| RETIREMENT AND PROFIT SHARING PLANS | RETIREMENT AND PROFIT SHARING PLANS Defined Benefit Pension and Postretirement Plans In the United States and certain other countries, the Company maintains and administers defined benefit retirement plans and postretirement medical plans for certain current, retired and resigned employees. In addition, the Company’s U.S. defined benefit pension plans include a frozen plan for former pre-incorporation partners, which is unfunded. Benefits under the employee retirement plans are primarily based on years of service and compensation during the years immediately preceding retirement or termination of participation in the plan. The defined benefit pension disclosures include the Company’s U.S. and material non-U.S. defined benefit pension plans. Postemployment Plans Certain postemployment benefits, including severance benefits, disability-related benefits and continuation of benefits, such as healthcare benefits and life insurance coverage, are provided to former or inactive employees after employment but before retirement. These costs are not material and are substantially provided for on an accrual basis. Assumptions The weighted-average assumptions used to determine the defined benefit pension obligations as of August 31 and the net periodic pension expense were as follows: Pension Plans Postretirement Plans August 31, August 31, 2015 2014 2013 2015 2014 2013 U.S. Non-U.S. Plans U.S. Non-U.S. Plans U.S. Non-U.S. Plans U.S. and Non-U.S. Plans U.S. and Non-U.S. Plans U.S. and Non-U.S. Plans Discount rate for determining projected benefit obligation 4.50 % 3.47 % 4.25 % 3.53 % 5.00 % 4.18 % 4.46 % 4.25 % 4.96 % Discount rate for determining net periodic pension expense (1) 4.25 % 3.53 % 5.00 % 4.18 % 4.00 % 4.23 % 4.25 % 4.96 % 4.12 % Long term rate of return on plan assets 5.50 % 4.55 % 5.50 % 4.79 % 5.50 % 4.72 % 5.05 % 4.87 % 5.06 % Rate of increase in future compensation for determining projected benefit obligation 3.65 % 3.56 % 3.65 % 3.75 % 3.60 % 3.79 % N/A N/A N/A Rate of increase in future compensation for determining net periodic pension expense (1) 3.65 % 3.75 % 3.60 % 3.79 % 4.00 % 3.81 % N/A N/A N/A _______________ (1) Prior period amounts have been reclassified to conform to the current period presentation. Beginning in fiscal 2016, the Company will change the method it uses to estimate the service and interest cost components of net periodic pension expense. Historically, the Company selected a discount rate for the U.S. plans by matching the plans’ cash flows to that of the average of two yield curves that provide the equivalent yields on zero-coupon corporate bonds for each maturity. The discount rate assumption for the non-U.S. Plans primarily reflected the market rate for high-quality, fixed-income debt instruments. Beginning in fiscal 2016, the Company will utilize a full yield curve approach to estimate these components by applying specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The Company will make this change to improve the correlation between projected benefit cash flows and the corresponding yield curve spot rates and to provide a more precise measurement of service and interest costs. This change does not affect the measurement of the Company’s total benefit obligations. The Company will account for this change as a change in estimate and, accordingly, will recognize its effect prospectively beginning in fiscal 2016. The discount rate assumptions are based on the expected duration of the benefit payments for each of the Company’s defined benefit pension and postretirement plans as of the annual measurement date and is subject to change each year. The expected long-term rate of return on plan assets should, over time, approximate the actual long-term returns on defined benefit pension and postretirement plan assets and is based on historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the asset portfolio. Assumed U.S. Health Care Cost Trend The Company’s U.S. postretirement plan assumed annual rate