Coca Cola 2007 Annual Report Download - page 111

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
Assumptions
Certain weighted-average assumptions used in computing the benefit obligations are as follows:
Pension Benefits Other Benefits
December 31, 2007 2006 2007 2006
Discount rate 6% 5
1
⁄
2
%6
1
⁄
4
%6%
Rate of increase in compensation levels 4
1
⁄
4
%4
1
⁄
4
%N/A N/A
Certain weighted-average assumptions used in computing net periodic benefit cost are as follows:
Pension Benefits Other Benefits
Year Ended December 31, 2007 2006 2005 2007 2006 2005
Discount rate 5
1
⁄
2
%5
1
⁄
4
%5
1
⁄
2
%6% 5
3
⁄
4
%6%
Rate of increase in compensation levels 4
1
⁄
4
%4% 4% N/A N/A N/A
Expected long-term rate of return on plan assets 7
3
⁄
4
%7
3
⁄
4
%7
3
⁄
4
%8
1
⁄
2
%8
1
⁄
2
%8
1
⁄
2
%
The assumed health care cost trend rates are as follows:
December 31, 2007 2006
Health care cost trend rate assumed for next year 9% 9%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5% 5%
Year that the rate reaches the ultimate trend rate 2012 2011
During 2007, the Company amended its U.S. retiree medical plan to limit the Company’s exposure to increases in
retiree medical costs for both current and future retirees. As a result, the effects of a one percentage point change in the
assumed health care cost trend rate would not be significant to the Company.
The discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates
at which the benefit obligations could be effectively settled. Rates for each of our primary U.S. plans at December 31,
2007 were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-
quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. The rate of
compensation increase assumption is determined by the Company based upon annual reviews. We review external data
and our own historical trends for health care costs to determine the health care cost trend rate assumptions.
109