Chrysler 2006 Annual Report Download - page 81

Fiat Group Consolidated Financial Statements at December 31, 2006 -Notes 159
Provisions for employee benefits at December 31, 2006 and 2005 are as follows:
(in millions of euros) At December 31, 2006 At December 31, 2005
Post-employment benefits:
- Employee severance indemnity 1,270 1,283
-Pension Plans 795 903
- Health care plans 986 1,102
- Other 259 294
Total post-employment benefits 3,310 3,582
Other provisions for employees 266 216
Other long-term employee benefits 185 152
Total provision for employee benefits 3,761 3,950
Defined benefit plan assets 11 –
Total Defined benefits plan assets 11 –
In 2006, changes in Other provisions for employees and in Other long-term employee benefits are as follows:
Change in the scope of
At December consolidation and At December
(in millions of euros) 31, 2005 Provision Utilisation other changes 31, 2006
Other provisions for employees 216 209 (129) (30) 266
Other long-term employee benefits 152 21 (14) 26 185
Total 368 230 (143) (4) 451
In 2005, changes in Other provisions for employees and in Other long-term employee benefits were as follows:
Change in the scope of
At December consolidation and At December
(in millions of euros) 31, 2004 Provision Utilisation other changes 31, 2005
Other provisions for employees 100 136 (28) 8 216
Other long-term employee benefits 140 18 (13) 7 152
Total 240 154 (41) 15 368
Post-employment benefits and Other long-term employee benefits are calculated on the basis of the following actuarial
assumptions:
At December 31, 2006 At December 31, 2005
In % Italy USA UK Other Italy USA UK Other
Discount rate 3.98 5.80 5.00 4-5 3.53 5.50 4.75 1-5.25
Future salary increase 3.65 n/a 3.50 1.5-3.5 2.58 n/a 3.50 2.25-3.5
Inflation rate 2.00 n/a 3.00 2.00 2.00 n/a 2.75 2.00
Increase in healthcare costs n/a 5-10 n/a n/a n/a 5-10 n/a n/a
Expected return on plan assets n/a 8.25 7.25 n/a n/a 8.25 6.88 n/a
26. Provisions for employee benefits
Group companies provide post-employment benefits for their employees, 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. The obligations relate
both to active employees and to retirees.
Group companies provide post-employment benefits under defined contribution and/or defined benefit plans.
In the case of defined contribution plans, the company pays contributions to publicly or privately administered pension insurance
plans on a mandatory,contractual or voluntary basis. Once the contributions have been paid, the company has no further payment
obligations. Liabilities for contributions accrued but not paid are included in the item Other payables (see Note 30). The entity
recognise the contribution cost when the employee has rendered his service and includes this cost by destination in Cost of Sales,
Selling, General and Administrative costs and Research and development costs. In 2006, these expenses totalled 1,161 million
euros (1,080 million euros in 2005).
Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions 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.
In the case of funded and unfunded post employment benefits, included in the item Post-employment benefits, the Group
obligation is determined on an actuarial basis, using the Projected Unit Credit Method and is offset against the fair value of plan
assets, if any.Where the fair value of plan assets exceed the post-employment benefits obligation, and the group has a right of
reimbursement or a right to reduce future contributions, the surplus amount is recognised in accordance with IAS 19 as an asset.
As discussed in the paragraph Significant accounting policies, actuarial gains and losses are accounted for from January 1, 2004
using the corridor approach.
Finally, the Group grants certain other long-term benefits to its employees; these benefits include those generally paid when the
employee attains a specific seniority or in the case of disability. In this case the measurement of the obligation reflects the
probability that payment will be required and the length of time for which payment is expected to be made. The amount of this
obligation is calculated on an actuarial basis using the Projected Unit Credit Method. The corridor approach is not used for
actuarial gains and losses arising from this obligation.
The item Other provisions for employees consists of the best estimate at the balance sheet date of short-term employee benefits
payable (such as bonuses for example) by the Group within twelve months after the end of the period in which the employees
render the related.
Fiat Group Consolidated Financial Statements at December 31, 2006 -Notes 158