates. To determine the expected return on plan assets,
the market-related value of approximately 50% of our plan assets is actual fair value. The expected return on the remainder of
our plan assets is determined by applying the expected long-term rate of return on assets to a calculated market-related value of
these plan assets, which recognizes changes in the fair value of the plan assets in a systematic manner over five years.
Our pension expense for 2015 is determined at the December 31, 2014 measurement date. For purposes of analysis, the
following table highlights the sensitivity of our pension obligations and expense to changes in key assumptions:
Change in Assumption Impact on Pension Expense Impact on PBO
25 basis point (“bp”) decrease in discount rate................................................................. + $8 million + $102 million
25 bp increase in discount rate.......................................................................................... - $6 million - $95 million
25 bp decrease in long-term expected return on assets..................................................... + $3 million —
25 bp increase in long-term expected return on assets...................................................... - $3 million —
The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors
and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not
necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring
programs.
Based on information provided by our actuaries and asset managers, we believe that the assumptions used are reasonable;
however, changes in these assumptions could impact our financial position, results of operations or cash flows. Refer to Note
12. Pension Benefits to the audited consolidated financial statements included herein for additional information.
Accounts Receivable Allowance
Establishing valuation allowances for doubtful accounts requires the use of estimates and judgment in regard to the risk
exposure and ultimate realization. The allowance for doubtful accounts is established based upon analysis of trade receivables
for known collectability issues, including bankruptcies, and aging of receivables at the end of each period. Changes to our
assumptions could materially affect our recorded allowance.