Sony 2006 Annual Report Download - page 115

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The components of net pension and severance costs, which exclude employee termination benefits paid in restructuring activities,
for the fiscal years ended March 31, 2004, 2005 and 2006 were as follows:
Japanese plans:
Dollars in
Yen in millions millions
Years ended March 31 2004 2005 2006 2006
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 54,501 ¥ 31,971 ¥ 26,561 $ 227
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,489 21,364 16,504 141
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,812) (16,120) (17,290) (148)
Amortization of net transition asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (375) (375) (104) (1)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,019 20,236 14,393 123
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (939) (7,216) (10,229) (87)
Gains on curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —(876) ——
Settlement loss resulting from the transfer of the substitutional portion . . . . . . . . . . . . . . . ——59,850 512
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 80,883 ¥ 48,984 ¥ 89,685 $ 767
plan the amount of payment is determined based on sum of
cumulative points from past services and interest points earned on
the cumulative points regardless of whether or not the employee
is voluntarily retiring. As a result of the plan amendment, the
projected benefit obligation was decreased by ¥120,873 million.
Sony Corporation and most of its subsidiaries in Japan had
contributory funded defined benefit pension plans pursuant to
the Japanese Welfare Pension Insurance Law, which consisted
of a substitutional portion of the governmental welfare pension
program and an additional portion which was established at the
discretion of each employer. In June, 2001, the Japanese
Government issued the Defined Benefit Corporate Pension Plan
Act, which permits each employer and employees’ pension fund
plan to separate the substitutional portion from its employees’
pension fund and transfer the obligation and related assets to
the government. In July, 2004, in accordance with the law, the
Japanese Government approved applications submitted by
Sony Corporation and most of its subsidiaries in Japan for an
exemption from the obligation to pay benefits for future employee
services related to the substitutional portion of the governmental
welfare pension program. In January 2005, the government also
approved applications for an exemption from the obligation to
pay benefits for past employee services related to the substitu-
tional portion. On September 20, 2005, the benefit obligation for
past employee services related to the substitutional portion and
the related government-specified portion of the plan assets were
transferred to the government. As a result of the transfer to the
government of the substitutional portion, as of March 31, 2006,
Sony Corporation and most of its subsidiaries in Japan maintain
contributory funded defined benefit plans, which were estab-
lished by succeeding the additional portion established at the
discretion of each employer, pursuant to the Corporate Defined
Benefit Pension Plan Law.
Under the contributory pension plans, in general, the defined
benefits cover 65% of the indemnities under existing regulations
to employees. The remaining indemnities are covered by sever-
ance payments by the companies. The pension benefits are
payable at the option of the retiring employee either in a lump-
sum amount or monthly pension payments. Contributions to
the plans are funded through several financial institutions in
accordance with the applicable laws and regulations.
EITF Issue No. 03-2, “Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee
Pension Fund Liabilities”, requires employers to account for the
entire separation process of a substitutional portion from an
entire plan upon completion of the transfer of the substitutional
portion of the benefit obligation and related plan assets to the
government as the culmination of a series of steps in a single
settlement transaction. For the fiscal year ended March 31,
2006, in accordance with EITF Issue No. 03-2, Sony recognized
a government subsidy of ¥133,322 million ($1,140 million), which
is the net of the amount of the accumulated benefit obligation
settled and the plan assets transferred to the government. Sony
also recognized a settlement loss of ¥59,850 million ($512 million),
the amount of which is the net of ¥100,253 million ($857 million)
of unrecognized losses related to the substitutional portion and
¥40,403 million ($345 million) for the derecognition of previously
accrued salary progression. The net gain of ¥73,472 million ($628
million) is included in selling, general and administrative expenses.
Many foreign subsidiaries have defined benefit pension plans
or severance indemnity plans, which substantially cover all of
their employees. Under such plans, the related cost of benefits
is currently funded or accrued. Benefits awarded under these
plans are based primarily on the current rate of pay and length
of service.
Sony uses a measurement date of March 31 for substantially
all of its pension and severance plans.