2010Annual Report - Schneider Electric CZ, s.r.o.

21.7 - Tax on equity
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Total income tax recorded in Equity amounts to EUR200 million as of December 31, 2010 and can be analysed as follows:
Dec. 31, 2010 Dec. 31, 2009 Change in tax
Cash-fl ow hedges 69 72 (3)
Available-for-sale fi nancial assets (14) (19) 5
Actuarial gains (losses) on defi ned benefi ts 146 145 1
Other (1) (1) -
TOTAL 200 197 3
Note 22 Pensions and other post-employment benefit obligations
The Group has set up various post-employment benefi t plans for
employees covering pensions, termination benefi ts, healthcare, life
insurance and other benefi ts, as well as long-term benefi t plans for
active employees, primarily long service awards and similar benefi ts,
mainly in France.
Actuarial valuations are generally performed each year. The assumptions used vary according to the economic conditions prevailing in the
country concerned, as follows:
Weighted average rate Of which US plans
2010 2009 2010 2009
Discount rate 5.0% 5.2% 5.5% 5.8%
Rate of compensation increases 2.0% 3.1% NA 4.5%
Expected return on plan assets (1) 7.0% 7.1% 8.3% 8.3%
(1) Corresponding to the 2009 and 2010 rates.
The discount rate is determined on the basis of the interest rate
for investment-grade (AA) corporate bonds or, in the event a liquid
market does not exist, government bonds with a maturity that
matches the duration of the benefi t obligation (reference: Bloomberg).
In the United States, the average discount rate is determined on the
basis of a yield curve for investment-grade (AA and AAA) corporate
bonds.
These benchmarks, which are the same as those used in previous
years, comply with IAS 19.
The expected return on plan assets is determined on the basis of the
weighted average expected return of the total asset value.
The discount rate currently stands at 4.33% in the euro zone, 5.5%
in the United States and 5.4% in the United Kingdom.
A 0.5 point increase in the discount rate would reduce pension and
termination benefi t obligations by around EUR130 million and the
service cost by EUR1 million. A 0.5 point decrease would increase
pension and termination benefi t obligations by EUR146 million and
the service cost by EUR1 million.
The post-employment healthcare obligation mainly concerns the
United States. A one point increase in the healthcare costs rate
would increase the post-employment healthcare obligation by
EUR45 million and the sum of the service cost and interest cost
by EUR3 million. A one point decrease in healthcare costs rate
would decrease the post-employment healthcare obligation by
EUR38 million and the sum of the service cost and interest cost by
EUR2 million.
In 2010, the rate of healthcare cost increases in the United States is
based on a decreasing trend from 9% in 2011 to 5% in 2015. This
compares with the previous year’s forecast of 9% in 2010 to 5% in
2014. The rate in France was estimated at 4% in 2010 as in 2009.
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