increase in the per capita cost of health care benefits is 7.0% for the plan year ending June 30, 2016. The rate is assumed to decrease on a straight-line basis to 4.5% for the plan year ending June 30, 2027 and remain at that level thereafter. A one percentage point increase in the assumed health care cost trend rates would increase the benefit obligation by $55,255 , while a one percentage point decrease would reduce the benefit obligation by $43,037 . U.S. Defined Benefit Pension Plan Settlement Charge On January 12, 2015, the Company announced a plan to offer a voluntary one-time lump sum payment option to certain eligible former employees who had vested benefits under the Company’s U.S. pension plan, that if accepted, would settle the Company’s pension obligations to them. The lump sum cash payment offer closed during the third quarter of fiscal 2015. In total, more than 4,800 former participants accepted the offer, resulting in lump sum payments from plan assets of $279,571 in May 2015. As a result of this settlement and the adoption of the new U.S. mortality tables released by the Society of Actuaries, the Company remeasured the assets and liabilities of the U.S. pension plan during the third quarter of fiscal 2015, which in aggregate resulted in a net reduction to the projected benefit obligation of $179,938 as well as a non-cash settlement charge of $64,382 , pre-tax, in the third quarter of fiscal 2015. Pension and Postretirement Expense Pension expense for fiscal 2015, 2014 and 2013 was $143,968 (including the above noted settlement charge), $87,422 and $91,771 , respectively. Postretirement expense for fiscal 2015, 2014 and 2013 was not material to the Company’s Consolidated Financial Statements. Benefit Obligation, Plan Assets and Funded Status The changes in the benefit obligations, plan assets and funded status of the Company’s pension and postretirement benefit plans for fiscal 2015 and 2014 were as follows: Pension Plans Postretirement Plans August 31, August 31, 2015 2014 2015 2014 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans U.S. and Non-U.S. Plans U.S. and Non-U.S. Plans Reconciliation of benefit obligation Benefit obligation, beginning of year $ 1,909,651 $ 1,519,007 $ 1,614,094 $ 1,231,577 $ 375,312 $ 312,244 Service cost 8,899 67,471 8,680 60,120 17,784 15,750 Interest cost 76,969 48,199 79,687 51,335 15,602 15,255 Participant contributions — 6,081 — 5,683 — — Acquisitions/divestitures/transfers — (364 ) — 1,491 — — Amendments — 79 — 468 — — Pension settlement (279,571 ) — — — — — Actuarial (gain) loss (35,478 ) 14,618 245,555 181,941 14,180 40,356 Benefits paid (44,726 ) (39,685 ) (38,365 ) (31,155 ) (11,186 ) (6,921 ) Exchange rate impact — (176,181 ) — 17,547 (8,597 ) (1,372 ) Benefit obligation, end of year $ 1,635,744 $ 1,439,225 $ 1,909,651 $ 1,519,007 $ 403,095 $ 375,312 Reconciliation of fair value of plan assets Fair value of plan assets, beginning of year $ 1,883,789 $ 1,032,378 $ 1,565,764 $ 913,294 $ 29,484 $ 28,164 Actual return on plan assets 25,580 39,797 344,961 74,457 92 4,223 Acquisitions/divestitures/transfers — — — 1,385 — — Employer contributions 11,114 52,033 11,429 53,061 6,253 4,018 Participant contributions — 6,081 — 5,683 — — Pension settlement (279,571 ) — — — — — Benefits paid (44,726 ) (39,685 ) (38,365 ) (31,155 ) (11,186 ) (6,921 ) Exchange rate impact — (108,133 ) — 15,653 — — Fair value of plan assets, end of year $ 1,596,186 $ 982,471 $ 1,883,789 $ 1,032,378 $ 24,643 $ 29,484 Funded status, end of year $ (39,558 ) $ (456,754 ) $ (25,862 ) $ (486,629 ) $ (378,452 ) $ (345,828 ) Amounts recognized in the Consolidated Balance Sheets Non-current assets $ 102,686 $ 64,690 $ 116,470 $ 62,040 $ — $ — Current liabilities (11,148 ) (10,287 ) (11,241 ) (8,627 ) (1,416 ) (1,638 ) Non-current liabilities (131,096 ) (511,157 ) (131,091 ) (540,042 ) (377,036 ) (344,190 ) Funded status, end of year $ (39,558 ) $ (456,754 ) $ (25,862 ) $ (486,629 ) $ (378,452 ) $ (345,828 ) Accumulated Other Comprehensive Loss The pre-tax