Chrysler 2009 Annual Report Download - page 285

FIAT S.P.A.
STATUTORY
FINANCIAL
STATEMENTS AT
31 DECEMBER
2009
NOTES
284
Employee benefits
Post-employment plans
The company provides pension plans and other post-employment plans to its employees. The pension plans for which the
company has an obligation under Italian law are defined contribution plans, while the other post-employment plans, for which
the company generally has an obligation under national collective bargaining agreements, are defined benefit plans. Payments
made by the Company for defined contribution plans are recognised as a cost in the income statement when incurred. Defined
benefit plans are based on the employee’s working life and on the salary or wage received by the employee over a pre-
determined period of service.
The scheme underlying the employee severance indemnity of the Italian Group companies (Trattamento di Fine Rapporto
or “TFR”) was classified as a defined benefit plan until 31 December 2006. Legislation relating to this scheme and leading to
this classification was amended by Law 296 of 27 December 2006 (the “2007 Finance Law”) and subsequent decrees and
regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies
with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the consolidated financial
statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that
date the scheme is classified as a defined contribution plan.
The company’s obligation to fund defined benefit plans and the annual cost recognised in the income statement is determined
on an actuarial basis using the projected unit credit method. The portion of net cumulative actuarial gains and losses which
exceeds the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of the plan assets at
the end of the previous year is amortised over the average remaining service lives of employees (the “corridor approach”); the
portion of actuarial gains and losses that does not exceed this threshold is deferred.
Upon first-time adoption of IFRS, the Company elected to recognise all cumulative actuarial gains and losses existing at
1 January 2004 (date of first-time adoption of IFRS by the Fiat Group), despite having elected the corridor approach for
recognition of subsequent actuarial gains and losses.
The expense related to the reversal of discounting pension obligations for defined benefit plans are recognised under financial
expense.
The post-employment benefit obligation recognised in the statement of financial position represents the present value of the
defined benefit obligation as adjusted for unrecognised actuarial gains and losses, arising from the application of the corridor
method and unrecognised past service cost.
Other long-term employee benefits
The accounting treatment for other long-term benefits is the same as that for post-employment benefit plans except for the fact
that actuarial gains and losses and past service costs are fully recognised in the income statement in the year in which they arise
and the corridor method is not applied.
Equity-based compensation
The Company provides additional benefits to certain senior managers and employees in the form of equity participation schemes
(stock options and stock grants). In accordance with IFRS 2 - Share-based Payment, such plans constitute a component of the
recipient’s compensation and the cost, based on the fair value of the instrument at the grant date, is recognised in the income
statement on a straight-line basis over the period from the grant date to the vesting date, and a balancing entry recognised
directly in equity. The initial measurement is not affected by any subsequent changes in fair value. In accordance with the
transitional provisions of IFRS 2, the Company applied the Standard to all stock options granted after 7 November 2002 and not
yet vested at 1 January 2005, the effective date of the Standard. Detailed information is provided in respect of all stock options
granted on or prior to 7 November 2002.