Sisal Annual Report 2011 - Permira

Employee benefitsPost-employment benefits are divided into two categories: defined contributionplans and defined benefit plans. In defined contribution plans, contributory costsare charged to the statement of comprehensive income as they occur, based onthe relative nominal value. In defined benefit plans, as the amount of the benefitto be granted is quantifiable only after termination of employment, the cost ischarged to the statement of comprehensive income based on actuarial computations.The severance indemnity, regulated by art. 2120 of the Italian Civil Code, representsthe indemnity recognised in Italy to employees and accrued during theirservice life, which is liquidated on termination of employment (severance).It is classified as an unfunded defined benefit plan and therefore there are no assetsto service it.Following the reform of complementary pensions, in accordance with LegislativeDecree 252 dated December 5, 2005, the severance indemnity due to employeesup to December 31, 2006 will remain as a liability of the company while thataccruing to employees from January 1, 2007 must be, at the discretion of theemployee, either placed in a complementary pension scheme or remain in thecompany which will then transfer it to the fund managed by INPS (the Italian SocialSecurity Institute).The change in the legislation has caused a differentiation in the treatments of theamounts due to the employee at the termination of employment as follows:• the liability for the portion of severance indemnity accrued up to December 31,2006 continues to follow the rules for defined benefit plans;• the liability for the portion maturing from January 1, 2007, payable to complementarypension schemes or to the INPS treasury fund, is recorded on the basisof contributions due in the period.With regard to the severance indemnity accrued up to December 31, 2006, inclusionin the financial statements as a defined benefit plan requires an actuarialestimate of the sums due to employees in exchange for their service in the currentperiod and in the preceding years and the discounted present value calculation ofsuch services in order to determine the present value of the Group’s obligations.The calculation of the present value of the Group’s obligations is carried out by anexternal expert using the Projected Unit Credit Method which considers only theseniority matured at the time of the valuation, the service years accrued at suchdate and the overall seniority at the time of expected payment of the benefit.As the Group, after the above mentioned reform, has no obligation for the indemnitymaturing after December 31, 2006, the component relative to future salaryincreases is excluded from the actuarial calculation of the indemnity.61 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011