Unilever 2002 Annual Report Download - page 96

Notes to the consolidated accounts 93
Unilever Group
Unilever Annual Report & Accounts and Form 20-F 2002
Financial Statements
17 Pensions and similar obligations continued
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Other post Other post Other post
Key Key Key retirement retirement retirement
Pension plans Pension plans Pension plans benefit plans benefit plans benefit plans
2002 2001 2000 2002 2001 2000
Weighted-average assumptions as at
31 December
Discount rate 5.70 6.00 6.25 6.50 7.25 7.50
Expected return on plan assets 6.90 7.75 7.25 n/a n/a n/a
Salary increases 3.60 3.75 3.75 4.30 4.50 4.50
Pension increases 2.20 2.50 2.50 n/a n/a n/a
The valuations of other benefit plans typically assume that medical cost inflation will fall from its current level (assumed to be approximately
10% in 2003) over the next few years and reach a constant level of 4.9% (2001: 5%; 2000: 5%) within five years.
million million million million million million
Other post Other post Other post
Key Key Key retirement retirement retirement
Pension plans Pension plans Pension plans benefit plans benefit plans benefit plans
2002 2001 2000 2002 2001 2000
Components of net periodic benefit cost
Service cost (gross) 324 253 231 20 20 16
Interest cost 864 737 698 78 83 64
Expected return on plan assets (1 189) (1 007) (932) –––
Expected employee contributions (9) (1) – –––
Amortisation of prior service cost 33 24 26 –––
Amortisation of transition (asset) (63) (63) (66) –––
Amortisation of actuarial loss/(gain) (45) (81) (58) (6) (2) (2)
Total before SFAS 88 events (85) (138) (101) 92 101 78
Adjustments for SFAS 88 events (118) 43 19 (23) (2) (1)
Net periodic benefit cost (203) (95) (82) 69 99 77
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were 11 015 million, 10 188 million, and 7 334 million respectively, as of 31 December
2002 and 2171 million, 2 035 million, and 1 308 million respectively, as of 31 December 2001.
The Group also maintains a number of smaller defined benefit plans. Approximately 1 129 million (2001: 1 685 million) is provided for
on their behalf in the Group balance sheet. In 2002, 158 million (2001: 202 million; 2000: 151 million) was charged in the accounts.
These amounts would not have been materially different under SFAS 87.
In addition to the special termination benefits included in the table above, during 2002, the Group also charged 96 million
(2001: 49 million; 2000: 56 million) in respect of pension or similar obligations arising on terminations of employment.
Expected return on plan assets
Beginning 1 January 2002 the Group changed its method for determining the expected return on plan assets under US GAAP by changing
the value placed on the plan assets. The value now used is the fair value at the balance sheet date instead of a market related value
calculated by smoothing asset gains and losses over a five year period. Management believe that using the actual fair value at the balance
sheet date provides a better representation of the financial position of the Group. The impact of this change in methodology on reported
results is given on pages 114 and 121.
Post-retirement health care benefits
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point
change in assumed health care cost trend rates would have the following effects:
million million
1% point 1% point
increase decrease
Effect on total of service and interest cost components 7(6)
Effect on post-retirement benefit obligations 68 (62)