Porsche 2008 Annual Report Download - page 168

To our shareholders The Company
166
Hybrid capital
Provided the bond conditions of the hybrid capital issued satisfy the criteria, hybrid capital is
accounted for as an equity instrument of the group in accordance with IAS 32. If the hybrid capital
is classified as equity, the deductible interest is not presented as interest expenses but accounted
for corresponding to the accounting for dividends to the shareholders. Any transaction costs are
deducted from the hybrid capital, taking tax effects into account.
If classified as a debt instrument, hybrid capital is presented under bonds. Interest is included in
interest and similar expenses.
Provisions for pensions and similar obligations
In accordance with IAS 19, the actuarial measurement of pension obligations arising from defined
benefit plans is based on the projected unit credit method. This method considers not only the
pension payments and the future claims known on the balance sheet date but also future antici-
pated increases in salaries and pensions. If pension obligations are funded by plan assets the
obligation and the assets are offset. The calculation is based on actuarial expert opinions taking
into account biometric assumptions. The company applies the corridor method to measure the
pension obligations and determine the pension cost. Actuarial gains and losses are not accounted
for to the extent they do not exceed ten percent of the defined benefit obligation or ten percent of
the fair value of the plan assets. The amount exceeding the corridor is recognized by allocation to
the average remaining working lives of the employees. Past service cost is recognized on a
straight-line basis over the average period until the benefits become vested to the extent that the
benefits are already vested immediately following the introduction of, or changes to, a pension
plan, past service cost is recognized immediately in profit or loss. Service cost is presented as
personnel expense while the interest expense of the obligation and return on plan assets is pre-
sented in the financial result. The interest rate used to discount provisions is determined on the
basis of the return on long-term high-quality corporate bonds at the balance sheet date.
Other provisions
Other provisions are recognized if a past event has led to a current legal or constructive obligation
to third parties which is expected to lead to a future outflow of resources that can be estimated
reliably. Provisions for warranty claims are recognized taking account of the past or estimated
future claims pattern. Non-current provisions are stated at their present value at the balance sheet
date. The present value also includes the estimated cost increases. The interest rate used is a pre-
tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The expense resulting from the unwinding of the interest rate is recognized in finance
cost. Provisions are not offset against reimbursement claims from third parties. Reimbursement
claims are recognized separately in other assets if it is virtually certain that the Porsche group will
receive the reimbursement when it settles the obligation. Provisions resulting from insurance con-
tracts are accounted for in accordance with the provisions of IFRS 4. Reinsurance acceptances
are accounted for on an accrual basis. Accruals are not presented as provisions, but under trade
payables or other liabilities, based on their nature.