accumulated net loss and prior service (credit) cost recognized in Accumulated other comprehensive loss as of August 31, 2015 and 2014 was as follows: Pension Plans Postretirement Plans August 31, August 31, 2015 2014 2015 2014 U.S. Plans Non-U.S. U.S. Plans Non-U.S. U.S. and Non-U.S. Plans U.S. and Non-U.S. Plans Net loss $ 397,065 $ 295,098 $ 432,280 $ 335,436 $ 75,224 $ 63,125 Prior service (credit) cost — (7,281 ) — (10,877 ) 35,173 38,034 Accumulated other comprehensive loss, pre-tax $ 397,065 $ 287,817 $ 432,280 $ 324,559 $ 110,397 $ 101,159 Funded Status for Defined Benefit Plans The accumulated benefit obligation for defined benefit pension plans as of August 31, 2015 and 2014 was as follows: August 31, 2015 2014 U.S. Plans Non-U.S. U.S. Plans Non-U.S. Accumulated benefit obligation $ 1,626,972 $ 1,313,946 $ 1,899,616 $ 1,392,969 The following information is provided for defined benefit pension plans and postretirement plans with projected benefit obligations in excess of plan assets and for defined benefit pension plans with accumulated benefit obligations in excess of plan assets as of August 31, 2015 and 2014 : Pension Plans Postretirement Plans August 31, August 31, 2015 2014 2015 2014 U.S. Plans Non-U.S. U.S. Plans Non-U.S. U.S. and Non-U.S. Plans U.S. and Non-U.S. Plans Projected benefit obligation in excess of plan assets Projected benefit obligation $ 142,244 $ 757,741 $ 142,333 $ 1,179,305 $ 403,095 $ 375,312 Fair value of plan assets — 236,297 — 630,636 24,643 29,484 August 31, 2015 2014 U.S. Plans Non-U.S. U.S. Plans Non-U.S. Accumulated benefit obligation in excess of plan assets Accumulated benefit obligation $ 142,244 $ 629,524 $ 142,333 $ 992,326 Fair value of plan assets — 204,076 — 536,489 Investment Strategies U.S. Pension Plans The overall investment objective of the plans is to provide growth in the defined benefit pension plans’ assets to help fund future defined benefit pension obligations while managing risk in order to meet current defined benefit pension obligations. The plans’ future prospects, their current financial conditions, the Company’s current funding levels and other relevant factors suggest that the plans can tolerate some interim fluctuations in market value and rates of return in order to achieve long-term objectives without undue risk to the plans’ ability to meet their current benefit obligations. The Company recognizes that asset allocation of the defined benefit pension plans’ assets is an important factor in determining long-term performance. Actual asset allocations at any point in time may vary from the target asset allocations and will be dictated by current and anticipated market conditions, required cash flows and investment decisions of the investment committee and the pension plans’ investment funds and managers. Ranges are established to provide flexibility for the asset allocation to vary around the targets without the need for immediate rebalancing. Non-U.S. Pension Plans Plan assets in non-U.S. defined benefit pension plans conform to the investment policies and procedures of each plan and to relevant legislation. The pension committee or trustee of each plan regularly, but at least annually, reviews the investment policy and the performance of the investment managers. In certain countries, the trustee is also required to consult with the Company. Asset allocation decisions are made to provide risk adjusted returns that align with the overall investment strategy for each plan. Generally, the investment return objective of each plan is to achieve a total annualized rate of return that exceeds inflation over the long term by an amount based on the target asset allocation mix of that plan. In certain countries, plan assets are invested in funds that are required to hold a majority of assets in bonds, with a smaller proportion in equities. Also, certain plan assets are entirely invested in contracts held with the plan insurer, which determines the strategy. Defined benefit pension plans in certain countries are unfunded. Risk