Siegfried Annual Report 2009

Employee benefits
Pension plans The expense and the net present value of
pension commitments of the material defined benefit plans
and other long-term employee benefits are determined
based on various economic and demographic assumptions
using the Projected Unit Credit Method. This takes into
account insurance years up to the valuation date. The major
assumptions involved in the calculation are expectations
about future salary increases, return on pension assets,
turnover and life expectancy.
The fair value of the shares corresponds to the fair value at
the grant date. Costs for the employee share plan are
recorded as personnel expenses in the period in which the
employee performed his services. The costs for the shares
are adjusted to fair value on the grant date and also booked
as personnel expenses.
Profit sharing/Bonus plans Bonus obligations and profit
sharing are recognized on an accrual basis as a liability and
expense, if there is a contractual commitment or past business
practice constitutes a de facto commitment.
The valuation of the pension commitments of the material
defined benefit plans is performed on an annual basis by
independent qualified actuaries. The last valuation of the
pension commitments of the material defined benefit plans
was performed as of Decemberr 31, 2009. Pension assets
are valued annually, at market value. The calculation is based
on November 30, 2009 figures with an expansion to year
end.
Current service cost is recorded in the Income Statement in
the period in which it is incurred. Past-service costs resulting
from plan changes are recognized in income on a straightline
basis over the average period until vesting. If deferred
benefits vest immediately, they are recognized in income
immediately.
Differences in experience and changes in actuarial assumptions
result in actuarial gains and losses. The Group has
adopted the policy to recognize these actuarial gains and
losses directly in equity in the Statement of comprehensive
income. As the differences may be significant, this method
may have a material impact on the Group’s equity.
Surpluses in pension plans are recognized to the extent of
their future economic benefit for the Siegfried Group.
Taxes The tax expense for the period comprises current and
deferred tax. Tax is recognized in the income statement,
except to the extent that it relates to items recognized in
other comprehensive income or equity. In this case tax is also
recognized there. Provisions are made for all tax liabilities at
the balance sheet date, irrespective of the date on which
they are payable. Provisions are made for deferred taxes on
all temporary differences between amounts determined for
tax purposes and those reported for Group accounting purposes
at the actual local tax rates likely to be applied (liability
method), except for those temporary differences related to
entities, where the timing of their reversal can be controlled
and it is probable that the difference will not reverse in the
foreseeable future. These differences are mainly due to the
application of declining balance depreciation allowed for tax
purposes and to the creation of reserves on inventories and
receivables. Deferred tax assets arising from temporary timing
differences and tax loss carry-forwards are recognized
if it is probable that future taxable profits will be available
against which the deferred tax asset can be utilized.
Changes in deferred taxes are measured against net profit
unless the tax relates to an item recognized under equity. No
provisions are made for deferred income taxes on potential
future dividends out of retained earnings, as these sums are
deemed permanently reinvested.
Other non-current employee benefits Other non-current
employee benefits represent amounts to be provided by
Group companies under deferred compensation arrangements
mandated by certain jurisdictions or regulations. In
the Siegfried Group these are mainly benefits related to long
service awards. The commitments calculated by the expert
are included in Other non-current liabilities. Benefit costs are
recognized on an accrual basis in the Income Statement.
Share-based payments In September 2005 the Siegfried
Group implemented an Employee Share Plan to allow
employees and the Board of Directors to buy shares at a discounted
rate (30% below market value). The share plan is
considered as an equity-settled share-based payment plan.
Net sales Net sales represent amounts received and receivable
for goods and services supplied to customers after
deducting discounts and volume rebates and excluding sales
and value added taxes. Revenue from the sale of goods is
recognized when the significant risks and rewards of ownership
have passed to the buyer, usually upon shipment. Raw
materials supplied by the customer or raw materials, on
which the customer carries the risk, are not recognized as
sales. Income from services is recognized on an accrual basis
in accordance with the underlying service agreements.
Cost of goods sold The production costs of the goods
and services sold include the direct production costs and the
78 Financial Statements Siegfried Group