Unilever 2003 Annual Report Download - page 106

Unilever Annual Report & Accounts and Form 20-F 2003 103
Notes to the consolidated accounts
Unilever Group
17 Pensions and similar obligations continued
History of experience gains and losses
2003 2002 2001
Actual return less expected return on plan assets (€m) 967 (3 276) (2 343)
As % of plan assets at beginning of year (%) 8(19) (12)
Experience gains/(losses) on plan liabilities (€m) (135) (95) 197
As % of present value of plan liabilities at beginning of year (%) (1) (1) 1
Total actuarial gain/(loss) (€m) 188 (4 323) (2 344)
As % of present value of plan liabilities at beginning of year (%) 1(23) (13)
US GAAP disclosures
Under US GAAP, the actuarial assumptions used to calculate the benefit obligations are set by reference to market conditions at the balance
sheet date, in a similar manner to that used under FRS 17. The accounting methodology however is not the same as under FRS 17, since
under US GAAP all costs are recognised in operating profit and certain cost items are amortised in the profit and loss account rather than
recognised immediately.
The disclosures below show the benefit obligations, assets, funded status and balance sheet impact, as well as the periodic expense, cash flows
and related economic assumptions associated with the defined benefit pension plans and other post-employment benefit plans as computed in
accordance with SFAS 87 and SFAS 106.
Measurement dates
All plan assets are valued at fair value at the balance sheet date. Liabilities in respect of the most important pension plans comprising
approximately 75% of the pension liabilities are subject to actuarial valuations every year. The valuations use membership data for the current
year with the liability projected forward to the balance sheet date. Valuations of all other plans are carried out every three years and in the case
of the other principal pension plans, comprising approximately a further 15% of the liabilities, the valuations are updated each year.
Benefit obligations
The table below shows changes in benefit obligations during 2003 and 2002.
€ million € million € million € million
Other post- Other post-
Pension Pension employment employment
plans plans benefit plans benefit plans
2003 2002 2003 2002
Change in benefit obligations
Benefit obligations at 1 January 15 215 12 750 1 012 1 171
Extension of coverage(a) 1 690 2 261 77 –
Service cost 308 315 23 20
Interest cost 895 864 63 78
Plan member contributions 21 8––
Amendments 3– – (4)
Plan mergers –170––
Actuarial (gains)/losses 661 1 215 132 33
Acquisitions/disposals 1(57) – (22)
Settlements/curtailments (12) (321) (5) –
Special termination benefits 75 –1–
Benefits paid (1 139) (1 204) (78) (88)
Currency retranslation (1 000) (786) (176) (176)
Benefit obligations at 31 December 16 718 15 215 1 049 1 012
(a) With effect from 1 January 2003 a number of additional pension plans were included in the SFAS 87 disclosures. This increases the overall
coverage from 90% to 100% of liabilities. With effect from 1 January 2002 other plans had been included that had raised the coverage to
90% in 2002 from 76% in 2001.
Assumptions
The assumptions used to value the benefit obligations in respect of the principal plans are:
%%%%
Other post- Other post-
Pension Pension employment employment
plans plans benefit plans benefit plans
2003 2002 2003 2002
Weighted average assumptions used to determine benefit
obligations for the principal plans at 31 December
Discount rate 5.50 5.70 6.10 6.50
Salary increases 3.70 3.60 4.50 4.30
Pension increases 2.20 2.20 n/a n/a
Assumptions for the remaining defined benefits plans vary considerably, depending on the economic conditions of the country where they
are situated.