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36
flows of the business caused by the continued decline
of the overall Brazilian economy.
In the fourth quarter of 2014, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its Asia Industrial Packaging business using
the discounted future cash flows and determined that
all of the goodwill in this business, totaling $100 million,
should be written off. The decline in the fair value of the
Asia Industrial Packaging business and resulting
impairment charge was due to a change in the strategic
outlook for the business.
In the fourth quarter of 2013, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its India Papers business using the
discounted future cash flows and determined that all of
the goodwill of this business, totaling $112 million,
should be written off. The decline in the fair value of the
India Papers reporting unit and resulting impairment
charge was due to a change in the strategic outlook for
the India Papers operations.
Also in the fourth quarter of 2013, the Company
calculated the estimated fair value of its xpedx business
using the discounted future cash flows and wrote off all
of the goodwill of its xpedx business, totaling $400
million. The decline in fair value of the xpedx reporting
unit and resulting impairment charge was due to a
significant decline in earnings and a change in the
strategic outlook for the xpedx operations.
As a result, during the fourth quarter of 2013, the
Company recorded a total goodwill impairment charge
of $512 million ($485 million after taxes and a gain of
$3 million related to noncontrolling interest),
representing all of the recorded goodwill of the xpedx
business and the India Papers business.
Also during 2013, the Company recorded a pre-tax
charge of $15 million ($7 million after taxes and
noncontrolling interest) for the impairment of a trade
name intangible asset related to our India Papers
business.
Pension and Postretirement Benefit Obligations
The charges recorded for pension and other
postretirement benefit obligations are determined
annually in conjunction with International Paper’s
consulting actuary, and are dependent upon various
assumptions including the expected long-term rate of
return on plan assets, discount rates, projected future
compensation increases, health care cost trend rates
and mortality rates.
The calculations of pension and postretirement benefit
obligations and expenses require decisions about a
number of key assumptions that can significantly affect
liability and expense amounts, including the expected
long-term rate of return on plan assets, the discount
rate used to calculate plan liabilities, the projected rate
of future compensation increases and health care cost
trend rates.
Benefit obligations and fair values of plan assets as of
December 31, 2015, for International Paper’s pension
and postretirement plans were as follows:
In millions Benefit
Obligation
Fair Value of
Plan Assets
U.S. qualified pension $ 14,092 $ 10,923
U.S. nonqualified pension 347 —
U.S. postretirement 275 —
Non-U.S. pension 204 155
Non-U.S. postretirement 45 —
The table below shows assumptions used by
International Paper to calculate U.S. pension
obligations for the years shown:
2015 2014 2013
Discount rate 4.40% 4.10% 4.90%
Rate of compensation
increase 3.75% 3.75% 3.75%
Additionally, health care cost trend rates used in the
calculation of U.S. postretirement obligations for the
years shown were:
2015 2014
Health care cost trend rate assumed for
next year 7.00% 7.00%
Rate that the cost trend rate gradually
declines to 5.00% 5.00%
Year that the rate reaches the rate it is
assumed to remain 2022 2022
International Paper determines these actuarial
assumptions, after consultation with our actuaries, on
December 31 of each year to calculate liability
information as of that date and pension and
postretirement expense for the following year. The
expected long-term rate of return on plan assets is
based on projected rates of return for current and
planned asset classes in the plan’s investment portfolio.
The discount rate assumption was determined based
on a hypothetical settlement portfolio selected from a
universe of high quality corporate bonds.
The expected long-term rate of return on U.S. pension
plan assets used to determine net periodic cost for the
year ended December 31, 2015 was 7.75%.
Increasing (decreasing) the expected long-term rate of
return on U.S. plan assets by an additional 0.25% would
decrease (increase) 2016 pension expense by