Siemens 2006 Annual Report Download - page 198

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
194
The discount rate assumptions reflect the rates available on high-quality, fixed-income
investments of appropriate duration at the measurement date of each plan. The expected
return on plan assets is determined on a uniform basis, considering long-term historical
returns, asset allocation, and future estimates of long-term investment returns. The Company
decreased the assumption for the expected return on plan assets for fiscal 2007 for the majori-
ty of its principal pension plans due to changes in asset allocation and revised future estimates
of long-term investment returns. Other actuarial assumptions not shown in the tables above,
such as employee turnover, mortality, disability, etc., remained primarily unchanged in 2006.
Pension benefits: Sensitivity analysis
A one-percentage-point change of the established assumptions mentioned above, used for
the calculation of the NPPC for fiscal 2007, and a change of the market-related value of plan
assets of €500, as of September 30, 2006, would result in the following increase/(decrease) of
the fiscal 2007 NPPC:
Increases and decreases in the discount rate, rate of compensation increase and rate of
pension progression which are used in determining the PBO do not have a symmetrical effect
on NPPC primarily due to the compound interest effect created when determining the present
value of the future pension benefit. If more than one of the assumptions were changed simul-
taneously, the cumulative impact would not necessarily be the same as if only one assumption
was changed in isolation.
Pension benefits: Additional information concerning changes of the AML and actual
returns on plan assets
The reduction of shareholders’ equity caused by the underfunded ABO decreased by €1,451.
This decrease has no effect on income and was, among other effects, caused by the decrease in
the ABO as a result of the increase in discount rate for the domestic and foreign pension plans.
Contributions to plan assets had no effect on the AML, resulting in a lower difference between
the ABO and the fair value of plan assets while prepaid pension assets before AML adjustments
increased by the same amount.
Effect on NPPC 2007 due to a
one-percentage- one-percentage-
point/€500 point/€500
increase decrease
Discount rate (226) 291
Expected return on plan assets (217) 217
Rate of compensation increase 65 (56)
Rate of pension progression 310 (256)
Market-related value of plan assets (70) 71
Year ended September 30, 2006 Year ended September 30, 2005
Total Domestic Foreign Total Domestic Foreign
Change in the minimum liability adjustment
within accumulated other comprehensive income (1,451) (507) (944) 1,813 896 917
Year ended September 30, 2006 Year ended September 30, 2005
Total Domestic Foreign Total Domestic Foreign
Actual return on plan assets 1,291 741 550 2,289 1,596 693