Arcelor's capital increase - Vernimmen

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2—ACCOUNTING POLICIES (Continued)
Options were issued at the market price at the date of issue and may be exercised at that price. No
cost linked with these awards has been accounted for in the income statement. When options are exercised
the cash received less transaction costs are credited to subscribed capital and share premium.
17) Provisions for contract termination benefits
The Group recognises an obligation for termination benefits when it is demonstrably committed
either to terminating an employee’s contract before the normal retirement date or to encouraging
voluntary redundancy. Such termination benefits do not bring future economic benefits (serices rendered
by employees) to the Group and are immediately recognised in the income statement.
Within the Group, provisions for termination benefits fall into one of two categories:
Social provisions in the context of restructuring plans
Provisions are recorded when the Group has announced to the entirety of the affected employees or
their representatives a social plan that is detailed and formalised in accordance with the requirements of
IAS 37. Such social plans either translate into redundancy or early retirement measures.
Benefits are calculated as a function of the approximate number of people for whose employment
contracts will be terminated. If such benefits are claimable more than twelve months after the end of the
period, they are discounted using an interest rate, which corresponds to that of AAA credit rated bonds
that have maturity dates approximating the terms of the Group’s obligations.
Early retirement plans
Within the Group, early retirement plans primarily correspond to the practical implementation of
social plans. Such early retirement plans are considered effective when the affected employees have been
formally informed and when liabilities have been determined using an appropriate actuarial calculation.
Early retirement plans can also be linked to collective agreements signed with certain categories of
employees.
Liabilities in respect of both of the above scenarios are calculated on the basis of the effective number
of employees likely to take early retirement, in accordance with IAS 19. An independent actuary performs
the calculation annually. Liabilities are discounted using an interest rate, which corresponds to that of
AAA credit rated bonds that have maturity dates approximating the terms of the Group’s obligations.
18) Provisions
A provision is accounted for when the Group has a present obligation as a result of a past event (legal
or constructive), whose amount can be reliably estimated, and when it is probable that an outflow of
economic resources will be required to settle the obligation.
Technical warranties
A provision for technical warranties is recognised when the underlying products or services are sold.
The provision is based on historic warranty data and a weighting of all possible outcomes against their
associated probabilities.
Restructuring
A provision for restructuring is accounted for when the Group has approved a detailed formal
restructuring plan and has raised a valid expectation that it will carry out the restructuring by commencing
the implementation of the plan or announcing publicly its main features.
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