ANNUAL REPORT ARCELOR 2003 - paperJam

Within the Group, defined benefit plans relate to complementaryretirement schemes, departure indemnities,work medals and health insurance arrangements.Nature of commitments of defined benefit plans> Complementary retirement schemesSuch schemes are provided in addition to the legalminimum pension in respect of which Group companiescontribute directly into social organisations and whichare accounted for in the same manner as salaries andwages.> Departure indemnitiesDeparture indemnities are normally associated withcollective agreements with employees under whichindemnities are paid upon normal retirement as well asupon voluntary or involuntary retirement.> Work medalsWork medal programmes are sometimes establishedunder agreements at individual company level. Thesearrangements represent long-term service awardprogrammes made to employees with certain levels ofseniority with their employers.> Health insuranceHealth insurance schemes relate exclusively to theAmerican subsidiaries of the Group (“post retirementmedical care”). For European entities, health insuranceis in place by way of obligatory contributions intostate health insurance schemes. These contributionsare accounted for in the same manner as wages andsalaries.Assets covering commitments relating to definedbenefit plansThe commitments in respect of certain retirement plansare wholly, or in part, covered by life assurance policiesor pension funds, depending on the regulations in placein the country in which the benefits are awarded (theconcept of a “funded obligation”).Externalised commitments are evaluated by externalspecialists.Remuneration by way of shares or share optionsArcelor S.A. has a share option plan in place as atDecember 31, 2003. Moreover, options on Usinorshares have been allocated to certain Directors andemployees of Usinor.Options were issued at the market price at the dateof issue and may be exercised at that price. No costlinked with these awards has been accounted for in theincome statement. When options are exercised thecash received less transaction costs are credited tosubscribed capital and share premium.17) Provisions for contract termination benefitsThe Group recognises an obligation for terminationbenefits when it is demonstrably committed either toterminating an employee’s contract before the normalretirement date or to encouraging voluntary redundancy.Such termination benefits do not bring future economicbenefits (services rendered by employees) to the Groupand are immediately recognised in the income statement.Within the Group, provisions for termination benefits fallinto one of two categories:Social provisions in the context of restructuringplansProvisions are recorded when the Group has announcedto the entirety of the affected employees or their representativesa social plan that is detailed and formalised inaccordance with the requirements of IAS 37. Suchsocial plans either translate into redundancy or earlyretirement measures.Benefits are calculated as a function of the approximatenumber of people for whose employment contracts willbe terminated. If such benefits are claimable more thantwelve months after the end of the period, they arediscounted using an interest rate, which corresponds tothat of AAA credit rated bonds that have maturity datesapproximating the terms of the Group’s obligations.Early retirement plansWithin the Group, early retirement plans primarilycorrespond to the practical implementation of socialplans. Such early retirement plans are consideredeffective when the affected employees have beenformally informed and when liabilities have beendetermined using an appropriate actuarial calculation.Early retirement plans can also be linked to collectiveagreements signed with certain categories of employees.Liabilities in respect of both of the above scenarios arecalculated on the basis of the effective number ofemployees likely to take early retirement, in accordancewith IAS 19. An independent actuary performs thecalculation annually. Liabilities are discounted using aninterest rate, which corresponds to that of AAA creditrated bonds that have maturity dates approximating theterms of the Group’s obligations.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 143