Annual Report 2011 - Analist.be

Pension liabilities and similar obligationsDefined benefits schemesCommitments for defined benefit pension plans and similarobligations are valued using the Projected Unit Credit methodin compliance with IAS 19. This valuation uses financial anddemographic actuarial assumptions. These are used to valueservices rendered during the year on the basis of an estimateof the end-of-career salary.Provisions (or assets) recognised correspond to the presentvalue of the commitment less the fair value –possibly with anupper limit– of the scheme’s assets and past-service costs.Discount rates are adopted with reference to rates for bondsissued by AA (high quality) listed companies.Net pension expenditure under these types of plans isrecorded under “Personnel costs” or “Other operatingincome and expenditure relating to investing activities”, withthe exception of undiscounting of the commitments and ofthe expected yield on assets, which are accounted for underfinancial income and expenses, and reductions caused byrestructuring, which are recorded as other operating incomeand expenses.Past-service costs not recognised are progressivelyincorporated into the value of provisions (or assets) throughstraight-line depreciation over the average vesting period ofthe rights. Actuarial differences and post-employment limitsof scheme assets are wholly recognised as equity withoutsubsequent reclassification to profit or loss (option “OCI”).Defined contributions schemesThe Group contributes, in accordance with the laws andcustoms of each country, to the constitution of retirementreserves for its staff, paying contributions on a mandatoryor voluntary basis to external bodies such as pension funds,insurance companies or financial establishments. Theseschemes are defined contributions plans, in other wordsthey do not guarantee the level of benefits return. Thesecontributions are recorded under “Personnel costs” or “Otheroperating income and expenses relating to investing activities”.ProvisionsProvisions are recorded at the end of the financial year when acompany of the Group has an actual legal or implicit obligationresulting from a past event, when it is probable that an amountwill have to be paid out to settle this obligation, and if theamount of the obligation can be determined reliably.The amount recorded as a provision should be the mostaccurate estimation of the expenditure required to meet theobligation existing on the last day of the financial year.Provisions are recognised against profit or loss, apart fromprovisions for decommissioning and some provisions forrehabilitation, whose counterpart is included in the cost ofassets whose construction has created the obligation. Thistreatment applies in particular to certain of Imerys’ industrialinstallations and overburden mineral assets.Provisions whose settlement is expected within twelve monthsafter the balance sheet date or whose settlement may occurat any time are not discounted. Provisions whose settlementis expected after twelve months after the balance sheet dateare discounted. Changes in discounted provisions resultingfrom a revision of the amount of the obligation, its calendar orits discount rate are recognised against profit or loss, or forprovisions recognised against assets, as an adjustment of thecost of the assets. The discounting is recognised as a debit infinancial income and expenses.Provisions for restructuring are not recorded unless the Grouphas approved a detailed and formal restructuring plan and ifthe restructuring has either begun or been publicly announced.Costs relating to the Group’s current operations are not takeninto account.Current and non-current debtsNon-current debts (bank loans and bonds) and current debts(bank deposits) are initially recorded in the accounts at theirfair value less, in the case of a financial liability that has notbeen recorded at fair value through the income statement, thetransaction costs that are directly imputed to the acquisition orrelease of the financial liability. After initial recording, they arevalued at their amortized cost (initial amount less repaymentsof principal plus or minus the cumulative amortization ofany difference between the initial amount and the value onmaturity).The exchangeable loans issued by the Group are consideredas hybrid instruments. At the date of issue, the fair value ofthe liability component is estimated based on the prevailingmarket interest rate for similar non-exchangeable bonds.The difference between the proceeds of issuance of theexchangeable bond and the fair value assigned to the liabilitycomponent, representing the embedded option to exchangethe bonds into shares, is included in the shareholders’ equity.The interest cost of the liability component is calculated byapplying the prevailing interest market rate.Trade payables and other liabilities are measured atamortised cost.Derivative financial instrumentsThe Group’s consolidated operating companies use derivativefinancial instruments to reduce their exposure to variousrisks, in particular foreign exchange, interest rate and energyprice risks. The purpose of these instruments is to hedgethe economic risks to which they are exposed. Financialinstruments are recognised at the transaction date, i.e. thedate the hedging contract is entered into. However, only thosethat fulfil the hedging criteria laid down in IAS 39 are given theaccounting treatments described hereafter.Changes in the fair value of financial instruments that do notqualify for hedge accounting are immediately recognised inprofit or loss.Accounts at 31 December 2011Annual Report 2011 77