Kimberly-Clark 2010 Annual Report Download - page 31

PART II
(Continued)
product categories. Estimates of trade promotion liabilities for promotional program costs incurred, but unpaid,
are generally based on estimates of the quantity of customer sales, timing of promotional activities and forecasted
costs for activities within the promotional programs. Settlement of these liabilities sometimes occurs in periods
subsequent to the date of the promotion activity. Trade promotion programs include introductory marketing
funds such as slotting fees, cooperative marketing programs, temporary price reductions, favorable end-of-aisle
or in-store product displays and other activities conducted by our customers to promote our products. Promotion
accruals as of December 31, 2010 and 2009 were $352 million and $364 million, respectively. Rebate accruals as
of December 31, 2010 and 2009 were $353 million and $365 million, respectively.
Pension and Other Postretirement Benefits
Pension Benefits
We have defined benefit pension plans in North America and the United Kingdom (the “Principal Plans”)
and/or defined contribution retirement plans covering substantially all regular employees. Certain other
subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering
substantially all regular employees. The funding policy for the qualified defined benefit plans in North America
and the defined benefit plans in the United Kingdom is to contribute assets at least equal to regulatory minimum
requirements. Funding for the remaining defined benefit plans outside the U.S. is based on legal requirements,
tax considerations, investment opportunities, and customary business practices in these countries. Nonqualified
U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not
funded.
Consolidated pension expense for defined benefit pension plans was $133 million in 2010 compared with
$251 million for 2009. Pension expense in 2009 included a curtailment charge of about $21 million related to the
freeze of our U.S. defined benefit pension plans. Pension expense is calculated based upon a number of actuarial
assumptions applied to each of the defined benefit plans. The weighted-average expected long-term rate of return
on pension fund assets used to calculate pension expense was 7.96 percent in 2010 compared with 8.17 percent in
2009 and will be 7.14 percent in 2011. The expected long-term rate of return is evaluated on an annual basis. In
setting this assumption, we consider a number of factors including projected future returns by asset class, current
asset allocation and historical long-term market performance.
The weighted-average expected long-term rate of return on pension fund assets used to calculate pension
expense for the Principal Plans was 8.19 percent in 2010 compared with 8.47 percent in 2009 and will be
7.35 percent in 2011. The expected long-term rate of return on the assets in the Principal Plans is based on an
asset allocation assumption of about 60 percent with equity managers, with expected long-term rates of return
ranging from 9 to 10 percent, and about 40 percent with fixed income managers, with an expected long-term rate
of return ranging from 5 to 6 percent. Actual asset allocation is regularly reviewed and it is periodically
rebalanced to the targeted allocation when considered appropriate. Long-term rate of return assumptions continue
to be evaluated at least annually and are adjusted as necessary.
Pension expense is determined using the fair value of assets rather than a calculated value that averages
gains and losses (“Calculated Value”) over a period of years. Investment gains or losses represent the difference
between the expected return calculated using the fair value of assets and the actual return based on the fair value
of assets. The variance between actual and expected gains and losses on pension assets is recognized in pension
expense more rapidly than it would be if a Calculated Value was used for plan assets. As of December 31, 2010,
the Principal Plans had cumulative unrecognized investment losses and other actuarial losses of approximately
$2.2 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual
investment returns that exceed the assumed investment returns, or (ii) other factors, including reduced pension
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