Merck 2014 Annual Report Download - page 225

220 CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
The development of cumulative actuarial gains (+) and losses (–)
was as follows:
€ million 2014 2013
Cumulative actuarial gains (+) / losses (–) recognized in equity on January 1 – 694.8 – 795.6
Currency translation differences –12.1 2.0
Remeasurements of defined benefit obligations
Actuarial gains (+) / losses (–) arising from changes in demographic assumptions 19.1 –1.1
Actuarial gains (+) / losses (–) arising from changes in financial assumptions – 915.2 88.6
Actuarial gains (+) / losses (–) arising from experience adjustments – 26.9 – 27.2
Remeasurements of plan assets
Actuarial gains (+) / losses (–) arising from experience adjustments 50.7 49.0
Effects of the asset ceilings
Actuarial gains (+) / losses (–) 10.8 –10.5
Reclassification within retained earnings – –
Cumulative actuarial gains (+) / losses (–) recognized in equity on December 31 – 1,568.4 – 694.8
Plan assets for funded defined benefit obligations primarily com-
prised fixed-income securities, stocks, and investment funds. They
did not include financial instruments issued by Group companies
or real estate used by Group companies.
The plan assets serve exclusively to meet the defined benefit
obligations. Covering the benefit obligations with financial assets
represents a means of providing for future cash outflows, which
occur in some countries (e.g. Switzerland and the United Kingdom)
on the basis of legal requirements and in other countries (e.g.
Germany) on a voluntary basis.
The ratio of the fair value of the plan assets to the present
value of the defined benefit obligations is referred to as the degree
of pension plan funding. If the benefit obligations exceed the plan
assets, this represents underfunding of the pension fund.
It should be noted, however, that both the benefit obligations as
well as the plan assets fluctuate over time. This could lead to an
increase in underfunding. Depending on the statutory regulations,
it could become necessary in some countries for the Group to re-
duce underfunding through additions of liquid assets. The reasons
for such fluctuations could include changes in market in
terest
rates and thus the discount rate as well as adjustments to
other
actuarial assumptions (e.g. life expectancy, inflation rates
).
In order to minimize such fluctuations, in managing its plan
assets, the Group also pays attention to potential fluctuations in
liabilities. In the ideal case, assets and liabilities develop
in oppo-
site directions when exposed to exogenous factors, creating a
natural defense against these factors. In order to achieve this
effect, the corresponding use of financial instruments is considered
in respect of individual pension plans.