ANNUAL REPORT ARCELOR 2003 - paperJam

13) EquityRepurchase of share capitalWhen share capital is repurchased, the amount ofconsideration paid, including all attributable costs, isrecognised as a change in equity. Repurchased/treasury shares are deducted from total shareholders’equity under the caption “Treasury shares” until they arecancelled or disposed of.DividendsDividends are recognised as a liability in the period inwhich they are approved by the General Meeting.14) Convertible debenture loansDebenture loans convertible into share capital at theoption of the holder, where the number of shares issueddoes not change with fluctuations in their fair value, areaccounted for as compound financial instruments, net ofattributable transaction costs. The equity component ofthe convertible debenture loans is calculated as theexcess of the issue proceeds over the present value ofthe future interest and principal payments, discounted atthe prevailing market rate for a similar liability that doesnot have an associated equity component. The interestexpense recognised in the income statement iscalculated using the effective interest rate method.15) Interest-bearing borrowingsInterest-bearing borrowings are recorded at initial cost,less direct attributable transaction costs. They are thenrecorded at amortised cost with any difference betweenthe amortised cost and the redemption value beingrecognised in the income statement over the period ofthe borrowings on an effective interest rate basis.16) Employee benefitsTypes of pension plans> Defined contribution plansDefined contribution plans are those plans in respect ofwhich the Group pays fixed contributions into anexternal life assurance or pension fund for certaincategories of employees. Contributions are paid in returnfor services rendered by the employees during theperiod. They are expensed as they are incurred in linewith the treatment applied to wages and salaries. Noprovisions are established in respect of definedcontribution plans, as they do not generate futurecommitments for the Group.Within the Group, defined contribution plans exclusivelyrelate to pension plans. They are, primarily, additionalpension plans that serve to complement local legalpension schemes in respect of which the Group payscontributions to social organisations and which areaccounted for in the same manner as salaries and wages.> Defined benefit plansDefined benefit plans are schemes that provideguaranteed benefits to certain categories of employees,either by way of contractual obligations or through acollective agreement. This guaranteed benefit representsa future commitment for the Group and, as such, aliability is calculated. The provision is calculated byestimating the benefits accumulated by employees inreturn for services rendered during the period and duringprior periods.Benefits are discounted in order to determine thepresent value of the future obligation resulting from thistype of plan. They are shown in the balance sheet afterthe deduction of the fair value of the assets that serve tocover them.The discount rate applied is the yield, at the balancesheet date, on AAA credit rated bonds that havematurity dates similar to the terms of the Group’spension obligations. A qualified actuary performs theunderlying calculations annually, using the projected unitcredit method.When the terms and conditions of a plan change, theportion of the increased benefit relating to past servicesby the employees is calculated as an expense in theincome statement on a straight-line basis over theaverage period until the benefits become vested. To theextent that the benefits vest immediately, the expense isimmediately recognised in the income statement.In calculating the Group’s obligation in respect of a plan,to the extent that any unrecognised actuarial gain or lossexceeds ten percent of the greater of the present valueof the defined benefit obligation and the fair value of planassets, it is recognised in the income statement over theexpected average remaining working lives of the employeesparticipating in the plan (“corridor policy”). Otherwise, theactuarial gain or loss is not taken into consideration.Where the calculation results in a benefit to the Group,the recognised asset is limited to the net total of anyunrecognised actuarial losses and past service costsand the present value of any future refunds from the planor reductions in future contributions to the plan.142ANNUAL REPORT ARCELOR 2003