PROBLEM 3–6 Refer to Colgate’s annual report in Appendix A at the end of the book and answer the following questions:

a. What type of pension plan does Colgate have for a majority of its employees? What are the primary other postretirement benefits (OPEBs) that Colgate offers its employees?

b. Separately for pensions (U.S. and international) and OPEBs, answer the following questions for both 2006 and 2005:

(1) What is the closing net economic position of the plan? Is it a net asset or net liability?

(2) What is the closing amount reported in the balance sheet? Is it a net asset or net liability?

(3) Where in the balance sheet are the reported amounts included?
(4) For 2005, what causes the reported amounts to deviate from the net economic position?
(5) Identify the amount of accumulated benefit obligation (ABO) and the projected benefit obligation (PBO).
Which amount is recognized in the balance sheet? Which is closer to Colgate’s legal obligation?
(6) What is the net economic position of each plan if it is terminated?
(7) What is the closing value of plan assets? Which asset classes does Colgate invest in and what proportions?
(8) What is the reported benefit cost that is included in net income for the year? What are its components?
(9) Identify and quantify the nonrecurring amounts that are deferred during the year.
(10) What is Colgate’s actual return on plan assets? How much does it recognize for the year (when determining reported benefit cost)?
(11) Identify how the reported cost is articulated with the net position included in the balance sheet. (Hint: How are the net deferrals recognized—or not recognized—on the balance sheet?) What are the differences between 2005 and 2006?
(12) What are the key actuarial assumptions that Colgate makes? Has Colgate changed any assumptions during 2006? What effects will the changes have on Colgate’s economic and reported position and cost?
(13) What is Colgate’s cash flow with respect to postretirement plans? What is the estimated cash flow for 2007?