Loreal 2011 Annual Report Download - page 127

125REGISTRATION DOCUMENT − L’ORÉAL 2011
2011 Consolidated Financial Statements
4
Notes to the consolidated  nancial statements
€ millions 12.31.2011 12.31.2010 12.31.2009
Total items recognised directly in equity
Gross reserve 1,872.0 998.6 2,072.4
Associated tax effect 182.7 189.5 97.5
Reserve net of tax 2,054.7 1,188.1 2,169.9
NOTE21
Post-employment benefits, termination benefits
andotherlong-term employee benefits
The Group operates pension, early retirement and other benefit
schemes depending on local legislation and regulations.
For obligatory state schemes and other defined-contribution
schemes, the Group recognises in the income statement
contributions payable when they are due. No provision has
been set aside in this respect as the Group’s obligation does
not exceed the amount of contributions paid.
The characteristics of the defined benefit schemes in force
within the Group are as follows:
♦French regulations provide for specific length-of-service
awards payable to employees on retirement. An early
retirement plan and a defined benefit plan have also been
set up. In some Group companies there are also measures
providing for the payment of certain healthcare costs for
retired employees.
These obligations are partially funded by an external
fund, except those relating to healthcare costs for retired
employees;
♦for foreign subsidiaries with employee pension schemes or
other specific obligations relating to defined benefit plans,
the excess of the projected benefit obligation over the
scheme’s assets is recognised by setting up a provision for
charges on the basis of the actuarial value of employees’
vested rights.
Pension obligations are determined and recognised in
accordance with the accounting principles presented in
note1.23. As from January1st, 2009, the Group decided to adopt
the IAS19 option allowing the direct recognition in equity of
actuarial gains and losses instead of the corridor method.
The actuarial assumptions used to calculate these obligations take into account the economic conditions specific to each country
or Group company. The weighted average assumptions for the Group are as follows:
12.31.2011 12.31.2010 12.31.2009
Discount rate 4.5% 4.6% 5.3%
Salary increase 4.7% 4.7% 4.9%
Expected long-term return on plan assets 5.5% 5.7% 5.9%
12.31.2011 12.31.2010 12.31.2009
Initial rate Final rate
Application
of final rate Initial rate Final rate
Application
of final rate Initial rate Final rate
Application
of final rate
Expected rate of
health care inflation 5.4% 3.7% 2016 5.5% 3.6% 2016 6.3% 4.1% 2016
The discount rates are obtained by reference to market yields on
high quality corporate bonds having maturity dates equivalent
to those of the obligations. Bond quality is assessed by reference
to the AA-/Aa3 minimum rating provided by one of the three
main credit-rating agencies.