Consolidated Financial Statements >
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
178
| 2012 annual report prysmian group
B.17
EMPLOYEE BENEFITS
Pension funds
The Group operates both defined contribution plans and
defined benefit plans.
A defined contribution plan is a plan under which the Group
pays fixed contributions to third-party fund managers and
to which there are no legal or other obligations to pay further
contributions should the fund not have sufficient assets
to meet the obligations to employees for current and prior
periods. In the case of defined contribution plans, the Group
pays contributions, voluntarily or as established by contract, to
public and private pension insurance funds. The contributions
are recorded as personnel costs on an accrual basis. Prepaid
contributions are recognised as an asset which will be repaid or
used to offset future payments, should they be due.
A defined benefit plan is a plan not classifiable as a defined
contribution plan. In defined benefit plans, the total benefit
payable to the employee can be quantified only after the
employment relationship ceases, and is linked to one or
more factors, such as age, years of service and remuneration;
the related cost is therefore charged to the period’s income
statement on the basis of an actuarial calculation. The liability
recognised for defined benefit plans corresponds to the
present value of the obligation at the reporting date, less the
fair value of the plan assets, where applicable. Obligations
for defined benefit plans are determined annually by an
independent actuary using the projected unit credit method.
The present value of a defined benefit plan is determined by
discounting the future cash flows at an interest rate equal to
that of high-quality corporate bonds issued in the liability’s
settlement currency and which reflects the duration of the
related pension plan. Actuarial gains and losses arising
from the above adjustments and the changes in actuarial
assumptions are recorded directly in equity.
Other post-employment obligations
Some Group companies provide medical benefit plans for
retired employees. The expected cost of these benefits is
accrued over the period of employment using the same
accounting method as for defined benefit plans. Actuarial
gains and losses arising from the valuation and the effects
of changes in the actuarial assumptions are accounted for
in equity. These liabilities are valued annually by a qualified
independent actuary.
Termination benefits
The Group recognises termination benefits when it can be
shown that the termination of employment complies with
a formal plan communicated to the parties concerned that
establishes termination of employment, or when payment of
the benefit is the result of voluntary redundancy incentives.
Termination benefits payable more than twelve months after
the reporting date are discounted to present value.
Share-based payments
Share-based compensation is accounted for according to the
nature of the plan:
(a) Stock options
Stock options are valued on the basis of the fair value
determined on their grant date. This value is charged to
the income statement on a straight-line basis over the
option vesting period with a matching entry to equity.
This recognition is based on an estimate of the number of
stock options that will effectively vest in favour of eligible
employees, taking into consideration any vesting conditions,
irrespective of the market value of the shares.
(b) Equity-settled share-based payment transactions
Where plan participants acquire the Company’s shares at a
fixed price (co-investment plans), the difference between the
fair value of the shares and the purchase price is recognised
over the vesting period in personnel costs, with a matching
entry in equity.
