| 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. 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, August 31, August 31, 2016 August 31, 2015 August 31, 2014 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 3.50 % 2.40 % 4.50 % 3.47 % 4.25 % 3.53 % 3.51 % 4.46 % 4.25 % Discount rate for determining net periodic pension expense 4.50 % 3.47 % 4.25 % 3.53 % 5.00 % 4.18 % 4.46 % 4.25 % 4.96 % Long term rate of return on plan assets 4.75 % 3.99 % 5.50 % 4.55 % 5.50 % 4.79 % 4.54 % 5.05 % 4.87 % Rate of increase in future compensation for determining projected benefit obligation 2.57 % 3.47 % 3.65 % 3.56 % 3.65 % 3.75 % N/A N/A N/A Rate of increase in future compensation for determining net periodic pension expense 3.60 % 3.56 % 3.65 % 3.75 % 3.60 % 3.79 % N/A N/A N/A Beginning in fiscal 2016, the Company changed 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 utilized 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 made 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 accounted for this change as a change in estimate and, accordingly, recognized 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 are 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 of increase in the per capita cost of health care benefits is 6.8% for the plan year ending June 30, 2017. 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 $81,422 , while a one percentage point decrease would reduce the benefit obligation by $62,615 . U.S. Defined Benefit Pension Plan Settlement Charge During fiscal 2015, the Company offered 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. This resulted in lump sum payments from plan assets of $279,571 during fiscal 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, 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, during fiscal 2015. Pension and Postretirement Expense Pension expense for fiscal 2016, 2015 and 2014 was $94,827 , $143,968 (including the above noted settlement charge) and $87,422 , respectively. Postretirement expense for fiscal 2016, 2015 and 2014 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 2016 and 2015 were as follows: Pension Plans Postretirement Plans August 31, August 31, August 31, 2016 August 31, 2015 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 $ 1,635,744 $ 1,439,225 $ 1,909,651 $ 1,519,007 $ 403,095 $ 375,312 Service cost 7,305 72,502 8,899 67,471 18,565 17,784 Interest cost 63,470 43,827 76,969 48,199 15,618 15,602 Participant contributions — 9,857 — 6,081 — — Acquisitions/divestitures/transfers — 41,719 — (364 ) — — Amendments — (1,561 ) — 79 — — Curtailment — (689 ) — — 84 — Pension settlement — — (279,571 ) — — — Special termination benefits — 1,332 — — — — Actuarial (gain) loss 371,294 261,252 (35,478 ) 14,618 74,213 14,180 Benefits paid (47,807 ) (52,549 ) (44,726 ) (39,685 ) (11,143 ) (11,186 ) Exchange rate impact — (56,805 ) — (176,181 ) 532 (8,597 ) Benefit obligation, end of year $ 2,030,006 $ 1,758,110 $ 1,635,744 $ 1,439,225 $ 500,964 $ 403,095 Reconciliation of fair value of plan assets Fair value of plan assets, beginning of year $ 1,596,186 $ 982,471 $ 1,883,789 $ 1,032,378 $ 24,643 $ 29,484 Actual return on plan assets 242,112 97,638 25,580 39,797 3,856 92 Acquisitions/divestitures/transfers — 24,052 — — — — Employer contributions 10,944 71,046 11,114 52,033 9,774 6,253 Participant contributions — 9,857 — 6,081 — — Pension settlement — — (279,571 ) — — — Benefits paid (47,807 ) (52,549 ) (44,726 ) (39,685 ) (11,143 ) (11,186 ) Exchange rate impact — (51,361 ) — (108,133 ) — — Fair value of plan assets, end of year $ 1,801,435 $ 1,081,154 $ 1,596,186 $ 982,471 $ 27,130 $ 24,643 Funded status, end of year $ (228,571 ) $ (676,956 ) $ (39,558 ) $ (456,754 ) $ (473,834 ) $ (378,452 ) Amounts recognized in the Consolidated Balance Sheets Non-current assets $ — $ 59,335 $ 102,686 $ 64,690 $ — $ — Current liabilities (11,091 ) (16,691 ) (11,148 ) (10,287 ) (1,579 ) (1,416 ) Non-current liabilities (217,480 ) (719,600 ) (131,096 ) (511,157 ) (472,255 ) (377,036 ) Funded status, end of year $ (228,571 ) $ (676,956 ) $ (39,558 ) $ (456,754 ) $ (473,834 ) $ (378,452 ) 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, 2016 and 2015 was as follows: Pension Plans Postretirement Plans August 31, August 31, August 31, August 31, 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 $ 592,873 $ 480,408 $ 397,065 $ 295,098 $ 143,777 $ 75,224 Prior service (credit) cost — (6,860 ) — (7,281 ) 31,569 35,173 Accumulated other comprehensive