ING Direct 2004 Annual Report Download - page 76

74 ING Group Annual Report 2004
WEIGHTED AVERAGES OF BASIC ACTUARIAL ASSUMPTIONS IN ANNUAL % AS AT 31 DECEMBER
2004 2003 2002
Discount rates 4.75 5.50 6.00
Expected rates of salary increases (excluding promotional increase) 2.50 2.50 2.75
Medical cost trend rates 4.25 4.00 3.75
Consumer price inflation 2.00 1.75 2.25
The expected rate of return for 2004 on plan assets was 6.75% (2003: 7.25%; 2002: 7.50%).
The expected rate of return on plan assets was weighted by the fair value of these assets. All other assumptions were weighted
by defined benefit obligations.
Insurance provisions
Provision for life policy liabilities The Provision for life policy liabilities is calculated on the basis of a prudent prospective
actuarial method, taking into account the conditions for current insurance contracts.
ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED
BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
OF ING GROUP (continued)
2.1
ANNUAL ACCOUNTS
Deferred tax assets Deferred corporate tax assets are stated at face value and are calculated for the carryforward of unused
tax losses and for temporary valuation differences between carrying amounts of assets and liabilities in the balance sheet and
tax base based on tax rates that are expected to apply in the period when the assets are realised.
Deferred corporate tax assets in relation with the carryforward of unused tax losses are recognised only to the extent that it is
probable that future taxable profits will be available for compensation.
Deferred tax assets are reported net of adjustable deferred tax liabilities.
Accrued assets
Direct variable costs for the acquisition of life insurance policies, for which periodic premiums will be receivable, are deferred
and amortised over the average period for which these premiums will be received, with allocation to such periods being made
on an annuity basis. Costs of acquiring non-life insurance business which vary with and are primarily related to the production
of such business are deferred and amortised equally over the period of the insurance.
General provisions
General A general provision involves a present obligation arising from past events, the settlement of which is expected to
result in an outflow from the company of resources embodying economic benefits, whereas the timing or the amount is
uncertain. Unless stated otherwise below, general provisions are discounted using a pre-tax discount rate to reflect the time
value of money.
Deferred tax liabilities Deferred corporate tax liabilities are stated at face value and are calculated for temporary valuation
differences between carrying amounts of assets and liabilities in the balance sheet and tax base based on tax rates that are
expected to apply in the period when the liabilities are settled.
Deferred tax liabilities are reported net of adjustable deferred tax assets.
Pension liabilities and other staff-related liabilities Provisions for pension liabilities and other staff-related liabilities are
calculated using the projected unit credit method of actuarial cost allocation. In accordance with this method, the discounted
value of the pension liabilities and other staff-related liabilities is determined on the basis of the active period of service up to
the balance sheet date, the projected salary at the expected retirement date and the market yields at the balance sheet date
on high quality corporate bonds.
In order to distribute expenses for pensions and other staff-related expenses evenly over the years, these expenses are
calculated using the expected rate of return on plan assets. Differences between this expected return and the actual return on
these plan assets and actuarial changes are not recognised in the profit and loss account, unless the accumulated differences
and changes exceed 10% of the greater of the defined benefit obligation and the fair value of the plan assets. The excess is
amortised and charged to the profit and loss account over employees remaining working lives.
The rates used for salary developments, interest discount factors and other adjustments reflect specific country conditions.