National Oilwell Varco 2003 Annual Report Download - page 44

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43
On December 8, 2003, the President signed into law the Medicare Prescription Drug, Improvement
and Modernization Act of 2003. This Act introduces a Medicare prescription drug benefit as well as a
federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least
actuarially equivalent to the Medicare benefit. As allowed by FASB Staff Position 106-1, Accounting
and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, we have elected to defer recognizing the effects of the Act on our
accumulated postretirement benefit obligation and net periodic postretirement benefit cost in the
consolidated financial statements and notes to consolidated financial statements until authoritative
guidance on the accounting for the federal subsidy is issued. The FASB plans to issue authoritative
guidance on the accounting for subsidies later in 2004. When the authoritative guidance is issued, we
may be required to change previously reported information.
Fiscal Period January 1 to December 31 FYE 2003 FYE 2002
Disclosure Assumptions
For determining benefit obligations at year-end:
Discount rate 6.25% 6.50%
Salary increase 5.00% 5.00%
For determining net periodic cost for year:
Discount rate 6.50% 6.87%
Salary increase 5.00% 5.00%
Expected return on assets n/a n/a
Measurement date 9/30/2003 9/30/2002
Effect of 1% annual increase in health care cost trend rate:
Aggregate of the Service Cost and Interest Cost - Dollar change 43$ 47$
APBO - Dollar change 729$ 769$
Effect of 1% annual decrease in health care cost trend rate:
Aggregate of the Service Cost and Interest Cost - Dollar change (36)$ (40)$
APBO - Dollar change (622) (656)
Defined Benefit Healthcare Plans