Chrysler 2010 Annual Report Download - page 159

FIAT GROUP
CONSOLIDATED
FINANCIAL
STATEMENTS
AT 31 DECEMBER
2010
NOTES
158
Employee benefits
Pension plans
Employees of the Group participate in several defined benefit and/or defined contribution pension plans in accordance with local
conditions and practices in the countries in which the Group operates.
The Group’s obligation to fund defined benefit pension plans and the annual cost recognised in the income statement are
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 plan assets at the end of the previous year is amortised over the average remaining service lives of the employees (the
“corridor approach”). In the context of IFRS First-time Adoption, the Group elected to recognise all cumulative actuarial gains
and losses that existed at 1 January 2004, even though it had decided to use the corridor approach for subsequent actuarial
gains and losses.
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, reduced by the fair value of plan assets. Any net asset resulting from this
calculation is recognised at the lower of its amount and the total of any cumulative unrecognised net actuarial losses and past
service cost, and the present value of any economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan.
If changes are made to a plan that alter the benefits due for past service or if a new plan is introduced regarding past service
then past service costs are recognised in the income statement on a straight-line basis over the average period remaining
until the benefits become vested. If a change is made to a plan that significantly reduces the number of employees who are
members of the plan or that alters the conditions of the plan such that employees will no longer be entitled to the same benefits
for a significant part of their future service, or if such benefits will be reduced, the profit or loss arising from such changes is
immediately recognised in the income statement.
All other costs and income arising from the measurement of pension plan provisions are allocated to costs by function in the
income statement, except for interest cost on unfunded defined benefit plans which is reported as part of Financial expenses.
Costs arising from defined contribution plans are recognised as an expense in the income statement as incurred.
Post-employment plans other than pensions
The Group provides certain post-employment defined benefits, mainly health care plans. The method of accounting and the
frequency of valuations are similar to those used for defined benefit pension plans.
The scheme underlying the Employee leaving entitlements in Italy of the Italian Group companies (the TFR) was classified as
a defined benefit plan until 31 December 2006. The legislation regarding this scheme and leading to this classification was
amended by Law no. 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.
Equity compensation plans
The Group provides additional benefits to certain members of senior management and employees through equity compensation
plans (stock option plans and stock grants). In accordance with IFRS 2 – Share-based Payment, these plans represent a
component of recipient remuneration. The compensation expense, corresponding to the fair value of the instruments 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, with the offsetting credit recognised directly in equity. Any subsequent changes to fair value do not have any effect on the