Annual Report 2010 - SBM Offshore

Financial Review / Financial Statements 2010
Deferred income tax assets are recognised only to the
extent that it is probable that future taxable profit will be
available against which the temporary differences can
be utilised.
Deferred income tax is provided on temporary differences
arising on investments in subsidiaries and
associates, except where the timing of the reversal of
the temporary difference is controlled by the Company
and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when
the deferred income tax assets and liabilities relate to
income taxes levied by the same taxation authority
on either the taxable entity or different taxable entities
where there is an intention to settle the balances on a
net basis.
Employee benefits
Pension obligations
Group companies operate various pension schemes.
The schemes are generally funded through payments to
insurance companies or are defined as multi employer
plans. The payments in each case are determined
by periodic actuarial calculations. The Company has
both defined benefit and defined contribution plans. A
defined benefit plan is a pension plan that defines an
amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors
such as age, years of service and compensation.
A defined contribution plan is a pension plan under
which the Company pays fixed contributions to public
or private pension insurance plans on a mandatory,
contractual or voluntary basis. The Company has no
legal or constructive obligations to pay further contributions
if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service
in the current and prior periods. The contributions to
defined contribution plans and multi-employer plans,
are recognised as an expense in the income statement
as incurred.
124 SBM Offshore – Annual Report 2010
The liability recognised in the balance sheet in respect
of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet
date less the fair value of the plan assets, together
with adjustments for unrecognised actuarial gains and
losses and past service costs. The defined benefit
obligation is calculated periodically by independent
actuaries using the projected unit credit method.
The present value of the defined benefit obligation is
determined by discounting the estimated future cash
outflows using interest rates on high-quality corporate
bonds that have maturity dates approximating the
terms of the Company’s obligations.
Cumulative actuarial gains and losses arising from
experience adjustments and changes in actuarial
assumptions exceeding 10% of the value of plan
assets or 10% of the defined benefit obligation are
taken to the income statement over the expected average
remaining working lives of the employees in the
related plan.
Past-service costs are recognised immediately in net
income, unless the changes of the pension plan are
conditional on remaining in service for a specified
period of time (the vesting period). In this case, the
past-service costs are amortised on a straight-line
basis over the vesting period.
Other employee benefits
The other employee benefits provisions relate to
other post-employment benefit obligations, termination
and seniority benefits. Termination benefits are
payable when employment is terminated before the
normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits.
Seniority benefits are paid upon reaching a predetermined
number of service years. The Company
recognises termination benefits when it is demonstrably
committed to either: terminating the employment of
current employees according to a detailed formal plan
without possibility of withdrawal; or providing termination
benefits as a result of an offer made to encourage
voluntary redundancy. Benefits falling due more than 12
months after the balance sheet date are discounted to
present value.