APC 2011 Annual Report Download - page 192

190 2011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC
CONSOLIDATED FINANCIAL STATEMENTS
5NOTES TO THE CONSOLIDATED FINANCIAL
21.6 – Schneider ElectricSA shares
At December31, 2011, the Group held 9,164,952 Schneider Electric shares in treasury stock, which have been recorded as a deduction
from retained earnings.
21.7 – Tax on equity
Total income tax recorded in Equity amounts to EUR329million as of December31, 2011 and can be analysed as follows:
Dec.31, 2011 Dec.31, 2010 Change in tax
Cash-fl ow hedges 100 69 31
Available-for-sale fi nancial assets (3) (14) 11
Actuarial gains (losses) on defi ned benefi ts 233 146 87
Other (1) (1) -
TOTAL 329 200 129
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.
Note22 Pensions and other post-employment benefit obligations
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
2011 2010 2011 2010
Discount rate 4.3% 5.0% 4.6% 5.5%
Rate of compensation increases 2.5% 2.0% N/A N/A
Expected return on plan assets (1) 6.9% 7.0% 8.0% 8.3%
(1) Corresponding to the 2010 and 2011 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 4.00% in the euro zone,
4.59% in the United States and 4.90% in the United Kingdom.
A 0.5 point increase in the discount rate would reduce pension and
termination benefi t obligations by around EUR155million and the
service cost by EUR2million. A 0.5 point decrease would increase
pension and termination benefi t obligations by EUR165million and
the service cost by EUR2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
EUR38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
EUR33million and the sum of the service cost and interest cost by
EUR2million.
In 2011, the rate of healthcare cost increases in the United States
is based on a decreasing trend from 8% in 2012 to 4.5% in 2023.
Thiscompares with the previous year’s forecast of 9% in 2011 to
5% in 2015. In 2009, the forecast was based on a decreasing trend
from 9% in 2010 to 5% in 2014. The rate in France was estimated
at 4% in 2011, as in 2010 and in 2009.