annual report - FIAT SpA

Cash-settled share-based payments
Various entities belonging to the former joint venture with General Motors reached agreements with certain employees
in 2001, 2002, 2003 and 2004 over four cash-settled share-based payment schemes entitled Stock Appreciation
Rights (SAR) plans. Under these plans, certain of the employees involved had the right to receive a payment
corresponding to the increase in price between the grant date and the exercise date of Fiat S.p.A. ordinary shares.
The 2001 and 2002 plans have already expired. In accordance with IFRS 2, the Group measures the liability arising
from cash-settled share-based payment transactions at fair value at each reporting date and each settlement date; the
changes in the fair value of these liabilities are recognised in the income statement for the period. With reference to
the 70,644 rights outstanding at that date, the liability arising at 31 December 2010 was €0.7million (€0.5 million at
31 December 2009). Moreover, 30,192 rights that were still outstanding at 31 December 2010 were no longer so at
the date of these financial statements following the expiry of the 2003 plan. Finally, as a consequence of the
Demerger, the residual Stock Appreciation Rights were converted to the right to receive a payment corresponding to
the increase in price between the grant date and the exercise date of the sum of the prices of the Fiat S.p.A. and Fiat
Industrial S.p.A. ordinary shares.
24. Provisions for employee benefits
Group companies provide post-employment benefits for their active employees and for retirees, either directly or by
contributing to independently administered funds. The way these benefits are provided varies according to the legal,
fiscal and economic conditions of each country in which the Group operates, the benefits generally being based on
the employees’ remuneration and years of service.
Group companies provide post-employment benefits under defined contribution and/or defined benefit plans.
In the case of defined contribution plans, the Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual, or voluntary basis. Once the contributions have been paid, the Group
has no further payment obligations. The entity recognise the contribution cost when the employee has rendered his
service and includes this cost by function in Cost of sales, Selling, general and administrative costs and Research and
development costs. In 2010 expenses of this nature included in Profit/(loss) from Continuing Operations totalled €937
million (€984 million in 2009), while those included in Profit/(loss) from Discontinued Operations totalled €443 million
(€396 million in 2009).
Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions made by an entity,
and sometimes by its employees, into an entity, or fund, that is legally separate from the employer and from which the
employee benefits are paid. Benefits are generally payable under these plans after the completion of employment.
The plans are classified by the Group on the basis of the type of benefit provided as follows: Reserve for Employee
leaving entitlements in Italy (TFR), Pension plans, Health care plans and Other.
Reserve for Employee leaving entitlements in Italy (“TFR”)
The TFR consists of the residual obligation for employee leaving entitlement which was required until 31
December 2006 under Italian legislation to be paid to employees of Italian companies with more than 50 employees
when leaving the company, and accrued over the employee’s working life for other companies. This provision is
settled to retiree employees and may be partially paid in advance if certain conditions are met. This is an unfunded
defined benefit post-employment plan.
Pension plans
The item Pension plans consists principally of the obligations of Group companies operating in the United States
(mainly to those in the CNH – Case New Holland sector) and in the United Kingdom towards certain employees and
former employees of the Group.
Under these plans, a contribution is generally made to a separate fund (trust) which independently administers the
plan assets. The Group’s funding policy is to contribute amounts to the plan equal to the amounts required to satisfy
the minimum funding requirements prescribed by the laws and regulations of each individual country. Prudently, the
Group makes discretionary contributions in addition to the funding requirements. If these funds are overfunded, that is
if they present a surplus compared to the requirements of law, the Group companies concerned could not be required
to contribute to the plan in respect of a minimum performance requirement as long as the fund is in surplus.
The investment strategy for these assets depends on the features of the plan and on the maturity of the obligations.
Typically long-term plan benefit obligations are funded by investing mainly in equity securities, as they are expected to
achieve long-term growth while exceeding inflation; short and medium-term plan benefit obligations are funded by
investing in fixed income securities, which are less volatile.
In the United Kingdom the Group participates amongst others in a plan financed by various entities belonging to the
Group, called the “Fiat Group Pension Scheme”. Under this plan, participating employers make contributions on
Fiat Group Consolidated Financial Statements at 31 December 2010 181