Page 59 - Demo samer flip book

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Take a look at key assumptions disclosed by PepsiCo:
In regard to our first concern--the economic status of the liability--we want to look at the funded status that equals the fair value of plan assets minus the PBO. The two key assumptions that impact the PBO are the discount rate and projected rate of salary increases. A company can decrease its PBO (and therefore, increase its funded status) by either increasing the discount rate or lowering the projected rate of salary increases. You can see that PepsiCo's rate of salary increase is fairly stable at 4.4% but the discount rate dropped to 6.1%. This steady drop in the discount rate contributes significantly to the increased PBO and the resultant under-funded status.
In regard to our second concern--the quality of the pension expense--there are three key assumptions:
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