Sony 1998 Annual Report Download - page 67

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Annual Report 1998 Sony Corporation [65]
Pension plans’ funded status:
Japanese plans Foreign plans
Dollars in Dollars in
Yen in millions thousands Yen in millions thousands
March 31 March 31, March 31 March 31,
1997 1998 1998 1997 1998 1998
Actuarial present value of obligations—
Vested benefit . . . . . . . . . . . . . . ¥268,719 ¥327,802 $2,483,348 ¥50,325 ¥57,119 $432,720
Nonvested benefit . . . . . . . . . . . 53,311 61,508 465,970 4,060 5,850 44,318
Accumulated benefit obligation. . . . 322,030 389,310 2,949,318 54,385 62,969 477,038
Additional benefits related to
projected salary increase . . . . . . . 71,418 86,758 657,258 20,288 22,190 168,106
Projected benefit obligation . . . . . . 393,448 476,068 3,606,576 74,673 85,159 645,144
Plan assets at fair value . . . . . . . . . 204,491 236,966 1,795,197 43,837 54,597 413,614
Excess of projected benefit
obligation over plan assets . . . . . . 188,957 239,102 1,811,379 30,836 30,562 231,530
Unrecognized net loss . . . . . . . . . . (59,740) (91,343) (691,992) (4,805) (4,617) (34,977)
Unrecognized net transition asset . . 3,104 2,729 20,674 1,453 492 3,727
Unrecognized prior service cost . . . . (12,807) (12,496) (94,667) —2,651 20,084
Adjustment required to recognize
minimum pension liability . . . . . . — 20,692 156,758 ———
Net pension liability recognized in
the balance sheet . . . . . . . . . . . . ¥119,514 ¥158,684 $1,202,152 ¥27,484 ¥29,088 $220,364
Assumptions used in developing the
pension obligation as of March 31:
Discount rate . . . . . . . . . . . . . . 3.5% 3.0% 6.5 - 9.0% 6.5-8.0%
Long-term rate of salary increase . . 3.0% 3.0% 2.5 - 8.5% 2.5-8.5%
Long-term rate of return on
funded assets . . . . . . . . . . . . . 3.7% 4.0% 7.0-10.0% 6.5-9.8%
As required under FAS 87 “Employers’ Accounting for Pensions”, the assumptions are reviewed in accordance with
changes in circumstances. Such changes in assumptions are the primary reason for the fluctuation in the projected
benefit obligation and unrecognized net gains and losses.
Under FAS 87, the company has recorded a pension liability to cover the amount of the projected benefit obliga-
tion in excess of plan assets, considering unrealized items and the minimum pension liability. The minimum pension
liability which the company has recognized represents the excess of accumulated benefits over plan assets and ac-
crued pension cost. A corresponding amount was recognized as an intangible asset to the extent of unrecognized
prior service cost, and the balance was recorded as a separate reduction of stockholders’ equity, net of tax.
The plan assets are invested primarily in interest bearing securities and listed equity securities.
14. Income taxes
The company is subject to a number of different income taxes which, in the aggregate, indicate a statutory rate in
Japan of approximately 51%. Due to a change in Japanese income tax regulations, effective April 1, 1998, the statu-
tory rate was reduced to approximately 48% and such amount has been used in calculating the future expected tax
effects of temporary differences. The effect of the enacted change in the tax rate was insignificant.