Analyzing and Interpreting Pension Disclosures

Assume E.I. Du Pont De Nemours and Co.'s 10-K report has the following disclosures related to its retirement plans ($ millions).

Pension Benefits

($ millions) 2010 2009

Change in benefit obligation

Benefit obligation at beginning of year $ 22,849 $ 22,935

Service cost 383 388

Interest cost 1,228 1,192

Plan participants' contributions 13 9

Acturarial loss (gain) (728) (244)

Benefits paid (1,544) (1,506)

Amendments -- (1)

Net effects of acquisitions/divestitures 5 76

Benefit obligation at end of year $ 22,206 $ 22,849

Change in plan assets

Fair value of plan assets at beginning of year $ 22,249 $ 20,132

Actual gain on plan assets 1,927 3,306

Employer contributions 277 280

Plan participants' contributions 13 9

Benefits paid (1,544) (1,506)

Net effects of acquisitions/divestitures -- 28

Fair value of plan assets at end of year $ 22,922 $ 22,249

Funded status

U.S. plans with plan assets $ 2,365 $ 892

Non-U.S. plans with plan assets (90) (317)

All other plans (1,559) (1,515)

Total $ 716 $ (940)

Pension Benefits

(in millions)

Components of net periodic benefit cost (credit) 2010 2009 2008

Net periodic benefit

Service cost $ 383 $ 388 $ 349

Interest cost 1,228 1,192 1,160

Expected return on plan assets (1,799) (1,648) (1,416)

Amortization of loss 117 227 303

Amortization of prior service cost 18 29 37

Curtailment/settlement (gain) loss -- 3 (1)

Net periodic benefit cost $ (53) $ 191 $ 432

Weighted-avg. assumptions used for net periodic benefit cost for years ended Dec. 31

2010

2009

Discount Rate 5.56% 5.43%

Expected return on plan assets 8.09% 8.18%

Rate of compensation increase 4.32% 4.31%

The following benefit payments, which reflect future service, as appropriate, are expected to be paid:

($ millions) Pension Benefits

2008 $ 1,525

2009 1,507

2010 1,493

2011 1,500

2012 1,500

Years 2013-2017 7,690

HINT: Do not use negative signs with your answers.

(a) How much pension expense (revenue) does DuPont report in its 2010 income statement?

DuPont reports pension Answer

revenue

of $Answer

53

million.

(b) DuPont reports a $1,799 million expected return on pension plan assets as an offset to 2010 pension expense. Estimate what the expected return would have been had DuPont not changed the assumption on the expected return in 2010. (Round your dollar answers to the nearest whole number.)

$Answer

1,800

million

What is DuPont's actual gain or loss realized on its 2010 pension plan assets?

Answer

1,927

($ million) Answer

gain