Financial Statements - Solvay

68
Solvay Global Annual Report 2008
Employment benefi ts provisions
The actuarial assumptions used in determining the pension obligation at December 31 as well as the annual cost can be
found on pages 91-96. All main employee benefi ts plans are assessed annually by independent actuaries. Discount rates
and infl ation rates are defi ned globally by management, the other assumptions (such as future salary increases, expected
long-term rates of return on plan assets and expected rates of medical care cost increases) are defi ned at a local level. All
plans are supervised by the Group’s central HR department with the help of one central actuary to check the acceptability
of the results and assure uniformity in reporting.
Health, Safety and Environmental Provisions (HSE)
HSE provisions are managed and coordinated jointly by an HSE competence center and corporate fi nance in cooperation
with the strategic business units and local management.
Events, the probable occurrence of which lies more than 20 years into the future, have not been taken into account in
the provision amount since it is considered that, except on rare occasions, estimates of expenditures are no longer reliable
beyond this period.
The forecasts of expenses are set up in constant currency, with assumptions made regarding infl ation and technological
innovations in the environmental fi eld.
The forecasts of expenses are discounted to present value in accordance with IFRS rules.
The discount rate (4 % in 2007 and 2008) corresponds to an average risk-free rate on 10-year government bonds.
This rate is set annually by Solvay’s corporate fi nance department and can be revised based on the evolution of economic
parameters of the country involved.
To refl ect the nearness of the probable date of occurrence of the expenses, the provisions are increased each year
on a prorated basis at the discount rate defi ned by Solvay’s corporate fi nance department. This increase is applied
systematically to provisions with a probability of occurrence less than or equal to 10 years. Provisions in the 10-20 year
bracket are examined annually and updated if necessary.
Provisions for litigation
All signifi cant legal litigations 1 (or threats of litigation) are reviewed by Solvay’s in-house lawyers with the support, when
appropriate, of external counsels at least every quarter. This review includes an assessment of the need to recognize
provisions or adapt existing provisions together with Solvay’s corporate fi nance department and the insurance
department. The resulting report is submitted to the Executive Committee by the Group general counsel and thereafter
to the Audit Committee.
Doubtful trade receivables
Customer credit risk exceeding EUR 500 000 per customer is managed by a risk committee and by in-house credit
management, who fi x credit limits for customers and follow up on cash collections. Additionally, Solvay also uses credit
insurance policies to manage customer credit risk.
1 A similar procedure is implemented for tax litigations.