Merck 2014 Annual Report Download - page 197

192 CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
(19) LEASING
Where non-current assets are leased and economic ownership lies
with the Group (finance lease), the asset is recognized at the pres-
ent value of the minimum lease payments or the lower fair value
in accordance with IAS17 and depreciated over their useful life.
The corresponding payment obligations from future lease pay-
ments are recorded as liabilities. If an operating lease is concerned,
the associated expenses are recognized in the period in which they
are incurred.
(20) DEFERRED TAXES
Deferred tax assets and liabilities result from temporary differences
between the carrying amount of an asset or liability in the IFRS
and tax balance sheets of consolidated companies as well as from
consolidation activities, insofar as the reversal of these differences
will occur in the future. In addition, deferred tax assets are recorded
in particular for tax loss carryforwards if and insofar as their
utilization is probable in the foreseeable future. In accordance
with the liability method, the tax rates enacted and published as
of the balance sheet date are used.
Deferred tax assets and liabilities are only offset on the balance
sheet date if they meet the requirements of IAS12.
(21) PROVISIONS
Provisions are recognized in the balance sheet if it is more likely
than not that a cash outflow will be required to settle the obliga-
tion and the amount of the obligation can be measured reliably.
The carrying amount of provisions takes into account the amounts
required to cover future payment obligations, recognizable risks
and uncertain obligations of the Group to third parties.
Measurement is based on the settlement amount with the
highe
st probability or, if the probabilities are equivalent and a high
number of similar cases exist, it is based on the expected value of
the settlement amounts. Long-term provisions are discounted and
carried at their present value as of the balance sheet date. To the
extent that reimbursement claims exist as defined in IAS37, they
are recognized separately as an asset if their realization is virtually
certain and the asset recognition criteria has been met.
(22) PROVISIONS FOR PENSIONS AND
OTHER POST-EMPLOYMENT BENEFITS
Provisions for pensions and other post-employment benefits are
recorded in the balance sheet in accordance with IAS19. The obli-
gations under defined benefit plans are measured using the pro-
jected unit credit method. Under the projected unit credit method,
dynamic parameters are taken into account in calculating the
expected benefit payments after an insured event occurs; these pay-
ments are spread over the entire period of service of the partici-
pat ing employees. Annual actuarial opinions are prepared for this
purpose. The actuarial assumptions for discount rates, salary and
pension trends, staff turnover as well as health care cost increases,
which were used to calculate the benefit obligation, were deter-
mined on a country-by-country basis in line with the economic
conditions prevailing in each country; the latest country-specific
actuarial mortality table was used in each case. The respective
discount rates are generally determined on the basis of the returns
on high-quality corporate bonds issued with adequate maturities
and currencies. For euro-denominated obligations, bonds with
ratings of at least “AA” from one of the three major rating agencies
(Standard & Poor’s, Moody’s or Fitch), and a euro swap rate of
adequate duration served as the basis for the data. Actuarial gains
and losses resulting from changes in actuarial assumptions and / or
experience adjustments (the effects of differences between the
previous actuarial assumptions and what has actually occurred)
are recognized immediately in equity as soon as they are incurred,
taking deferred taxes into account. Consequently, the balance
sheet discloses – after deduction of the plan assets – the full scope
of the obligations while avoiding the fluctuations in expenses that
can result especially when the calculation parameters change.
The actuarial gains and losses recorded in the respective reporting
period are presented separately in the Statement of Comprehensive
Income.