Annual report 2004 (English) - PDF 3546K - Imperial Tobacco

96
Altadis Group 2004 Financial Information
Notes to 2004
Consolidated Financial Statements
m) Provisions for contingencies and expenses
The Group records provisions for the estimated
amounts required to meet possible or certain
liabilities arising from litigation in progress or from
indemnity payments or obligations of an
undetermined amount, and collateral and other
guarantees provided by the consolidated
companies. These provisions are recorded when the
circumstances giving rise to such liability become
known.
n) Pension and other commitments to
employees
The main Group companies have undertaken to
supplement the social security benefits received by
certain groups of employees, mainly in the event of
retirement, disability or death.
In general, the commitments relating to serving
and retired employees in these groups are definedcontribution
commitments and have been
externalized through external pension plans and
insurance policies. The contributions made by the
Group are recorded under the “Personnel
Expenses” caption in the consolidated statement of
income for the year, and the amounts payable in
this connection are recorded under the “Long-Term
Debt – Other Payables” and “Current Liabilities –
Other Payables” captions in the accompanying
consolidated balance sheet.
The French Group companies assign a percentage
of their income for each year to compensation for
their employees, in accordance with current
legislation. This amount is externalized by each
company, in the name of the employee, in certain
marketable securities which the employees
generally cannot sell for a period of five years.
The expense recorded in this connection in 2004
amounted to €22,378 thousand and is recorded
under the “Personnel Expenses” caption in the
accompanying consolidated statement of income.
Additionally, there are defined commitments to
certain groups of employees, which are generally
externalized and are valued based on actuarial
studies. The related provisions are recorded under
the “Provisions for Contingencies and Expenses”
caption in the accompanying consolidated balance
sheet (see Note 15). In this connection, the
collective labor agreements or current agreements
between certain consolidated companies (mainly
Altadis, S.A., SEITA and RTM) and certain groups of
their employees stipulate the companies’ obligation
to make a one-time set payment on retirement or
termination, provided certain conditions, relating
generally to the date the employee was hired and
his/her years of service, are met. Also, Altadis USA,
Inc. is obliged to make certain periodic pension
payments to its employees from the date on which
they retire.
o) Compensation systems linked to the share
price
As indicated in Note 19-b, the Parent Company and
the subsidiaries SEITA and LOGISTA have
instrumented various stock option plans for
directors holding executive office, executives and
employees.
In order to hedge the possible variations in the
share price as compared with the exercise prices of
the stock options granted by Altadis, S.A. and of
those granted by LOGISTA in 2000, the two
companies have entered into equity swap contracts
with financial institutions. The costs of the
contracts are accrued by the interest method. Also,
provisions are recorded to meet the possible loss
that might arise from settlement of these contracts,
calculated as the difference between the contract
value and the lower of the market value at year-end
or the exercise price of the options.
In the case of the SEITA stock option plans and of
the stock option plan launched by LOGISTA in
2002, the shares required for the options granted