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- Interest cost, corresponding to the increase in the projected benefit obligation due to the passage of time,
- benefit payments.
• Non-recurring factors:
- changes in long-term actuarial assumptions (concerning, for example, inflation rates and future salary levels),
- changes in benefit formula.
Some countries have introduced legislation authorizing or providing that these obligations be funded by employer (and, for contributory
plans, employee) contributions to external funds responsible for investing and managing the amounts received. In this case, employers
nevertheless retain a legal and constructive obligation towards their employees. The funds management and investment policies differ
from country to country and, in some cases, from fund to fund.
The value of plan assets held in external funds also varies, depending on:
• the level of contributions received from employers and employees,
• the level of benefits paid to eligible employees,
• the return on plan assets, including unrealized gains and losses.
Plan assets are valued on a yearly basis, at October 31.
13.2. Actuarial assumptions
To calculate projected benefit obligations, actuaries use a number of long-term assumptions provided by the Company (including
inflation rate, rate of salary increases and discount rate). These assumptions are reviewed annually.
Assumptions used at December 31, 2004 North America Europe Other
Rate of salary increases (1) 3.00% to 3.25% 2.75% to 3.90% 6.60% to 10.00%
Discount rate 5.75% to 6.25% 4.75% to 5.30% 9.20% to 11.00%
Average remaining service lives 13.1 years 14.0 years 16.4 years
Expected return on plan assets
Actual return on plan assets
8.00% to 8.50% 3.50% to 6.75% 9.20%
for the year ended December 31, 2004 (2) 9.90% to 10.00% 4.50% to 8.40% 14.80%
Assumptions used at December 31, 2003 North America Europe Other (3)
Rate of salary increases (1) 3.25% to 3.50% 3.00% to 4.00% 2.59% to 10.00%
Discount rate 6.25% to 6.50% 5.50% to 5.75% 2.00% to 11.00%
Average remaining service lives 13.8 years 13.9 years 18.5 years
Expected return on plan assets
Actual return on plan assets
8.00% to 8.50% 4.75% to 6.75% 2.00% to 9.20%
for the year ended December 31, 2003 (2) 12.90% to 13.90% 2.00% to 8.30% not significant
(1) Including all assumptions relating to career development, promotions, seniority and other, over the employee’s entire service life.
(2) As of the measurement date.
(3) Brazil and Nigeria in 2004.
Brazil, Nigeria and Japan in 2003.