HP 2015 Annual Report Download - page 53

Table of Contents
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We have engaged in restructuring actions which require management to estimate the timing and amount of severance and other employee separation
costs for workforce reduction and enhanced early retirement programs, fair value of assets made redundant or obsolete, and the fair value of lease cancellation
and other exit costs. We accrue for severance and other employee separation costs under these actions when it is probable that benefits will be paid and the
amount is reasonably estimable. The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated
settlements. For a full description of our restructuring actions, refer to our discussions of restructuring in "Results of Operations" below and in Note 3 to the
Consolidated Financial Statements in Item 8, which are incorporated herein by reference.
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Our pension and other post-retirement benefit costs and obligations depend on various assumptions. Our major assumptions relate primarily to discount
rates, mortality rates, expected increases in compensation levels and the expected long-term return on plan assets. The discount rate assumption is based on
current investment yields of high-quality fixed-income securities with maturities similar to the expected benefits payment period. Mortality rates help predict
the expected life of plan participants and are based on a historical demographic study of the plan. The expected increase in the compensation levels
assumption reflects our long-term actual experience and future expectations. The expected long-term return on plan assets is determined based on asset
allocations, historical portfolio results, historical asset correlations and management's expected returns for each asset class. We evaluate our expected return
assumptions annually including reviewing current capital market assumptions to assess the reasonableness of the expected long-term return on plan assets.
We update the expected long-term return on assets when we observe a sufficient level of evidence that would suggest the long-term expected return has
changed. In any fiscal year, significant differences may arise between the actual return and the expected long-term return on plan assets. Historically,
differences between the actual return and expected long-term return on plan assets have resulted from changes in target or actual asset allocation, short-term
performance relative to expected long-term performance, and to a lesser extent, differences between target and actual investment allocations, the timing of
benefit payments compared to expectations, and the use of derivatives intended to effect asset allocation changes or hedge certain investment or liability
exposures. For the recognition of net periodic benefit cost, the calculation of the expected long-term return on plan assets uses the fair value of plan assets as
of the beginning of the fiscal year unless updated as result of interim remeasurement.
Our major assumptions vary by plan, and the weighted-average rates used are set forth in Note 4 to the Consolidated Financial Statements in Item 8,
which is incorporated herein by reference. The following table provides the impact changes in the weighted-average assumptions of discount rates, the
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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