loss, pre-tax $ 592,873 $ 473,548 $ 397,065 $ 287,817 $ 175,346 $ 110,397 Funded Status for Defined Benefit Plans The accumulated benefit obligation for defined benefit pension plans as of August 31, 2016 and 2015 was as follows: August 31, August 31, U.S. Plans Non-U.S. U.S. Plans Non-U.S. Accumulated benefit obligation $ 2,017,437 $ 1,592,598 $ 1,626,972 $ 1,313,946 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, 2016 and 2015 : Pension Plans Postretirement Plans August 31, August 31, August 31, August 31, 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 $ 2,030,006 $ 1,400,510 $ 142,244 $ 757,741 $ 500,964 $ 403,095 Fair value of plan assets 1,801,435 664,220 — 236,297 27,130 24,643 August 31, August 31, U.S. Plans Non-U.S. U.S. Plans Non-U.S. Accumulated benefit obligation in excess of plan assets Accumulated benefit obligation $ 2,017,437 $ 1,233,952 $ 142,244 $ 629,524 Fair value of plan assets 1,801,435 627,738 — 204,076 Investment Strategies U.S. Pension Plans The overall investment objective of the defined benefit pension plans is to match the duration of the plans’ assets to the plans’ liabilities 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 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 2017 and weighted-average plan assets allocations as of August 31, 2016 and 2015 by asset category for defined benefit pension plans were as follows: 2017 Target 2016 2015 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Asset Category Equity securities — % 36 % — % 29 % 10 % 30 % Debt securities 77 51 75 58 87 56 Cash and short-term investments 23 3 25 2 3 3 Insurance contracts — 7 — 7 — 6 Other — 3 — 4 — 5 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, 2016 were as follows: U.S. Plans Level 1 Level 2 Level 3 Total Fixed Income U.S. government, state and local debt securities — 359,583 — 359,583 Non-U.S. government debt securities — 38,232 — 38,232 U.S. corporate debt securities — 614,136 — 614,136 Non-U.S. corporate debt securities — 79,124 — 79,124 Mutual fund debt securities 286,360 — — 286,360 Cash and short-term investments — 451,130 — 451,130 Total $ 286,360 $ 1,542,205 $ — $ 1,828,565 Non-U.S. Plans Level 1 Level 2 Level 3 Total Equity Mutual fund equity securities $ — $ 311,324 $ — $ 311,324 Fixed Income Non-U.S. government debt securities 91,745 — — 91,745 Mutual fund debt securities 15,608 524,472 — 540,080 Cash and short-term investments 19,382 4,048 — 23,430 Insurance contracts — 72,525 — 72,525 Other — 42,050 — 42,050 Total $ 126,735 $ 954,419 $ — $ 1,081,154 There were no transfers between Levels 1 and 2 during fiscal 2016 . 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 $80,077 in fiscal 2017 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 2017 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 (1) Non-U.S. U.S. and Non-U.S. Plans 2017 $ 46,881 $ 44,537 $ 10,259 2018 49,865 50,094 11,469 2019 53,277 55,964 12,598 2020 56,950 66,225 13,942 2021 61,361 75,166 15,830 2022-2026 373,921 416,507 110,756 _______________ (1) Excludes the impact of the anticipated U.S. pension plan termination noted below. U.S. Pension Plan Termination On March 18, 2016 , Accenture plc’s Board of Directors approved an amendment to terminate the Company’s U.S. pension plan, effective May 30, 2016 , for all active and former employees who are no longer accruing benefits in the pension plan (approximately 16,200 people). The amendment also provides for the creation of a separate defined benefit plan with substantially the same terms for approximately 600 active employees who are currently eligible to accrue benefits. The U.S. pension plan is expected to be settled in 12 to 18 months from the termination effective date, subject to receipt of customary regulatory approvals. The Company’s ultimate settlement obligation will depend upon both the nature and timing of participant settlements and prevailing market conditions. Upon settlement, the Company expects to recognize additional expense, consisting of unrecognized actuarial losses included in Accumulated other comprehensive loss that totaled approximately $467,000 as of August 31, 2016 , adjusted for the difference between the ultimate settlement obligation and the Company’s accrued pension obligation. The Company does not expect the settlement of the U.S. pension plan obligations to have a material impact on its cash position. 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 $419,932 , $397,123 and $331,801 in fiscal 2016, 2015 and 2014 , respectively. |