Management Plan investments are exposed to certain risks including market, interest rate and operating risk. In order to mitigate significant concentrations of these risks, the assets are invested in a diversified portfolio primarily consisting of fixed income instruments and equities. To minimize asset volatility relative to the liabilities, plan assets allocated to debt securities appropriately match the duration of individual plan liabilities. Equities are diversified between U.S. and non-U.S. index funds and are intended to achieve long term capital appreciation. Plan asset allocation and investment managers’ guidelines are reviewed on a regular basis. Plan Assets The Company’s target allocation for fiscal 2016 and weighted-average plan assets allocations as of August 31, 2015 and 2014 by asset category, for defined benefit pension plans were as follows: 2016 Target 2015 2014 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Asset Category Equity securities 10 % 37 % 10 % 30 % 10 % 39 % Debt securities 90 52 87 56 89 47 Cash and short-term investments — 2 3 3 1 4 Insurance contracts — 6 — 6 — 6 Other — 3 — 5 — 4 Total 100 % 100 % 100 % 100 % 100 % 100 % Fair Value Measurements Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels: • Level 1—Quoted prices for identical instruments in active markets; • Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and • Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable. The fair values of defined benefit pension and postretirement plan assets as of August 31, 2015 were as follows: U.S. Plans Level 1 Level 2 Level 3 Total Equity Mutual fund U.S. equity securities $ — $ 98,900 $ — $ 98,900 Mutual fund non-U.S. equity securities — 61,500 — 61,500 Fixed Income U.S. government, state and local debt securities — 465,738 — 465,738 Non-U.S. government debt securities — 44,153 — 44,153 U.S. corporate debt securities — 483,812 — 483,812 Non-U.S. corporate debt securities — 62,430 — 62,430 Mutual fund debt securities 359,034 — — 359,034 Cash and short-term investments — 45,262 — 45,262 Total $ 359,034 $ 1,261,795 $ — $ 1,620,829 Non-U.S. Plans Level 1 Level 2 Level 3 Total Equity Mutual fund equity securities $ — $ 293,157 $ — $ 293,157 Fixed Income Non-U.S. government debt securities 70,188 — — 70,188 Mutual fund debt securities 16,739 466,460 — 483,199 Cash and short-term investments 25,862 5,805 — 31,667 Insurance contracts — 59,103 — 59,103 Other — 45,157 — 45,157 Total $ 112,789 $ 869,682 $ — $ 982,471 There were no transfers between Levels 1 and 2 during fiscal 2015 . Expected Contributions Generally, annual contributions are made at such times and in amounts as required by law and may, from time to time, exceed minimum funding requirements. The Company estimates it will pay approximately $67,047 in fiscal 2016 related to contributions to its U.S. and non-U.S. defined benefit pension plans and benefit payments related to the unfunded frozen plan for former pre-incorporation partners. The Company has not determined whether it will make additional voluntary contributions for its defined benefit pension plans. The Company’s postretirement plan contributions in fiscal 2016 are not expected to be material to the Company’s Consolidated Financial Statements. Estimated Future Benefit Payments Benefit payments for defined benefit pension plans and postretirement plans, which reflect expected future service, as appropriate, are expected to be paid as follows: Pension Plans Postretirement Plans U.S. Plans Non-U.S. U.S. and Non-U.S. Plans 2016 $ 43,399 $ 35,195 $ 8,694 2017 45,842 39,885 10,096 2018 48,310 44,971 11,553 2019 51,231 51,189 12,908 2020 54,402 58,639 14,495 2021-2025 330,805 369,487 107,555 Defined Contribution Plans In the United States and certain other countries, the Company maintains and administers defined contribution plans for certain current, retired and resigned employees. Total expenses recorded for defined contribution plans were $397,123 , $331,801 and $448,370 in fiscal 2015, 2014 and 2013 , respectively. |
